Deckers Outdoor Corporation v. ShoesScandal.com LLC et al
Filing
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ORDER GRANTING PLAINTIFFS REQUEST FOR AWARD OF DAMAGES IN DEFAULT JUDGMENT 28 by Judge Otis D. Wright, II:Court awards Deckers a total amount of $122,140.21. The Court also awards Deckers post-judgment interest at a rate of 9.8 percent from November 26, 2013, until the date of payment. Under Local Rule 54-2.1 Deckers has fourteen days from the date of this order to submit a bill of cost. A default judgment will issue. (lc). Modified on 11/25/2013 .(lc).
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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DECKERS OUTDOOR CORPORATION, Case No. CV 12-7382 ODW (SHx)
a Delaware Corporation,
ORDER GRANTING PLAINTIFF’S
Plaintiff,
REQUEST FOR AWARD OF
v.
DAMAGES IN DEFAULT
JUDGMENT [28]
SHOESCANDAL.COM, LLC, a Nevada
Limited Liability Company; and DOES 1–
10, inclusive,
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Defendants.
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I.
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INTRODUCTION
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On August 7, 2013, the Court entered default judgment as to liability against
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Defendant ShoeScandal.com, LLC. (ECF No. 27.) The Court denied the initial
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request for damages because Deckers Outdoor Corporation’s submitted evidence of
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ShoeScandal’s profits was too speculative. (Id.) Deckers filed a renewed request for
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an award of damages under 35 U.S.C. § 289 August 23, 2013 (ECF No. 28.) In light
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of Deckers’s supplemental evidence regarding typical industry profits, the Court
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GRANTS Deckers’s Request for Damages.1
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The Court deems this matter appropriate for decision without oral argument. Fed. R. Civ. P. 78;
C.D. Cal. L.R. 7-15.
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II.
FACTUAL BACKGROUND
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On August 28, 2012, Deckers sued ShoeScandal for patent infringement and
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unfair competition regarding the purchase and sale of goods with designs nearly
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identical to Deckers’s federally-registered design patents. (ECF No. 1.) Deckers
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holds multiple design patents for its famous UGG® Australia line of footwear.
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Defendant ShoeScandal.com advertises, offers for sale, and sells shoes through its
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online store www.shoescandal.com.
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provided below. ( See Compl. ¶ 14.)
(Compl. ¶ 13.)
An image comparison is
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On October 15, 2012, the Clerk of Court entered default against ShoeScandal
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under Federal Rule of Civil Procedure 55(a). (ECF No. 13.) Following entry of
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default, Deckers filed an Application for Default Judgment seeking injunctive relief
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and an award of $500,000.00, in addition to costs and post-judgment interest. (ECF
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No. 25.) On August 7, 2013, the Court granted Deckers’s Application with respect to
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liability, costs, and injunctive relief, but denied Deckers’s request for damages without
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prejudice. (ECF No. 27.)
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The Court denied the damages request because Deckers failed to adequately
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prove its damages. (Id.) Rather than seek damages in the form of a reasonable-
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royalty under § 284, Deckers sought ShoeScandal’s profits from the sale of the
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infringing products under § 289. (ECF No. 25.) But because ShoeScandal failed to
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appear in this action, Deckers sought to prove ShoeScandal’s profits through an
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invoice produced by Ollie’s Bargain Outlet—a retailer to whom ShoeScandal
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allegedly sold the infringing boots in an unrelated action pending in the Southern
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District of New York.
(Id.; Chan Decl. ¶ 7.)
Deckers improperly equated
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ShoeScandal’s total “earned revenue” with its total profits in its request.
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On August 23, 2013, Deckers renewed its request for damages. (ECF No. 33.)
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Deckers sought $230,000.00 in damages, again based on ShoeScandal’s sales of the
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infringing boots to Ollie’s Bargain Outlet. (Id.) Deckers noted that Ollie’s Bargain
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Outlet’s invoice reflected that ShoeScandal sold at least 39,780 units of the infringing
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boots and earned revenues in the amount of $238,282.20. (Id.) But although Deckers
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decreased the requested damages amount, Deckers did not provide the Court with any
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evidence of ShoeScandal’s profits.
