Sprint Nextel Corporation et al v. Welch et al

Filing 40

FINAL Stipulated Judgment and Permanent Injunction Against Defendant Aaron Simon Welch d/b/a The Cell Cycle, signed by District Judge Anthony W. Ishii on 1/28/2015. CASE CLOSED. (Marrujo, C)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA 9 10 11 12 SPRINT NEXTEL CORPORATION, and SPRINT COMMUNICATIONS COMPANY, L.P., 13 Plaintiffs, 14 Case No.: 1:13-cv-01174-AWI-SAB v. 15 AARON SIMON WELCH, individually and d/b/a/ THE CELL CYCLE, FINAL STIPULATED JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANT AARON SIMON WELCH D/B/A THE CELL CYCLE 16 17 Defendant. 18 Plaintiffs Sprint Nextel Corporation and Sprint Communications Company, L.P. 19 (collectively, “Sprint” or “Plaintiffs”) brought the above-captioned lawsuit against 20 Defendant Aaron Simon Welch d/b/a The Cell Cycle (collectively, “Defendant”), alleging 21 that Defendant is engaged in an unlawful enterprise involving the unauthorized and 22 deceptive bulk purchase and resale overseas of specially-manufactured wireless 23 telephones designed for use on Sprint’s wireless service, including the Sprint iPhone 24 (collectively, “Sprint Phones” or “Sprint Handsets” or “Phones” or “Handsets”), the theft 25 of Sprint’s subsidy investment in the Phones, the unlawful access of Sprint’s protected 26 computer systems and wireless network, the trafficking of Sprint’s protected and 27 24925632.1 28 FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANT AARON SIMON WELCH 1 1:13-cv-01174 1 confidential computer passwords, and the willful infringement of Sprint’s trademarks 2 (collectively, the “Bulk Handset Trafficking Scheme” or the “Scheme”). 3 Defendant perpetrated the Bulk Handset Trafficking Scheme by acquiring large 4 quantities of Sprint Phones from Sprint and/or Sprint authorized retailers and dealers, and 5 by soliciting others to purchase Sprint Phones in large quantities for the benefit of 6 Defendant. Defendant acquired the Sprint Phones with the knowledge and intent that the 7 Phones will not be used on the Sprint wireless network (as required by the Sprint 8 contracts). Instead, the Phones are trafficked and the vast majority are resold as new 9 overseas where the Phones are not subsidized by wireless carriers (as they are in the United 10 States) and where the Phones are not as readily available. In some cases, Defendant 11 acquired the Sprint Phones with the knowledge and intent that the Phones will be 12 computer-hacked. The purpose of this hacking, known as “unlocking,” is to disable 13 software installed in the Phones by the manufacturers at the request and expense of Sprint, 14 which enables the activation of the Sprint Phones exclusively on Sprint’s wireless system. 15 The purpose of the software is to allow Sprint to offer the Phones at a discount to the 16 consumer while protecting Sprint’s subsidy investment in the Phone. The illegally 17 unlocked Phones are trafficked and resold as new by Defendant, at a premium, under the 18 Sprint trademarks. 19 Sprint Phones are sold subject to terms and conditions (“Terms and Conditions”) 20 which conspicuously restrict and limit the sale and use of the Phones. These Terms and 21 Conditions are set forth in printed inserts that are packaged with each Phone and are posted 22 on Sprint’s website. Pursuant to the Terms and Conditions of Sprint Phones, purchasers 23 agree, among other things: (a) to pay the monthly service charges and other related fees; (b) 24 to pay an Early Termination Fee (“ETF”) for each line of service that is terminated before 25 the contract term is concluded; (c) to activate the Sprint Phones on the Sprint CDMA 26 27 29094717.1 28 FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANT AARON SIMON WELCH 2 1:13-cv-01174 1 network; (d) not to resell the Sprint Phones and related products and services; and (e) not to 2 use the Phones for a purpose that could damage or adversely affect Sprint. 3 As a result of Defendant’s involvement in the Bulk Handset Trafficking Scheme, 4 Sprint has asserted claims against Defendant for breach of contract, common law unfair 5 competition, tortious interference with business relationships and prospective advantage, 6 civil conspiracy, unjust enrichment, conspiracy to induce breach of contract, common law 7 fraud, fraudulent misrepresentation, violations of the federal Computer Fraud and Abuse 8 Act, 18 U.S.C. § 1030, et seq., federal trademark infringement under 15 U.S.C. § 1114, 9 federal common law trademark infringement and false advertising under 15 U.S.C. § 10 1125(a)(1)(A) and (B), contributory trademark infringement, conversion and unfair 11 competition under Cal. Bus. & Pro. Code § 17200, et. seq. 12 The parties specifically stipulate (Docs. 36 and 36-1) to the following: 13 1. This Court has jurisdiction over all the parties and all of the claims set forth 14 in Sprint’s Complaint. 15 2. Sprint has the right to use and enforce rights in the standard character 16 Sprint® mark and stylized Sprint® trademarks (collectively, the “Sprint Marks”), as 17 depicted below: 18 19 20 Sprint uses the Sprint Marks on and in connection with its telecommunications products 21 and services. The Sprint Marks are valid, distinctive, protectable, famous, have acquired 22 secondary meaning, and are associated exclusively with Sprint. 