Digby Adler Group LLC v. Image Rent A Car, Inc. et al
Filing
149
ORDER by Judge Samuel Conti granting in part and denying in part #122 Motion for Partial Summary Judgment; denying #134 Motion for Summary Judgment (sclc1, COURT STAFF) (Filed on 2/6/2015)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
United States District Court
For the Northern District of California
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DIGBY ADLER GROUP LLC,
) Case No. 10-cv-00617-SC
)
Plaintiff,
) ORDER ON CROSS MOTIONS FOR
) SUMMARY JUDGMENT
v.
)
)
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IMAGE RENT A CAR, INC., et al., )
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Defendants.
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)
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I. INTRODUCTION
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Now before the Court are two motions for summary judgment.
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One is brought by Plaintiff Digby Adler Group, LLC.
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("Pl.'s Mot.").
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No. 134 ("Sebag Mot.").
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Court deems them suitable for disposition without oral argument
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pursuant to Civil Local Rule 7-1(b).
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below, Plaintiff Digby Adler Group, LLC's motion for summary
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ECF No. 122
The other is brought by Defendant Gad Sebag.
ECF
Both motions are fully briefed, 1 and the
For the reasons set forth
ECF Nos. 128 ("Defs.' Opp'n"), 135 ("Pl.'s Reply"), 142 ("Pl.'s
Opp'n"), 144 ("Sebag Reply").
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judgment is GRANTED in part and DENIED in part, and Defendant Gad
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Sebag's motion for summary judgment is DENIED.
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II. BACKGROUND
Plaintiff Digby Adler Group, LLC ("Digby") has operated a van
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rental service under the name Bandago, LLC ("Bandago") through its
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United States District Court
A.
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For the Northern District of California
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Factual Background
website, bandago.com, since 2003.
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1-2.
ECF No. 124 ("Laguana Decl.") ¶¶
On August 31, 2010, the United States Patent and Trademark
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Office ("PTO") issued federal trademark registration number 3839689
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to Digby for the BANDAGO mark.
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18.
ECF No. 123 ("Rosenfeld Decl.") Ex.
The defendants in this matter are two individuals -- Gad Sebag
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and Schneior Zilberman -- and two companies -- Image Rent A Car,
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Inc. ("Image") and Van Rental Co., Inc. ("Van") (Van and Image will
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be referred to collectively as the "Corporate Defendants").
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Zilberman operated a third rental car company called Adir Rent A
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Car, Inc., from 1996 through 2004.
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¶¶ 3-8.
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dealership that supplied its inventory resulted in the supplier
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refusing to let Adir use its cars.
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personal finances and credit were seriously damaged in the process.
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Id. ¶ 9.
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law -- asking for financial assistance to start a new company.
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¶ 9.
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CEO, loan money to the company, and allow Mr. Zilberman to use his
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credit rating to obtain cars.
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9).
Mr.
ECF No. 129 ("Zilberman Decl.")
Adir folded in 2004, when a dispute with the car
Id. ¶¶ 6-8.
Mr. Zilberman's
So Mr. Zilberman approached Mr. Sebag -- his brother-inId.
Mr. Sebag agreed to form a rental car company, serve as its
ECF No. 130 ("Sebag Decl. I") ¶¶ 7,
However, according to both Mr. Sebag and Mr. Zilberman, Mr.
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Zilberman alone would control all of the company's operations.
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Id.; Zilberman Decl. ¶¶ 14, 17-19.
In October 2004, Defendant Image Rent A Car, Inc. ("Image")
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("Sebag Decl. II") at 1.
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the company's CEO (though the corporate record kept by the New York
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Department of State reflects the name "Gao Sebaf") and sole
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United States District Court
was incorporated under the law of New York State.
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For the Northern District of California
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ECF No. 21-4
shareholder; he also described Image as "my company."