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ShoeScandal’s gross revenues. (Id.) The Court issued an Order for supplemental
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briefing on September 26, 2013, requesting that Deckers provide some evidence of
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ShoeScandal’s profits. (ECF No. 37.) On October 25, 2013, Deckers responded to
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the Court’s Order by filing a declaration from Nellie Poole, Deckers’s Vice President
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of Supply Chain. (ECF No. 38.)
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III.
Instead, Deckers requested 50 percent of
LEGAL STANDARD
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Federal Rule of Civil Procedure 55(b) authorizes a district court to grant default
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judgment after the Clerk enters default under Rule 55(a). Local Rule 55-1 requires
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that the movant submit a declaration establishing (1) when and against which party
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default was entered; (2) identification of the pleading to which default was entered;
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(3) whether the defaulting party is a minor, incompetent person, or active
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servicemember; and (4) that the defaulting party was properly served with notice.
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A district court has discretion whether to enter a default judgment. Aldabe v.
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Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Upon default, the defendant’s liability
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generally is conclusively established, and the well-pleaded factual allegations in the
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complaint are accepted as true. Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–
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19 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Grp., 559 F.2d 557, 560
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(9th Cir. 1977)).
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But a Plaintiff must prove all damages sought in the complaint. Phillip Morris
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USA, Inc. v. Castworld Prods., 219 F.R.D. 494, 498 (C.D. Cal. 2003). If the facts
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necessary to determine damages are not contained in the complaint, or are legally
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insufficient, they will not be established by default. Cripps v. Life Ins. Co. of N.
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America, 980 F.2d 1261, 1267 (9th Cir. 1992). Fundamental fairness, required by due
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process of law, limits the scope of relief. U.S. Const. amend. XIV.
IV.
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DISCUSSION
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In the Renewed Request for Award of Damage in Default Judgment, Deckers
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seeks judgment in the sum of $258,270.05 in statutory damages, reasonable attorneys’
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fees in accordance with Local Rule 55-3, and prejudgment interest, as well as costs
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and postjudgment interest. (ECF No. 33.) The Court considers each in turn.
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A.
Statutory Damages
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Deckers first seeks a statutory-damages award of $119,141.10—which reflects
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a presumed 50 percent profit by ShoeScandal on its $238,282.20 sales to Ollie’s
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Bargain Outlet. This presumed profit is based upon the typical profit margin for
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footwear distributors of 40–50 percent. (Poole Decl. ¶¶ 5–6.) Under 35 U.S.C. § 284,
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a design-patent patentee may recover compensatory damages from the infringer, but in
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no event less than a reasonable royalty. Alternatively, the patentee may elect to
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recover the infringer’s total profits (but no less than $250) under 35 U.S.C. § 289.
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And when only a design patent is at issue, a patentee may not recover both infringer
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profits under § 289 and additional damages, such as a reasonable royalty, under § 284.
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Catalina Lighting, Inc. v. Lamps Plus, Inc., 295 F.3d 1277, 1291 (Fed Cir. 2002).
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Rather than seek damages under § 284, Deckers seeks ShoeScandal’s profits
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from the sale of the infringing products under § 289. (Mot. 3.) Under normal
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circumstances, it is the infringer who bears the burden of “offering a fair and
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acceptable formula for allocating a given portion of overhead to the particular
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infringing items in issue.” Sunbeam Prods., Inc. v. Wing Shing Prods. (BVI) Ltd., 311
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B.R. 378, 401 (S.D.N.Y. 2004) aff’d, 153 F. App’x 703 (Fed. Cir. 2005). But if the
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infringer has failed to produce any evidence—as in the default action at hand—the
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Court must determine the costs to be subtracted from revenue based on the evidence it
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has to determine profits. See Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1447
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(Fed. Cir. 1998).
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ShoeScandal has not responded to, nor produced any discovery in, this action,
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so Deckers has limited information regarding ShoeScandal’s sales and profits. The
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invoice produced by Ollie’s Bargain Outlet shows that ShoeScandal has sold at least
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39,780 units of the infringing products, resulting in $238,282.20 in sales to Ollie’s
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alone. (Poole Decl. ¶ 6.) But ShoeScandal’s total sales are not its total profits. In
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arriving at ShoeScandal’s total-profit figure under § 289, Deckers cannot look solely
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to ShoeScandal’s gross sales figures. Rather, it must subtract from the gross sales all
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of ShoeScandal’s direct and indirect expenses. See Nike, 138 F.3d at 1447.