23 3. The Terms and Conditions and the language in and on the packaging 24 constitute a valid and binding contract enforceable against Defendant. The acts of (a) 25 failing to pay for monthly service charges; (b) failing to pay ETF fees; (c) failing to 26 activate the Phones on the Sprint wireless network; (d) reselling and exporting the Sprint 27 29094717.1 28 FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANT AARON SIMON WELCH 3 1:13-cv-01174 1 Phones and related products and services; and (e) using the Phones for a purpose that could 2 damage or adversely affect Sprint, constitute independent breaches of contract for which 3 Sprint is entitled to relief. 4. 4 The conduct set forth in the Complaint constitutes violations of the Lanham 5 Act, 15 U.S.C. §§ 1114 and 1125(a)(1)(A) and (B) (federal trademark infringement and 6 false advertising). The conduct also constitutes breach of contract, common law unfair 7 competition, tortious interference with business relationships and prospective advantage, 8 civil conspiracy, unjust enrichment, conspiracy to induce breach of contract, common law 9 fraud, fraudulent misrepresentation, violations of the federal Computer Fraud and Abuse 10 Act, 18 U.S.C. § 1030, et seq., contributory trademark infringement, conversion and unfair 11 competition under Cal. Bus. & Pro. Code § 17200, et. seq. 5. 12 Sprint has suffered damages, including loss of goodwill and damage to its 13 reputation, as a result of Defendant’s conduct. Sprint is entitled to damages and injunctive 14 relief on the claims as set forth in the Complaint for the amount of $5 million. 6. The last known address of Defendant is 408 San Juan Drive, Modesto, CA 7. 15 Defendant waives any and all rights to challenge the validity of this Final 16 95354. 17 18 Judgment in this Court or in any other court, and specifically waives his right of appeal 19 from the entry of this Final Judgment. 20 8. A violation of this Permanent Injunction should be enforced by payment of 21 compensatory damages to Plaintiffs in an amount of $5,000 for each Sprint Phone that 22 Defendant is found to have purchased, sold or unlocked in violation of the Injunction. 23 Accordingly, it is ORDERED that, 24 Final judgment is entered against Defendant Aaron Simon Welch, and in favor of 25 the Plaintiffs, on all of the claims set forth in Plaintiffs’ Complaint in the principal amount 26 27 29094717.1 28 FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANT AARON SIMON WELCH 4 1:13-cv-01174 1 of Five Million Dollars and Zero Cents ($5,000,000.00 (U.S.)), which shall bear interest at 2 the legal rate, for which let execution issue forthwith. 3 Defendant and all of his past and present agents, employees, heirs, personal 4 representatives, beneficiaries, relatives, and all other persons or entities acting or 5 purporting to act for them or on his behalf, including, but not limited to, any corporation, 6 partnership, proprietorship or entity of any type that is in any way affiliated or associated 7 with Defendant or Defendant’s representatives, agents, assigns, employees, independent 8 contractors, associates, servants, and any and all persons and entities in active concert and 9 participation with Defendant who receive notice of this Order, shall be and hereby are 10 PERMANENTLY ENJOINED from, without Sprint’s prior written consent: a. 11 purchasing, selling, unlocking, reflashing, altering, advertising, soliciting and/or shipping, directly or indirectly, any Sprint Phones; 12 b. 13 supplying Sprint Phones to or facilitating or in any way assisting 14 other persons or entities who Defendant knows or should know are 15 engaged in the purchase or sale of Sprint Phones or hacking, altering, 16 erasing, tampering with, deleting or otherwise disabling the software 17 installed in Sprint Phones; c. 18 engaging in any of the conduct described in the Complaint as the “Bulk Handset Trafficking Scheme;” 19 d. 20 supplying Sprint Phones to or facilitating or in any way assisting 21 other persons or entities who Defendant knows or should know are 22 engaged in any of the acts prohibited under this Permanent 23 Injunction, including, without limitation, the buying and/or selling of 24 Sprint Phones; and e. 25 knowingly using the Sprint Marks or any other trademark, service mark, trade name and/or trade dress owned or used by Sprint now or 26 27 29094717.1 28 FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANT AARON SIMON WELCH 5 1:13-cv-01174 1 in the future, or that is likely to cause confusion with Sprint’s Marks, 2 without Sprint’s prior written authorization. 3 The Court retains jurisdiction over this matter and the parties to this action in order 4 to enforce any violation of the terms of this Permanent Injunction. The Clerk of the Court 5 is directed to close this case. 6 7 8 IT IS SO ORDERED. 9 Dated: January 28, 2015 SENIOR DISTRICT JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 29094717.1 28 FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANT AARON SIMON WELCH 6 1:13-cv-01174

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