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Ex. 13 at 16 2; Rosenfeld Decl. Exs. 16, 42 at 14:3-11 (Sebag "owned
Mr. Sebag filed for incorporation and was
ECF No. 137
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and initiated [Image and Van]"), 44 at 30:10-13.
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Zilberman served as Image's general manager.
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Image operated a car and van rental service primarily in New York,
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though it also had offices in Florida.
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rental service through its website, imagerentacar.com.
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5 at Responses 19-20.
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bylaws, without even the name of the corporation filled in.
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No. 137 Ex. 13 at 17-66.
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directors with at least three directors, Image never had a board of
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directors.
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it ever held shareholder meetings or keep corporate minutes.
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Ex. 13 at 2, 15-66.
Id. Ex. 2 at 1.
Image marketed its
Id. Exs. 4-
Image's bylaws were simply blank form
ECF
Though the bylaws require a board of
Id. Ex. 13 at 2.
Nor do Image's records indicate that
Id.
Defendant Van Rental Co., Inc. ("Van") was incorporated under
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Id.
Defendant Shneior
the law of New York State in July 2007.
Rosenfeld Decl.d. Ex. 17.
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Plaintiff's initial filing of the Rosenfeld Declaration (ECF No.
123) included an exhibit that failed to redact certain personal
information.
Pursuant to the Court's order, the initial filing
was expunged from the record and replaced with a properly redacted
version. See ECF Nos. 138, 141. As a result, exhibits 11-13 of
the Rosenfeld Declaration have a different electronic court filing
number than the other 56 exhibits.
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into new areas, Van was defunct almost from the start and never
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actually operated.
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Van's CEO and sole shareholder.
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Mr. Zilberman, who served as Van's president, recalls that Van
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either owned "none or very few" vehicles.
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42:14-19.
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United States District Court
Initially founded with the objective of expanding Image's business
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For the Northern District of California
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companies operated essentially as one entity.
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42 at 8:14-18, 10:3-4.
Id. Ex. 42 at 4:6-19, 5:6-12.
Mr. Sebag was
Id. Exs. 1 at 1, 42 at 14:3-11.
See Id. Exs. 26 at 3,
Van's finances were run through Image, and the two
Rosenfeld Decl. Ex.
In August of 2008, Van registered the domain name bandago.net
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(recall that Digby's website was bandago.com).
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31.
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owner, the contact email address supplied was
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info@imagerentacar.com.
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bandago.net; the site simply redirected visitors to Image's
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website.
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bandago.com domain, Defendants bid on the Google AdWords search
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terms "bandago," "bandago van rental," and "bandago van rentals"
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(the "Bandago Search Terms").
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AdWords is a service that lets customers bid on certain search
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terms, so that the customer's website will show up as advertisement
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when Google visitors search for those terms.
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advertisements that would direct users to Image's website when they
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searched for the Bandago Search Terms.
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AdWords account was registered in Mr. Sebag's name, but Mr.
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Zilberman operated the account.
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Id. Ex. 7 at 6; Ex.
Though the account with the domain registrar listed Van as the
Id. Ex. 31 at 3.
Sebag Decl. II at 2.
There was no website at
In addition to registering the
Rosenfeld Decl. Ex. 23.
Google
Defendants paid for
Id. Ex. 24.
The Google
Id. Exs. 9 at 2, 35.
On July 1, 2007, Digby's CEO, Sharky Laguana, created content
for the Bandago website.
The text on the website described
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Bandago's vans and rental services.
Laguana Decl. ¶ 11, Ex. 3.
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Digby applied for a copyright registration to cover the text of the
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website, and the PTO granted the registration on January 31, 2011.
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Rosenfeld Decl. Exs. 19-20.
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modified very slightly to reflect Image's name and locations)
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appeared on Image's website.
Virtually identical text (sometimes
See id. Exs. 52-59.
On April 27, 2010, Philippe Naim (Mr. Sebag's uncle) formed a
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United States District Court
For the Northern District of California
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corporation called Group Travel Solution, Inc. ("GTS").