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The Court finds evidence of the typical profit margin in the footwear industry
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sufficient for an award of damages on default. The ascertainment of the amount of
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damages is not certain, but it would be fundamentally unfair to deny all relief to
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Deckers. “The wrongdoer is not entitled to complain that [the damages] cannot be
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measured with the exactness and precision that would be possible if the case, which he
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alone is responsible for making, were otherwise.” However, the Court declines to
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grant the statutory damages as requested. The Court must balance the concern of
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fairness to an absent party against the risk that minimizing damages would motivate
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infringing parties to simply ignore infringement complaints. Instead the Court finds a
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statutory award of $107,226.99—based on a 45 percent profit margin—reasonable in
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this case. A profit margin of 45 percent represents an average of the 40–50 percent
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profit margin typical in the industry and adequately balances fairness and deterrence.
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(Poole Decl. ¶¶ 5–6.)
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B.
Attorney’s Fees and Costs
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Deckers also requests an award of reasonable attorneys’ fees under § 285.
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Under § 285, the Court must first determine that a case is “exceptional” and then it
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may exercise its discretion to award fees to the prevailing party. The standard for
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determining whether a case is exceptional under § 285 is set forth in Brooks Furniture
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Manufacturing, Inc. v. Dutailier International Inc., 393 F.3d 1378 (Fed. Cir. 2005).
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There, the Federal Circuit held that an award of attorneys’ fees is permissible “when
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there has been some material inappropriate conduct related to the matter in litigation,
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such as willful infringement, fraud or inequitable conduct in procuring the patent,
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misconduct during litigation, vexatious or unjustified litigation, conduct that violates
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Fed. R. Civ. P. 11, or like infractions.” Brooks, 393 F.3d at 1381. Indeed, the Federal
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Circuit has stated that attorneys’ fees should be awarded “only when it would be
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unjust not to make such an award.” Rohm & Haas Co. v. Crystal Chem. Co., 736 F.2d
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688, 692 (Fed. Cir. 1984). Thus, a court must predicate an attorneys’-fees award on
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something beyond the mere fact that the patentee has prevailed.
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Here, Deckers alleged that ShoeScandal sold and offered for sale the infringing
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shoes “knowingly and intentionally,” and that this conduct “constitute[d] willful acts
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and intentional infringement.” (Compl. ¶¶ 19, 23.) Deckers further asserts that, by
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failing to respond to its Complaint, ShoeScandal is deemed to have admitted that it
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willfully infringed Deckers’s design patent. But the fact that a default judgment was
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entered against ShoeScandal does not alone make this case exceptional—despite the
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default finding of willfulness. Accord Telequip Corp. v. The Change Exch., No. 5:01-
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CV-1748, 2007 WL 655734, at *2 (N.D.N.Y. Feb. 26, 2007) (denying patentee’s
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motion for attorneys’ fees and noting that “neither willful infringement nor defaults
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are unusual in patent-infringement cases.”); Cequent Trailer Prods., Inc. v. Intradin
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(Shanghai) Mach. Co., Ltd., No. 1:05-CV-2566, 2007 WL 438140, at *11 (N.D. Ohio
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Feb. 7, 2007) (awarding treble damages for willful infringement but refusing to award
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attorneys’ fees on default).
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Courts have awarded attorneys’ fees under 35 U.S.C. § 285 for willful
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infringement. Nat’l Gypsum Co. v. Steel Sys. Int’l, Inc., 696 F. Supp. 1379 (D. Or.
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1988); Chaparral Indus., Inc. v. Boman Indus., Inc., 697 F. Supp. 1113 (C.D. Cal.
