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EP Family Corp. v. Chen - Order On Default Judgment
EP Family Corp. v. Chen - Order On Default Judgment
On March 5, 2019, Plaintiff EP Family Corp. (“Plaintiff”) filed this action against Yuanmin Chen
(“Chen”), Global Skyline, Inc. (“Global Skyline,” together with Chen in this Order, “Defendants”), and
Does 1-10. Complaint (“Compl.”), Dkt. 1. The Complaint alleges several causes of action, including for
infringement of two United States patents.
Global Skyline was served with the Summons and Complaint on March 13, 2019. Dkt. 16. Proof of
service of the Complaint was entered on April 19, 2019. Id. After Global Skyline failed to respond, its
default was entered on April 23, 2019. Dkt. 18.
After several ex parte applications by Plaintiff requesting leave to serve Chen by publication, on
September 5, 2019, Plaintiff was permitted to do so. Dkt. 28. Chen was served with the Summons and
Complaint by publication four times in the Los Angeles Times between September 16, 2019 and
October 13, 2019. Dkt. 33. After Chen then failed to respond, the Clerk entered his default on
November 7, 2019. Dkt. 34.
On December 18, 2019, Plaintiff filed this Motion for Default Judgment (“Motion”). Dkt. 37. Notice of the
Motion was served on Defendants on December 18, 2019. Declaration of Tommy SF Wang in Support
of EP Family Corp.’s Motion for Default Judgment (“Wang Decl.”), Dkt. 37-2 ¶ 15.
After reviewing the materials presented, it was determined that a hearing on the motion was
unnecessary, and the matter was taken under submission. Dkt. 39. For the reasons stated in this
Order, the Motion is GRANTED-IN-PART as to Defendants’ liability for patent infringement,
GRANTED-IN-PART as to Plaintiff’s requests for costs, DENIED-IN-PART as to Plaintiff’s request for
an award of attorney’s fees, DENIED-IN-PART as to Plaintiff’s request for enhanced damages, and
DENIED-IN-PART as to injunctive relief. A ruling on monetary damages is DEFERRED pending
Plaintiff’s filing of a supplemental memorandum consistent with the direction provided in this Order
within 14 days of its issuance. If the supplemental memorandum is timely filed, the issue of monetary
damages will then be taken under submission, and a subsequent order will issue.
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Plaintiff alleges that it owns two patents related to home and office organizational products. Compl., ¶
12. The first patent, U.S. Patent No. 10,051,979 (“the ’979 Patent”), is titled “Stackable Can Rack
Assembly;” it issued on August 21, 2018. The second patent, U.S. Patent No. 9,648,953 (“the ’953
Patent,” collectively with the ’979 Patent, the “Asserted Patents”), is titled “Collapsible Hanging Storage
Assembly;” it issued on May 16, 2017. Copies of the Asserted Patents are attached to the Complaint.
Dkt. 1-1, Exs. 1, 2.
The Complaint alleges that Defendants have infringed the Asserted Patents by “making, using, offering
to sell, selling, and/or importing into the United States” competing home organization products. Compl.,
¶ 86. Plaintiff alleges that Defendants infringe Claims 1-5 and 7-12 of the ’979 Patent with their “NEX
Stackable Can Rack Organizer, 3-Tier Can Rack Holds Up To 36 Cans” (“NEX Can Rack”) product. Id.
¶ 88. As to the ’953 Patent, Plaintiff alleges that Defendants infringe Claims 1-10 with their “NEX Under
Shelf Basket, 2-Pack Under Cabinet Hanging Storage Wire Basket Organizer (14.17” x 10.50” x 5.90”)
for Kitchen Pantry Cupboard, White (LT-DB066B)” (“NEX Undershelf Basket”) product. Id. ¶ 89. Charts
are attached to the Complaint that purport to compare the asserted claims of the Asserted Patents to
notated images of the accused products. Dkt. 1-1, Exs. 7, 8 (ECF58-64).
In the Motion, Plaintiff requests that default judgment be entered against Defendants as to the
Complaint’s claims for patent infringement. Plaintiff also seeks money damages (Dkt. 37 at 8), treble
monetary damages based on Defendants’ alleged willful patent infringement (Id. at 8, 12), attorney’s
fees based on a claim that Defendants’ conduct was exceptional (Id. at 12-13), costs (Id. at 13) and
injunctive relief. Id. at 13-14.
III. Analysis
A. Legal Standards
1. Procedural Requirements
Local Rule 55-1 requires the moving party for default judgment submit a declaration or include
information with respect to the following: (i) when and against which party default has been entered; (ii)
the pleading to which default has been entered; (iii) whether the defaulting party is an infant or
incompetent person, and if so, whether that person is represented by a general guardian, committee,
conservator or other representative; (iv) whether the Servicemembers Civil Relief Act, 50 U.S.C. App.