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49 at 8:6-23; 60.
Id. Exs.
Mr. Naim recalls that GTS purchased Image's
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assets, including vehicles, phones, and websites.
Id. Ex. 49 at
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9:2-4.
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but guesses that the number was "[b]etween fifty and sixty."
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at 9:5-11.
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each.
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tax returns -- a 39-page exhibit -- with no pincite or explanation.
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But those returns indicate only that GTS owned some large number of
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vehicles, and the tax returns do not indicate the vehicles' source
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or sources.
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16-19, 22-27, 37-38.
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sale of 20 of the vehicles, and the sale prices and proceeds show
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that each was originally acquired for $1.
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On March 24, 2011, Van and Image filed for bankruptcy.
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25-26.
He does not recall exactly how many vehicles GTS purchased,
Id.
Digby asserts that GTS purchased 78 cars for one dollar
See Pl.'s Mot. at 10.
In support, Digby cites to GTS' 2010
See Rosenfeld Decl. Ex. 50 (filed under seal) at 11,
GTS' tax returns do, however, reflect the
See id. at 11, 24-27.
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B.
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This case was filed on February 11, 2010.
Id. Exs.
Procedural History
See ECF No. 1
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("Compl.").
The transfer of assets described above therefore took
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place after the filing of this lawsuit but before Van and Image
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declared bankruptcy.
When the Corporate Defendants filed for
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bankruptcy proceedings.
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2014, the bankruptcy court dismissed both bankruptcy proceedings.
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See ECF No. 96 Exs. A-B.
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Digby's unopposed motion to lift the stay.
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then moved for summary judgment, alleging that Mr. Sebag and Mr.
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Zilberman are personally liable for Van and Image's actions because
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United States District Court
bankruptcy, the Court stayed this case pending the outcome of the
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For the Northern District of California
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all defendants are alter egos of one another and because officers
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and directors of a corporation are liable for torts they authorize
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See ECF No. 90 ("Stay Order").
On May 23,
On June 16, 2014, the Court granted
or in which they participate.
See ECF No. 97.
Digby
Pl.'s Mot. at 19-21.
Defendants opposed the motion, but they conceded that the
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Corporate Defendants are liable for trademark and copyright
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infringement.
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cybersquatting.
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that Mr. Sebag and Mr. Zilberman are not alter egos of Van or Image
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and that Mr. Sebag is not personally liable as an officer or
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director.
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that he cannot be held liable for the Corporate Defendants'
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actions.
They also concede two of the elements of
See Defs.' Opp'n at 1.
However, Defendants argue
Mr. Sebag then moved for summary judgment on the grounds
See Sebag Mot.
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III. LEGAL STANDARD
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Entry of summary judgment is proper "if the movant shows that
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there is no genuine dispute as to any material fact and the movant
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is entitled to judgment as a matter of law."
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56(a).
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require a directed verdict for the moving party.
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Liberty Lobby, Inc., 477 U.S. 242, 251 (1986).
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bears the initial burdens of production and persuasion.
Fed. R. Civ. P.
Summary judgment should be granted if the evidence would
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Anderson v.
The moving party
Nissan
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Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099,
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1102 (9th Cir. 2000).
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IV. DISCUSSION
The Court begins with a discussion of the Corporate
Sebag or Mr. Zilberman may be held liable for the Corporate
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United States District Court
Defendants' liability, and then proceeds to analyze whether Mr.
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For the Northern District of California
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Defendants' actions.
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A.
The Corporate Defendants
Defendants do not vigorously contest the allegations against
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the Corporate Defendants.
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to the trademark infringement and copyright infringement claims.
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Defendants also concede that two of the three elements of Digby's
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cybersquatting claim are met, but they contest the third.
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Court examines each cause of action in turn.
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1.