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1988). And such an award has been upheld by the Federal Circuit. Spindelfabrik
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Suessen-Schurr, Stahlecker & Grill GmbH v. Schubert & Salzer Maschinenfabrik
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Aktiengesellschaft, 829 F.2d 1075 (Fed. Cir. 1987). But although a finding of willful
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infringement is a sufficient basis for finding a case exceptional, it does not compel
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such a finding. Tate Access Floors, Inc. v. Maxcess Techs., Inc., 222 F.3d 958, 972
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(Fed. Cir. 2000); Jurgens v. CBK, Ltd., 80 F .3d 1566, 1572 (Fed. Cir. 1996); Avia
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Group Intern., Inc. v. L.A. Gear Cal., Inc., 853 F.2d 1557, 1567 (Fed. Cir. 1988)..
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The bare default finding of willful infringement is insufficient evidence of
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exceptional circumstances to warrant an attorneys’-fees award. Attorneys’ fees are
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not awarded as a matter of course, and should not be permitted in the ordinary, typical
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patent suit. Neither default judgments nor willful infringement are uncommon in
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patent-infringement cases. The Court is not willing to categorize a default finding of
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willfulness as exceptional without some additional extraordinary circumstances plead
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in the complaint. An attorneys’-fees award should be premised upon a finding of
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unfairness, bad faith, or other equitable consideration of similar force that makes it
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grossly unjust that the prevailing party be left to bear the burden of its counsel’s fees.
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Deckers’s complaint does not allege such circumstances here.
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This is not to say that the Court condones ShoeScandal’s actions—it
intentionally failed to participate in this action.
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But although ShoeScandal is
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blameworthy for its failure to file responsive pleadings, this is not sufficiently
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exceptional to warrant an attorneys’-fees award.
Deckers is entitled to recover the costs incurred in litigating this action “upon
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finding for the claimant.” 35 U.S.C. § 284.
Accordingly, the Court GRANTS
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Deckers’s request for costs, subject to proof in an application to tax costs under Local
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Rule 54-2.1.
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C.
Pre- and Post-Judgment Interest
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It is within the Court’s discretion to award pre-judgment interest in design-
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patent infringement actions. See Catalina Lighting, 295 F.3d at 1292. Under 28
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U.S.C. § 1961(a), “interest shall be allowed on any money judgment in a civil case
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recovered in a district court.”
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judgment interest rate is appropriate, the rate of prejudgment interest is the Treasury
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Bill rate as defined in 28 U.S.C. § 1961. U.S. v. Gordon, 393 F.3d 1044, 1058 n.12
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(9th Cir. 2004); see also Blanton v. Anzalone (II), 813 F.2d 1574, 1576 (9th
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Cir.1987); Cyclone USA, Inc. v. LL & C Dealer Servs., LLC, CV 03-992 AJW, 2010
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WL 2132378, at *2 (C.D. Cal. May 24, 2010). The Treasury Bill rate is equal to the
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weekly average one-year constant maturity Treasury yield for the calendar week
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preceding the date of the judgment as the appropriate rate for interest. 28 U.S.C. §
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1961(a). The Court therefore awards Deckers $14,913.22 in pre-judgment interest
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from June 25, 2012, through November 20, 2013.2
Absent substantial evidence that a different pre-
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Deckers is entitled to post-judgment interest on their monetary award under
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28 U.S.C. § 1961(a). Further, interest is computed daily until the date of payment.
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Id.§ 1961(b). The Court therefore awards Deckers post-judgment interest at a rate of
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9.8 percent from November 21, 2013, until the date of payment.
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((($107,226.99×.098)÷365)×518) = $14, 913.22
The average 52-week Treasury rate for the week preceding judgment is 9.8%. Principal Amount
Due is $107,226.99. The daily interest (($107,226.99 × 0.098) ÷ 365) is $28.79. Interest accrued
from June 25, 2012, to November 25, 2013, ($28.79 × 518 days) is equal to $14,913.22.
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V.
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CONCLUSION
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For the reasons discussed above, the Court GRANTS Deckers’s Renewed
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Request for an Award of Damages in Default Judgment and awards Deckers a total
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amount of $122,140.21. The Court also awards Deckers post-judgment interest at a
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rate of 9.8 percent from November 26, 2013, until the date of payment. Under Local
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Rule 54-2.1 Deckers has fourteen days from the date of this order to submit a bill of
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cost. A default judgment will issue.
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IT IS SO ORDERED.
November 25, 2013
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____________________________________
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE
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