§ 521 does not apply; and (v) that notice has been served on the defaulting party, if required by Fed. R.
Civ. P. 55(b)(2).
2. Eitel Factors
Once the foregoing procedural elements have been satisfied, whether to enter a default judgment is
within the sound discretion of the trial court. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In
exercising such discretion, the Ninth Circuit has directed district courts to consider the following seven
factors (“the Eitel factors”): (i) the possibility of prejudice to the plaintiff; (ii) the merits of the plaintiff’s
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substantive claim; (iii) the sufficiency of the complaint; (iv) the sum of money at stake in the action; (v)
the possibility of a dispute concerning material facts; (vi) whether the default was due to excusable
neglect; and (vii) the strong public policy favoring decisions on the merits. Eitel v. McCool, 782 F.2d
1470, 1471-72 (9th Cir. 1986).
B. Application
1. Procedural Requirements
Plaintiff has satisfied the procedural requirements of Local Rule 55-1. It has submitted the declaration
of its counsel, Tommy SF Wang, in support of the Motion. Wang Decl. Wang declares as follows:
(i) default was entered as to Global Skyline on April 23, 2019 and as to Chen on November 7, 2019; (ii)
each default was entered as to the Complaint; (iii) Defendants are not infants or incompetent persons;
and (iv) Defendants are not subject to the Servicemembers Civil Relief Act. Wang Decl. ¶¶ 6-7, 9-10,
14-15. Although notice of the Motion is not required by Fed. R. Civ. P. 55(b)(2), Wang states that
Defendants were served with the Motion by mail on December 18, 2019. Id. ¶ 15; Dkt. 37 at 19.1
2. Eitel Factors
a) Possibility of Prejudice
As a result of Defendants’ failure to appear or participate in this litigation, Plaintiff will suffer prejudice if
default judgment is not granted. Absent entry of judgment, Plaintiff would be left without a remedy. See,
e.g., Phillip Morris USA v. Castworld Prods., 219 F.R.D. 494, 499 (C.D. Cal. 2003) (“Plaintiff would
suffer prejudice if the default judgment is not entered because Plaintiff will be without recourse or
recovery.”). Therefore, the first Eitel factor weighs in favor of granting the Motion.
The second and third Eitel factors assess the substantive merits of the movant’s claims and the
sufficiency of the pleadings. These factors “require that a [movant] state a claim on which [it] may
recover.” PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1175 (C.D. Cal. 2002) (internal
quotation marks omitted). Further, upon entry of default, all facts pleaded in the complaint are taken as
true, except those relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th
Cir. 1987). The Complaint alleges infringement of certain claims of the ’979 Patent and the ’953 Patent.
Compl., ¶¶ 86-89.
To establish a claim for direct patent infringement under § 271(a), a plaintiff must show that the
defendant “without authority makes, uses, offers to sell, or sells any patented invention, within the
United States or imports into the United States any patented invention during the term of the patent
therefor . . . .” 35 U.S.C. § 271(a).
1
It is unclear how Chen could be adequately served by mail when Plaintiff served Chen by publication after being
unable to successfully serve Chen with the summons and Complaint at an address purportedly belonging to
Chen.
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As noted, the Complaint alleges that Defendants have infringed and continue to infringe claims of the
Asserted Patents by “making, using, offering to sell, selling and/or importing into the United States”
competing home organization can racks. Compl., ¶ 86. The Complaint attaches charts comparing the
asserted claims of each patent to the corresponding accused product. See Dkt. 1-1, Exs. 7, 8 (ECF58-
64).
The attached chart for the ’979 Patent includes the language of Claim 1 of the ’979 Patent in one
column, with images of the accused NEX Can Rack notated with key words from Claim 1 of the ’979
Patent in the other column:
Dkt. 1-1, Ex. 7 at ECF59. The Complaint itself alleges that Defendants’ NEX Can Rack includes
features that are required by Claim 1 of the ’979 Patent. Compl., ¶¶ 37-48.
The Complaint and attached exhibits include a similar analysis for claims of the ’953 Patent as
compared to Defendants’ accused NEX Undershelf Basket product. See Dkt. 1-1, Ex. 8; Compl., ¶¶ 66-
77.
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Taking these allegations as true, including the claim charts attached to, and incorporated by reference
into, the Complaint, Plaintiff has adequately alleged that Defendants infringe the Asserted Patents with
the NEX Can Rack and NEX Undershelf Basket products.
