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Webspectator Corp. v. Tomas

United States District Court, C.D. California

June 7, 2017

Webspectator Corp.
v.
André Tomas Da Silva Pereira Nascimento Parreira,

          Present: The Honorable PERCY ANDERSON, UNITED STATES DISTRICT JUDGE

          CIVIL MINUTES - GENERAL

         Proceedings: IN CHAMBERS - COURT ORDER

         On May 24, 2017, the Court granted the Ex Parte Application for Temporary Restraining Order filed by plaintiff Webspectator Corp. (“Plaintiff”). In issuing the Temporary Restraining Order (“TRO”), the Court concluded that Plaintiff had met its burden for the issuance of the TRO without notice to defendants André Tomas Da Silva Pereira Nascimento Parreira (“Parreira”), Dulce Catarina Pareira (“Dulce”), Rafael Mora Funes (“Mora”), and Webspectator Lda (collectively “Defendants”). The Court ordered Plaintiff to serve Defendants with the TRO, the Summons, Complaint, and supporting documentation, and set a briefing schedule allowing the parties to show cause why the Court should not issue a preliminary injunction consistent with the TRO. Parreira and Dulce have been served with the TRO and filed an Opposition to the issuance of a preliminary injunction. Plaintiff has filed a Reply in support of its requested preliminary injunction (Docket No. 28). Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the Court finds that this matter is appropriate for decision without oral argument. The hearing calendared for June 8, 2017, is vacated, and the matter taken off calendar.

         I. Factual and Procedural Background

         Plaintiff commenced this action on May 24, 2017, and filed its Ex Parte Application for TRO at the same time. According to the Complaint and the evidence filed both in support of and in opposition to the TRO and issuance of a preliminary injunction, Parreira, Dulce, and Mora were, until April 18, 2017, directors of Plaintiff. On April 18, 2017, the Delaware Chancery Court entered an order confirming that Parreira, Dulce, and Mora had resigned their positions with Plaintiff and ordering that they “cease to be, or hold themselves out as, directors” of Plaintiff. Plaintiff contends that despite no longer being affiliated with Plaintiff, Parreira, Dulce, and Mora have orchestrated a scheme, begun while they were directors of Plaintiff, and despite a “status quo order” entered by the Delaware Chancery Court on September 29, 2016, to divert resources and assets from Plaintiff to themselves and defendant Webspectator Lda, a Portuguese company they control.

         Plaintiff was organized to conduct a digital advertising business using technology developed by Internet Business Technologies, SA, a holding company for a family of related entities including IBT Portugal, IBT Brazil, and IBT USA (collectively “IBT”). IBT applied to the United States Patent and Trademark Office for a trademark for “Webspectator” in December 2011, organized Plaintiff in March 2012, granted to Plaintiff a license to use IBT's technology, and, in 2013, assigned the interest and goodwill in the Webspectator mark to Plaintiff. Plaintiff obtained a registration for the Webspectator mark in February 2014. IBT similarly registered the webspectator.com domain in December 2011. Parreira, who was an IBT employee at the time, was listed as the “admin” and “tech” contact on the webspectator.com domain registration. Plaintiff alleges that the domain registration changed in August 2013, with Parreira listed as the registrant and IBT as the registrant organization. By November 8, 2015, Plaintiff had replaced IBT as the registrant organization. The registration listed Plaintiff's Santa Monica address.

         At some point between August 24, 2016, and January 28, 2017, the domain registration was changed and instead of listing Plaintiff's address and contact information, the registration listed Parreira's mobile phone number, an address in Portugal, and an email address of andretparreira@gmail.com. References to Plaintiff as the registrant organization were deleted. In his Declaration in Opposition to the Preliminary Injunction, Parreira states that he, “on behalf of IBT, registered the www.webspectator.com domain name. I always intended to own the www.webspectator.com domain name in my individual capacity.” Parreira also claims to have paid for all fees and costs associated with the domain name with his personal funds and that he has never attempted to sell the domain name to Plaintiff or anyone else. In support of its Reply, Plaintiff has provided receipts showing that the domain name registration was purchased by Parreira with a Visa card associated with IBT.