In fact, Defendants concede liability as
The
Trademark Infringement
"To establish a trademark infringement claim . . . , [Digby]
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must establish that [Defendants are] using a mark confusingly
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similar to a valid, protectable trademark of [Digby's]."
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Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036,
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1046 (9th Cir. 1999).
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the Bandago mark.
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"registration of the mark on the Principal Register in the Patent
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and Trademark Office constitutes prima facie evidence of the
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validity of the registered mark and of [Digby's] exclusive right to
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use the mark on the goods and services specified in the
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registration."
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registration of the bandago.net domain and bids on the Bandago-
It is undisputed that Digby has registered
See Rosenfeld Decl. Ex. 18.
Id. at 1047.
Digby's
Digby asserts that Defendants'
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Defendants do not dispute that Van and Image's conduct constitute
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trademark infringement; in fact, Defendants concede that Van and
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Image are liable for infringement of Digby's mark.
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Opp'n at 1, 11-12.
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liable for trademark infringement.
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respect to the allegations that Van and Image infringed upon
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United States District Court
related Google AdWords constitute use of the Bandago mark.
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For the Northern District of California
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Digby's trademark.
2.
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See Defs.'
Accordingly, the Court finds Van and Image
Digby's motion is GRANTED with
Copyright Infringement
"A plaintiff who claims copyright infringement must show: (1)
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ownership of a valid copyright; and (2) that the defendant violated
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the copyright owner's exclusive rights under the Copyright Act."
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Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004).
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copyright registration is 'prima facie evidence of the validity of
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the copyright and the facts stated in the certificate.'"
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Fabrics Int'l, Inc. v. C&J Wear, Inc., 630 F.3d 1255, 1257 (9th
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Cir. 2011) (quoting 17 U.S.C. § 410(c)).
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Digby has a registered copyright for the text of the bandago.com
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website.
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that the Corporate Defendants used language copied almost verbatim
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from Digby's website on the Image website (though they did so
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before the copyright was registered).
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again, Defendants concede that Van and Image infringed upon Digby's
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copyright.
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Image liable for copyright infringement.
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summary judgment is GRANTED with respect to the allegations that
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Van and Image infringed upon Digby's copyright.
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///
See Rosenfeld Decl. Exs. 19-20.
United
It is undisputed that
It is also undisputed
See id. Exs. 52-59.
See Defs.' Opp'n at 1, 11-12.
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"A
Once
The Court finds Van and
Digby's motion for
3.
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Cybersquatting
"The Anti–Cybersquatting Consumer Protection Act ["ACPA"]
proves that (1) the defendant registered, trafficked in, or used a
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domain name; (2) the domain name is identical or confusingly
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similar to a protected mark owned by the plaintiff; and (3) the
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defendant acted 'with bad faith intent to profit from that mark.'"
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United States District Court
establishes civil liability for 'cyberpiracy' where a plaintiff
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For the Northern District of California
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DSPT Int'l, Inc. v. Nahum, 624 F.3d 1213, 1218-19 (9th Cir. 2010).
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Digby alleges that (1) Defendants registered and used the
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bandago.net domain name; (2) the bandago.net domain name is
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identical to the Bandago mark; and (3) that Defendants acted with
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bad faith intent to profit from that mark.
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With respect to the cybersquatting claim, Defendants concede
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the first two elements: they admit that Van and Image registered
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the bandago.net domain name and that "bandago.net" is identical to
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Digby's Bandago mark.
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allege that there is a genuine dispute of material fact regarding
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the bad faith requirement.
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consider in determining whether an alleged cybersquatter acted in
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bad faith.
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factors are permissive and not exhaustive, the Ninth Circuit has
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emphasized that courts "need not, however, march through the nine
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factors seriatim . . . .
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finding bad faith are the unique circumstances of the case . . . ."
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Lahoti v. VeriCheck, Inc., 586 F.3d 1190, 1202 (9th Cir. 2009).
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See Defs.' Opp'n at 9.
