Wordtech Systems Inc v. Integrated Network, et al

Filing 336

MEMORANDUM AND ORDER signed by Judge Morrison C. England, Jr on 10/6/2009 GRANTING 304 Motion for Entry Default Judgment. (Matson, R)

1 2 3 4 5 6 7 8 9 10 11 12 Plaintiff, 13 v. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff Wordtech Systems, Inc. ("Plaintiff") brought this action against Ehteram Ghodsian ("Defendant"), Integrated Network Solutions Corp. ("INSC"), Nasser Khatemi ("Khatemi"), and Hamid Assadian ("Assadian"), among others, alleging infringement of several of its patents ("Patents-in-Suit"). 1 INTEGRATED NETWORK SOLUTIONS, CORP., dba INTEGRATED SYSTEMS, aka INTERNET NETWORK STORAGE COMPANY, aka INSC; NASSER KHATEMI; HAMID ASSADIAN; BRIAN J. DEAN; MICHAEL F. ELLSWORTH; EHTERAM GHODSIAN; INTEGRATED NETWORK SOLUTIONS, INC., a Nevada Corporation; SHOHREH JAVADI; SAN JUAN UNIFIED SCHOOL DISTRICT; and DOES 1-50, Defendants. ----oo0oo---MEMORANDUM AND ORDER WORDTECH SYSTEMS, INC., A California Corporation No. 2:04-cv-01971-MCE-EFB UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

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Wordtech succeeded at trial against non-defaulting Defendants INSC, Khatemi, and Assadian. Presently before the

Court is Plaintiff's Motion for Default Judgment against defaulting Defendant. For the reasons set forth below

Plaintiff's Motion is GRANTED.1

BACKGROUND

On September 22, 2004, Plaintiff, a California corporation and the owner of the Patents-in-Suit filed an infringement action against Defendant individually, INSC, Khatemi, Assadian, and others. Defendant is alleged to be the sole owner of INSC and to have willfully infringed Plaintiff's patent rights. failed to answer Plaintiff's Complaint. 2005, Plaintiff took Defendant's default. Defendant

Consequently, on June 3, The case proceeded to

trial against the non-defaulting Defendants: INSC, Khatemi and Assadian. On November 17, 2008, a jury found that the non-defaulting Defendants had infringed Plaintiff's patent rights and awarded Plaintiff $250,000. On January 15, 2009, the Court trebled the

jury verdict and awarded Plaintiff over $1.3 million. Subsequently, Plaintiffs filed the present Motion seeking an entry of default judgment against Defendant. ///

Because oral argument was not be of material assistance, the Court ordered this matter submitted on the briefs. E.D. Cal. Local Rule 78-230(h). 2

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STANDARD

The starting point for considering whether to grant a motion for entry of default judgment is the general rule that default judgments are ordinarily disfavored. 1470, 1472 (9th Cir. 1986). Eitel v. McCool, 782 F.2d

Cases should be decided upon their Pena v. Seguros La

merits whenever reasonably possible.

Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985). Whether to grant a motion for default judgment, however, is within the Court's discretion. Eitel, 782 F.2d at 1472. The

Ninth Circuit has set forth seven factors which may be considered in exercising this discretion: (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning material facts, (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Id.

The complaint's factual allegations are taken as true against a defaulting defendant, except with respect to damages. TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987). /// /// /// /// /// 3

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ANALYSIS

Defendant argues that INSC was found to be a valid corporation and as such Plaintiff cannot pierce the corporate veil and recover from her on an individual basis. The officers

of an infringing corporation, however, can be held individually liable for corporate torts in which the officer participates. Comm. for Idaho's High Desert, Inc. v. Yost, 92 F.3d 814, 823 (9th Cir. 1996). Corporate officers are also liable for the tort

of patent infringement under 35 U.S.C. § 271 where the officer has an "active directing hand in full charge of its operations". Int'l Mfg. Co. v. Landon, Inc., 336 F.2d 723, 728 (9th Cir. 1964). Applying these principles to the present case, the exhibits provided by Plaintiff in support of this Motion establish that Defendant was an officer and owner of INSC. Plaintiff also

alleges in its complaint that Defendant was individually involved in infringing the Patents-in-Suit. As indicated above, given

Defendant's default, those allegations must be taken as true. Contrary to Defendant's assertion, then, she can properly be held personally liable for infringing Plaintiff's patent rights. Where defendants are jointly liable and one of them defaults, an entry of default judgment should not be entered until the matter has been adjudicated with regard to all defendants. /// /// 4 Frow v. De la Vega, 82 U.S. 552, 554 (1872).

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This rule has been extended in cases even if the defendants are not jointly liable, as long as they are similarly situated. In

re First T.D. & Inv., Inc., 253 F.3d 520, 532 (9th Cir. 2001). Plaintiff's claims in this matter have been fully adjudicated through trial. The same result should apply to

Defendant, as a defaulted party, unless the result would be incongruous and unfair. Id. In this case, the nature of the

claims, legal issues, and facts of this case are similar with respect to all defendants. Plaintiff prevailed on its patent Given that result, it is

infringement claims at trial.

consistent to apply that same result to Defendant. Furthermore, a majority of the factors identified as relevant for default purposes by the Ninth Circuit in Eitel, supra, support entry of default judgment in this case. will be prejudiced if default judgment is denied because Plaintiff will not be able to recover against Defendant for patent infringement. Plaintiff established the merits of their Plaintiff

claim at trial and provided evidence against Defendant in Plaintiff's Motion and its supporting exhibits. Plaintiff's

complaint sufficiently stated a claim for patent infringement against Defendant. All material facts were resolved at trial,

the case was decided on its merits, and Defendant's default was not due to excusable neglect. Plaintiff's Motion for Entry of Default Judgment against Defendant will therefore be granted. /// /// /// 5

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2.

Damages

Plaintiff is required to prove the damage they are seeking in the claim. Philip Morris USA, Inc. v. Castworld Products, The burden on the

Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003).

plaintiff to prove damages is relatively lenient, and if injury is established plaintiff only needs to prove that the damages "naturally flow from the injuries." Id. The damages asked for

must be supported by the specific allegations in the complaint. Id. at 499. Multiple defendants who have jointly infringed on a patent are jointly and severally liable for the damages that result. U.S. Philips Corp. v. International Norcent Tech., 2007 WL 4984156, *2 (C.D. Cal. 2007).

In the instant case, Plaintiff received a jury award for actual damages in the amount of $250,000 for infringement of the Patents-in-Suit. Plaintiff has established that Defendant is

liable for patent infringement and is therefore liable for this amount jointly and severally with the non-defaulting Defendants. The Court declines to hold Defendant liable for the trebled damages granted to Plaintiff by this Court on January 15, 2009, or for the substantial attorney's fees incurred by Plaintiff in this matter. Both the trebled damages and attorney's fees were

primarily the result of trial as to the remaining Defendants. Defendant defaulted and therefore did not individually participate in that trial. /// /// /// 6

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CONCLUSION

For the following reason Plaintiff's Motion for Entry of Default Judgment (Docket No. 304) is GRANTED.2 The judgment

previously entered shall accordingly be amended to reflect judgment in the amount of against Defendant. IT IS SO ORDERED. Dated: October 6, 2009 $250,000.00 jointly and severally

_____________________________ MORRISON C. ENGLAND, JR. UNITED STATES DISTRICT JUDGE

Inasmuch as the Court did not consider Defendant's letter to the Court dated June 18, 2009 (Docket No. 194) in adjudicating this Motion, Plaintiff's Motion to Strike that letter is DENIED as moot. 7

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