         Plaintiff provides its digital advertising tools to Fortune 500 companies and publishers that allow its clients to increase their revenues from internet advertisements by verifying in realtime that those advertisements are being viewed by the targeted consumers. According to Plaintiff, Defendants have removed or blocked Plaintiff's access to its own financial records and prevented Plaintiff from accessing its systems that are hosted on servers operated by Amazon Web Services. Plaintiff also asserts that Defendants have redirected payments Plaintiff should be receiving from third-party marketplaces, including OpenX, SOVRN, Rubicon, and Komoona, to themselves. This diversion of payments has reduced Plaintiff's revenue stream and harmed its relationships with its clients. Plaintiff has also submitted evidence showing that individuals affiliated with Defendants have contacted Plaintiff's clients within the last month as part of an effort to divert revenue from Plaintiff to entities affiliated with Defendants. According to Plaintiff, these diversions could only be accomplished by someone with access to Plaintiff's “back office” systems. Plaintiff's logs of those who have accessed its back office systems appear to show that credentials of individuals affiliated with Defendants accessed Plaintiff's systems 38 times between April 18, 2017, and May 18, 2017. Plaintiff states that these individuals did not have authorization to access its systems at that time.

         Plaintiff's Complaint asserts claims for cybersquatting pursuant to the Anti-Cybersquatting Protection Act (“ACPA”), 15 U.S.C. § 1125(d), and for violations of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030. The TRO issued by the Court enjoined Defendants from, among other things, using the Webspectator mark, use of or access to the mark, the www.webspectator.com domain name, taking actions to directly or indirectly divert payments from Plaintiff or its clients, from withholding user names and passwords necessary for Plaintiff to access its back office systems, withholding access to the domain name, withholding money or payments generated with Plaintiff's technology, trademark, or domain name that were diverted or received by Defendants, and from interfering with the release of funds collected or generated by SOVRN, OpenX, Rubicon, Komoona, or any other similar marketplace prior to April 18, 2017.

         II. Legal Standard

         “A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. Natural Resources Defense Council, 555 U.S. 7, 20, 129 S.Ct. 365, 374, 172 L.Ed.2d 249 (2008). “A preliminary injunction is an extraordinary remedy never awarded as of right.” Id. The Ninth Circuit employs a “sliding scale” approach to preliminary injunctions as part of this four-element test. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). Under this “sliding scale, ” a preliminary injunction may issue “when a plaintiff demonstrates . . . that serious questions going to the merits were raised and the balance of hardships tips sharply in the plaintiff's favor, ” as long as the other two Winter factors have also been met. Id. (internal citations omitted). “[A] preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 1867, 138 L.Ed.2d 162 (1997). A preliminary injunction “is not a preliminary adjudication on the ultimate merits.” Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1423 (9th Cir. 1984). “[T]he findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits.” University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981).

         By requiring Defendants to take affirmative steps to allow Plaintiff to obtain access to its systems and accounts, the injunction Plaintiff seeks in some ways goes beyond preserving the status quo and could be considered to include provisions that require a mandatory injunction instead of a prohibitory injunction. Mandatory injunctions such as this are particularly disfavored. See Stanley v. University of S. Cal., 13 F.3d 1313, 1320 (9th Cir. 1994) (“A prohibitory injunction preserves the status quo. A mandatory injunction ‘goes well beyond simply maintaining the status quo pendente lite and is particularly disfavored.' When a mandatory preliminary injunction is requested, the district court should deny such relief ‘unless the facts and law clearly favor the moving party.'”) (citations omitted) (quoting Anderson v. United States, 612 F.2d 1112, 1114 (9th Cir. 1979)); Martin v. International Olympic Comm., 740 F.2d 670, 675 (9th Cir. 1984) (“In cases such as the one before us in which a party seeks mandatory preliminary relief that goes well beyond maintaining the status quo pendente lite, courts should be extremely cautious about issuing a preliminary injunction.”); Anderson, 612 F.2d at 1115 (“‘[M]andatory injunctions, however, are not granted unless extreme or very serious damage will result and are not issued in doubtful cases or where the injury complained of is capable of compensation in damages.'”) (quoting Clune v. Publishers' Assn., 214 F.Supp. 520 (S.D.N.Y. 1963)).

         III. Analysis

         A. Success on the Merits

         The ACPA authorizes a civil action by the owner of a mark against a person who:

(I) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark ...

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