However, Defendants
The ACPA sets out nine factors to
15 U.S.C. § 1125(d)(1)(B)(i).
But because the ACPA
[I]nstead, the most important grounds for
Nonetheless, the parties both discuss the ACPA factors, so it
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seems appropriate to begin the discussion there.
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factors are uncontroversial: it is undisputed, for example, that
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Some of the
mark, that bandago.net does not consist of Defendants' legal name,
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that Defendants never used the domain name in connection with the
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bona fide offering of any goods or services, and that Defendants
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never engaged in a bona fide noncommercial use of the mark in a
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site accessible under the domain name.
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clear that Defendants intended to divert consumers from Digby's
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United States District Court
Defendants have no intellectual property rights to the Bandago
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For the Northern District of California
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website.
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bandago.net domain name -- which Defendants acknowledge is
More importantly, it is
Digby has shown that Defendants registered the
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identical to Digby's Bandago mark -- and set up that domain to
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redirect to Defendants' own website.
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competing van rental companies, it is evident that this was an
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attempt to divert Digby's business.
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Defendants do not contest this factor in their opposition brief.
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See Defs.' Opp'n at 10-11.
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On the other hand, it also undisputed that Defendants never offered
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to sell or transfer the domain to Digby, so that factor favors
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Defendants.
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Court will address each in turn.
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Because Digby and Image were
Sebag Decl. II at 2.
Those factors, therefore, favor Digby.
The parties dispute the remaining factors, so the
The seventh bad faith factor is provision of misleading or
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false contact information.
The bandago.net domain was registered
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to Van.
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fictitious entity designed only to shield Image from liability, and
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so the contact information was misleading because it concealed
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Image's involvement, even though it provided Image's true phone
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number, email, and address.
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cites no authority in support of that interpretation of
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"misleading."
Rosenfeld Decl. Ex. 31.
Digby argues that Van was a
See Digby Mot. at 14.
However, Digby
Defendants emphasize that Van used its actual
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address.
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previously argued that Van and Image shared a physical address,
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phone numbers, and email addresses, see Digby Mot. at 7, it seems
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that little concealment was actually involved.
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favors Digby at all, the Court assigns it very little weight.
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See Defs.' Opp'n at 10.
Indeed, given that Digby
If this factor
The eighth bad faith factor is Defendants' registration of
United States District Court
multiple domain names confusingly similar to others' marks.
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For the Northern District of California
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Here,
Digby points out that Defendants registered the domains
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whizzcarhire.com and albacarhire.com, which are similar to other
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car rental companies' internet domains.
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Defendants respond that Whizz Car appears to be located in
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Singapore, Alba Car appears to be located in Spain, and that
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Plaintiffs have provided no evidence that either company existed
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when Defendants registered those domains.
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that this factor is not terribly persuasive in this situation.
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See Digby Mot. at 14-15.
Again, the Court finds
The ninth bad faith factor is the extent to which the mark at
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issue is or is not distinctive and famous.
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acknowledge that the Bandago mark is distinctive, but they contest
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whether it is famous.
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factor is not very persuasive for either side.
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Defendants apparently
See Defs.' Opp'n at 11.
Once more, this
Ultimately, the statutory factors are not hugely helpful in
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making a bad faith determination in this case, except for the
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intentional diversion factor.
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Digby; the sixth favors Defendants; and the last three are either
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neutral or not very important given the facts of this case.
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Court finds that the most important factor in this case is the
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fifth: that Defendants intended to divert consumers from Digby's
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website.
Five of the factors undeniably favor
The
Combined with the first four factors, which establish
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that Defendants had no legitimate interest in using the Bandago
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mark, the intent to divert consumers is a powerful indication of
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Defendants' bad faith.
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it is the broader circumstances of this case that finally resolve
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the issue.
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However, that does not end the inquiry, as
In the cybersquatting context, the Ninth Circuit has held that
United States District Court
the unique circumstances of the case are the most important
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For the Northern District of California
7
consideration in determining bad faith.