Because the Complaint sufficiently alleges each of the patent infringement claims, with those
allegations deemed true for purposes of the Motion, the second and third Eitel factors weigh in favor of
granting the requested relief.
Under the fourth Eitel factor, “the court must consider the amount of money at stake in relation to the
seriousness of Defendant’s conduct.” PepsiCo, 238 F. Supp. 2d at 1176. A party’s “declarations,
calculations, and other documentation of damages” are considered when determining if the sum is
reasonable. Gryphon Mobile Electronics, LLC v. Brookstone, Inc., 2016 WL 7637987, 8:15-CV-2056-
DOC (JCGx), at *7 (C.D. Cal. July 12, 2016) (citing Truong Giang Corp. v. Twinstar Tea Corp., No. 06-
CV-03594-JSW, at *12 (N.D. Cal. May 29, 2007)). “Default judgment is disfavored where the sum of
money at stake is too large or unreasonable in light of defendant’s actions.” HeadBlade, Inc. v.
Products Unlimited, LLC, 2016 WL 6237900, 2:15-CV-2611-SJO (VBKx) at *5 (citing Truong Giang
Corp., 2007 WL 1545173, at *12).
Plaintiff seeks $38,327.55 in damages from Defendants, which includes its request for treble damages.
Dkt. 37 at 12. As discussed below, Plaintiff incorrectly relies on 35 U.S.C. § 289 in providing its
calculation of damages. Section 289 of the Patent Act is only applicable in calculating damages for
infringement of a design patent. Damages for utility patents are governed by 35 U.S.C. § 284.
Assuming Plaintiff would seek no more than approximately $40,000 in total, the amount of money at
stake is modest when compared to the seriousness of Defendants’ conduct, including the significant
number of accused products sold. This factor is neutral as to whether default judgment should be
entered.
Upon entry of default, all facts pleaded in the complaint are taken as true, except those relating to
damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–918 (9th Cir. 1987). The Complaint
alleges that “Defendants are offering for sale, selling, importing into the United States, or otherwise
distributing” the infringing products. Compl., ¶¶ 49, 78. Although it is possible Defendants could dispute
the material facts in the course of the litigation, Defendants’ failure to appear and defend supports a
contrary finding. Therefore, the fifth Eitel factor weighs in favor of granting the Motion.
The sixth Eitel factor concerns whether the entry of default was the result of excusable neglect. There is
no evidence of excusable neglect here. Defendants were served with the Summons and Complaint, but
did not respond. Dkts. 16, 33. Plaintiff also provided notice by publication as to Chen, and still received
no response despite ample time for him to do so. Dkt. 33. Default was entered. Dkts. 18, 34. According
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to Plaintiff, it served Defendants with the Motion. Wang Decl. ¶ 15. Therefore, the sixth factor weighs in
favor of granting the Motion.
The final Eitel factor calls for consideration of the strong policy preference for deciding claims on the
merits. This factor generally disfavors the entry of default. “However, the mere existence of Fed. R. Civ.
P. 55(b) indicates that this preference, standing alone, is not dispositive.” PepsiCo, 238 F. Supp. 2d at
1177. Defendants’ failure to respond is why there has not been a decision on the merits. Therefore, this
factor only weighs slightly against granting the Motion.
g) Conclusion
Despite the need for supplemental briefing on monetary damages, the Eitel factors collectively weigh in
favor of entering default judgement against Defendants for patent infringement. The Motion is
GRANTED-IN-PART as to Defendants’ liability for patent infringement.
3. Remedies Sought
A “default judgment must not differ in kind from, or exceed in amount, what is demanded in the
pleadings.” Fed. R. Civ. P. 54(c). Therefore, “a default judgment must be supported by specific
allegations as to the exact amount of damages asked for in the complaint.” Philip Morris USA, 219
F.R.D. at 499.
The Complaint seeks, among other forms of relief, monetary damages under § 284 and § 289 (Compl.,
Prayer ¶ 2; see also id. at Prayer ¶¶ 7-8, 13), costs (id. at Prayer ¶ 16), attorney fees under § 285 (id. at
Prayer ¶ 15), and a permanent injunction (id. at Prayer ¶¶ 4, 11).
Through the Motion, Plaintiff seeks an award of the amount of Defendants’ profits under 35 U.S.C. §
289, enhanced damages under 35 U.S.C. § 284, attorney’s fees under 35 U.S.C. § 285, costs under 35
U.S.C. § 284, and a permanent injunction under 35 U.S.C. § 283. See generally Dkt. 37; see also id. at
8-14.
a) Damages
Plaintiff incorrectly refers to the Asserted Patents as design patents. However, the Asserted Patents are
utility patents with claims stated in prose as numbered sentences following their written descriptions. As
Plaintiff acknowledges, § 289 provides an alternative remedy for patent infringement solely for design
patents. Because the Asserted Patents are not design patents, § 289 does not apply.