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in this case are that Defendants not only registered a domain name
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that they admit was identical to the Bandago mark, but they bid on
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Google AdWords to redirect consumers to the Image website.
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is, Defendants were not content merely to redirect visitors who
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accidently typed "bandago.net" instead of "bandago.com" into their
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browsers.
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search engines to show the Image website as a result when consumers
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searched for "bandago" and related terms.
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why Defendants would want to do that, unless they intended to use
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the Bandago mark to generate business for themselves.
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Defendants offer no alternative explanation.
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the Court finds that there is only one reasonable interpretation of
21
the evidence: Defendants acted in bad faith because they registered
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the bandago.net domain solely to take advantage of Digby's
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goodwill, reputation, and name recognition in the Bandago mark.
24
Because the Court finds that Defendants acted with the bad
25
faith intent to profit from Digby's mark, all three elements of
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cybersquatting are satisfied.
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are liable for cybersquatting.
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is GRANTED with respect to the allegations of cybersquatting by Van
The most persuasive facts
That
Instead, Defendants actively attempted to manipulate
It is hard to understand
Indeed,
Given these facts,
The Court finds that Van and Image
Digby's motion for summary judgment
12
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and Image.
2
B.
The Individual Defendants
3
Digby asserts that Mr. Zilberman and Mr. Sebag are both
Defendants.
6
held liable directly and via an alter ego theory.
7
concede that Mr. Zilberman may be personally liable for the
8
United States District Court
personally liable for the torts committed by the Corporate
5
For the Northern District of California
4
Corporate Defendants' torts, but they contest Mr. Sebag's
9
responsibility. 3
10
Digby alleges that Mr. Zilberman and Mr. Sebag may be
Defendants
In fact, Mr. Sebag's personal liability is the
subject of Defendants' own motion for summary judgment.
1.
11
Schneior Zilberman
"A corporate officer or director is, in general, personally
12
13
liable for all torts which he authorizes or directs or in which he
14
participates, notwithstanding that he acted as an agent of the
15
corporation and not on his own behalf."
16
Transmission Parts Corp., 768 F.2d 1001, 1021 (9th Cir. 1985)
17
(internal quotation marks omitted).
18
principle extends to copyright and trademark infringement claims.
19
See Digby Mot. at 20; Defs.' Opp'n at 12; see also Foreverendeavor
20
Music, Inc. v. S.M.B., Inc., 701 F. Supp. 791, 793-94 (W.D. Wash.
21
1988) (president of corporation liable for corporation's
22
infringement because he was "the dominant influence" in the
Transgo, Inc. v. Ajac
The parties agree that this
23
3
24
25
26
27
28
Defendants apparently concede Mr. Zilberman's liability as an
officer involved in the Corporate Defendants' torts, but they
contest his liability as an alter ego. Compare Defs.' Opp'n at 12
("Defendants concede that Zilberman personally participated in the
events leading to the domain registration.") and 13 ("Zilberman was
solely responsible for Image's advertising and marketing, and
solely responsible for Image's website"), with Defs.' Opp'n at 16
("Defendants respectfully submit that disputed issues of fact exist
as to whether Image or Van are Zilberman's alter egos.").
13
1
corporation); Polo Fashions, Inc. v. Branded Apparel Merch., Inc.,
2
592 F. Supp. 648, 652 (D. Mass. 1984) (officer individually liable
3
because he was a "moving, active conscious force behind" the
4
corporation's infringement").
5
Defendants acknowledge that Mr. Zilberman was responsible for
Zilberman was "solely responsible for Image's advertising and
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United States District Court
the registration of the bandago.net domain name and that Mr.
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For the Northern District of California
6
marketing," managed Image and Van's website and internet accounts,
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and ran Image and Van's day-to-day operations.
See Defs.' Opp'n at
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12-13; Zilberman Decl. ¶¶ 14, 17-19.