Patent damages in this action are governed solely by § 284, which states, inter alia, “[u]pon finding for
the claimant the court shall award the claimant damages adequate to compensate for the infringement,
but in no event less than a reasonable royalty for the use made of the invention by the infringer….” 35
U.S.C. § 284. Utility patent holders often calculate damages pursuant to § 284 using either a
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reasonable royalty or lost profit theory of damages. See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538,
1545 (Fed. Cir. 1995) (listing factors often considered in calculating lost profit damages for patent
infringement); Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009)
(discussing one method of calculating reasonable royalty damages through a hypothetical negotiation).
Damages under §284 are not calculated as to the amount an infringer has gained, but as to the amount
a patent holder has lost. Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507 (1964).
Plaintiff obtained Defendants’ records for sales of the accused products made through amazon.com,
which show a total revenue of $25,551.70 of approximately 1,697 units of the accused products. Dkt.
37 at 7. Plaintiff attached to the Motion the Declaration of Tzu Yu Tseng, the Chief Executive Officer of
EP Family Corp. Declaration of Tzu Yu Tseng (“Tseng Decl.”), Dkt. 37-3. Tseng declares that Plaintiff
and other houseware retailers typically operate at approximately a 45%-50% profit margin when selling
products on Amazon. Tseng Decl., ¶¶ 7-8. Assuming a 50% profit margin on Defendants’ total sales,
Tseng declares Defendants likely earned approximately $12,775.85 in profit. Id. at ¶ 9. On this basis,
Plaintiff states that it should be awarded that amount as Defendants’ estimated total profits under §
289. Plaintiff further states that its damages should be trebled based on willful infringement.
Plaintiff’s gross profits calculation is not an appropriate measure of damages under § 284. Aro Mfg.,
377 U.S. at 507. Plaintiff must submit supplemental briefing, including supporting evidence, as to a
damages calculation that is consistent with the requirements of § 284. If Plaintiff seeks to prove that it is
entitled to lost profit damages, it should show that the four-factor test outlined in Rite-Hite, 56 F.3d at
1545 is satisfied. The ruling as to monetary damages is DEFERRED until Plaintiff has submitted its
supplemental brief and supporting evidence as to this issue.
4. Costs
As discussed above, § 284 awards successful plaintiffs monetary damages “together with interest and
costs as fixed by the court.” 35 U.S.C. § 284. The Motion has been granted as to the issue of
Defendants’ infringement of the Asserted Patents. Plaintiff will “submit a bill of costs within fourteen (14)
days after entry of judgment in this action pursuant to Local Rule 54-2.1.” Dkt. 37 at 13.
Plaintiff requests enhanced damages based on Defendants’ alleged willful infringement. Dkt. 37 at 12.
“The sort of conduct warranting enhanced damages has been variously described in our cases as
willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or – indeed −
characteristic of a pirate.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1934 (2016). District
courts have broad discretion to decide whether to award enhanced damages, and, if so, in what
amount. Id.
The Complaint generally alleges that “Plaintiff is informed and believes that Defendants were aware of
Plaintiff’s rights before they began their infringing activity, and that Defendants’ use and infringement is
therefore willful.” Compl., ¶ 82; see also id. at 93 (“Upon information and belief, Defendants’
infringement has taken place with full knowledge of the Asserted Patent and has been intentional,
deliberate, and willful.”), Prayer ¶ 3 (seeking a judgment that Defendants’ infringement was “willful and
deliberate”), Prayer ¶ 13 (seeking damages under 35 U.S.C. § 284). These allegations provide only
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generalized legal conclusions, and are not sufficient to support a claim of willful infringement. In support
of the Motion, Plaintiff argues that it sent cease and desist letters to Defendants before filing the
present action. However, that assertion is not reflected in the Complaint’s general allegations. See Dkt.
37 at 11. The Complaint does not include sufficient factual allegations, that if taken as true, would
support Plaintiff’s request for enhanced damages due to willful infringement. Therefore, the request is
DENIED.
6. Attorney’s Fees
“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C.
§ 285. An exceptional case is “simply one that stands out from others with respect to the substantive
strength of a party’s litigating position (considering both the governing law and the factors of the case)
or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. Icon Health &
Fitness, Inc., 134 S.Ct. 1749, 1756 (2014). “District courts may determine whether a case is
‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the
circumstances.” Id. In the context of requests for an award of attorney’s fees in default judgment
motions,
Tzu Techs., LLC v. Winzz, LLC, 2016 WL 6822754, 2:15-CV-5493 JAK (JPRx), at *9 (C.D. Cal. June
14, 2016) (quoting Deckers Outdoor Corp. v. ShoeScandal.com, LLC, 2013 WL 6185203, 2:12-CV-
7382 ODW (SHx), at *4 (C.D. Cal. Nov. 25, 2013)); see also Tzu Techs, LLC v. Happy Haptics, Inc.,
2016 WL 7444848, 2:15-5500 JAK (JPRx), at *9 (C.D. Cal. Nov. 23, 2016). “[T]o award attorney’s fees .
. . based solely on the allegation of willfulness and Defendant’s failure to respond, would, in effect,
establish a per se rule in favor of an award under 35 U.S.C. § 285 in connection with any default
judgment.” Winzz, 2016 WL 6822754, at *9.
Plaintiff relies on a previous case in which another company, Pretty Star Store, LLC (“Pretty Star”) sued
Chen for design patent infringement. Pretty Star Store, LLC v. Yuanmin Chen et al., 2:18-CV-05187
JAK (AGRx), Dkt. 32 (C.D. Cal. Apr. 10, 2019). By citing the default judgment in Pretty Star, Plaintiff
acknowledges the determination regarding default judgment reached in Pretty Star, including the denial
of the plaintiff’s request for attorney’s fees. See id. at *10. Moreover, the three attorneys listed as
counsel of record for plaintiff in Pretty Star are also listed as counsel of record in this case. Despite this,
Plaintiff fails to acknowledge or respond to the legal authority provided in the denial of the request for
attorney fees in Pretty Star. Substantially the same arguments are presented again in the Motion that
were offered, and rejected, there. For the same reasons set forth in Pretty Star and in this discussion,
Plaintiff has failed to show that an award of attorney’s fees is warranted under 35 U.S.C. § 285.
Therefore, the request is DENIED.
7. Permanent Injunction
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In deciding whether to award injunctive relief to prevailing parties in disputes arising under the Patent
Act, a plaintiff must satisfy a four-factor test by demonstrating:
(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as
monetary damages, are inadequate to compensate for that injury; (3) that, considering
the balance of hardships between the plaintiff and defendant, a remedy in equity is
warranted; and (4) that the public interest would not be disserved by a permanent
injunction.
The Complaint generally alleges consumer confusion and dilution of Plaintiff’s goodwill as a result of
Defendants’ sales of the accused products. Compl., ¶¶ 79-80. Plaintiff refers to these allegations in a
single sentence in support of the Motion, and includes only one paragraph requesting injunctive relief.
See Dkt. 37 at 4, 13-14. Plaintiff has not referred to the eBay factors or explained how they support the
requested injunctive relief.
In Pretty Star, the plaintiff also requested a permanent injunction as part of a default judgment motion
without initially providing an analysis of the eBay factors. After a hearing on the motion, the plaintiff was
instructed to submit supplemental briefing regarding “evidence to support the [Motion for Default
Judgment]’s request for a permanent injunction.” Pretty Star, 2:18-CV-05187 JAK (AGRx), Dkt. 32, at
*11 (C.D. Cal. Apr. 10, 2019). The default judgment order there determined that the supplemental
briefing neither included evidence of irreparable harm, nor addressed the eBay factors of alleged
irreparable harm, balancing of the hardships or the public interest. Id. The request for permanent
injunction was subsequently denied because “Pretty Star [had] been given two opportunities to support
its request for a permanent injunction, including through an order inviting Pretty Star to submit evidence
as to its claimed injury.” Id.
As noted, the same attorneys involved in Pretty Star are counsel for the Plaintiff in this action. They
have acknowledged, as they must, their familiarity with the determinations in Pretty Star. Nevertheless,
the Motion fails to make any showing with respect to the eBay factors. Therefore, the request for a
permanent injunction is DENIED.
IV. Conclusion
For the reasons stated herein, the Motion is GRANTED-IN-PART as to Defendants’ liability for patent
infringement, GRANTED-IN-PART as to Plaintiff’s requests for costs, DENIED-IN-PART as to Plaintiff’s
request for an award of attorney’s fees, DENIED-IN-PART as to Plaintiff’s request for enhanced
damages, and DENIED-IN-PART as to injunctive relief. A ruling on monetary damages is DEFERRED
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pending Plaintiff’s filing of a supplemental brief, within 14 days of the issuance of this Order, that
addresses the issues specified above.
IT IS SO ORDERED.
Initials of Preparer cw
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