11
"personally participated in the events leading to the domain
12
registration."
13
responsible for Image's day-to-day operations, its management, and
14
supervising employees."
15
explicitly concede Mr. Zilberman's liability (as they do for Van
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and Image), but these admissions are sufficient for the Court to
17
find that Mr. Zilberman directed and participated in the torts
18
committed by Image and Van.
19
Zilberman is liable on the copyright infringement, trademark
20
infringement, and cybersquatting causes of action described above.
21
Digby's motion for summary judgment is GRANTED with respect to Mr.
22
Zilberman's liability.
23
is directly liable for these torts, the Court need not reach the
24
issue of Mr. Zilberman's alter ego liability.
25
26
2.
Id. at 12.
Mr. Zilberman admits that he
Mr. Zilberman also says that he "was
Zilberman Decl. ¶ 15.
Defendants do not
As a result, the Court finds that Mr.
Because the Court finds that Mr. Zilberman
Gad Sebag
Mr. Sebag's liability is contested.
Digby claims that he is
27
liable both as a direct participant in the various torts alleged
28
and that Van and Image's liability can be imputed to him because
14
1
the Corporate Defendants are Mr. Sebag's alter egos.
i.
2
Direct Liability
in the Corporate Defendants' torts because he incorporated both Van
5
and Image, was the sole shareholder of both companies, and was
6
Van's only officer and employee.
7
credit card was also used to register the bandago.net domain name,
8
United States District Court
Digby argues that Mr. Sebag must have directed or participated
4
For the Northern District of California
3
and Mr. Sebag was listed as the account holder for the Corporate
9
Defendants' Google AdWords accounts.
Reply at 3.
Id.
Mr. Sebag's personal
Mr. Sebag counters that
10
he was barely involved in either corporation.
11
Zilberman (his brother-in-law) came to him for help, and he agreed
12
to let Mr. Zilberman form and operate the corporations under his
13
name and use his credit.
14
member, and that Mr. Zilberman needed his help because Mr. Sebag
15
had funds and better credit.
16
recalls signing certain incorporation documents and loaning money
17
to Image, but says that he "did not have any role" in "Image's
18
management or operations."
19
corroborates this: he testifies that he, and not Mr. Zilberman,
20
managed both Image and Van.
21
According to Mr. Zilberman, Mr. Sebag was only involved in the
22
companies when his signature was required for something, which was
23
"rare."
24
type of compensation from Image.
25
Id. ¶ 16.
He recounts that Mr.
Mr. Sebag says he did so to help a family
Sebag Decl. I ¶¶ 6-7.
Id. ¶ 11.
Mr. Sebag
Mr. Zilberman's testimony
Zilberman Decl. ¶¶ 14, 17-19.
Mr. Sebag never received a salary or any other
Id. ¶ 15.
Digby asserts that Mr. Sebag's declaration is a self-serving
26
declaration that contradicts his earlier statements and documentary
27
evidence.
28
contradict any of the evidence Digby has presented.
The Court disagrees.
Mr. Sebag's declaration does not
15
If it is true
found Image and Van, then it makes sense that Image and Van were
3
incorporated under Mr. Sebag's name and used his name for their
4
accounts.
5
testimony, then the Court might have found his declaration to be a
6
sham.
7
Cir. 1991) ("The general rule in the Ninth Circuit is that a party
8
United States District Court
that Mr. Sebag entrusted Mr. Zilberman to use Mr. Sebag's name to
2
For the Northern District of California
1
cannot create an issue of fact by an affidavit contradicting his
9
prior deposition testimony.").
If Mr. Sebag had contradicted his prior deposition
See Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266 (9th
Rejecting Mr. Sebag's declaration
10
in this manner requires a factual finding that the contradiction
11
actually was a sham.
12
finding here, and therefore cannot strike Mr. Sebag's declaration
13
as a sham.
14
credibility determinations or to draw from the evidence inferences
15
adverse to Defendants.
16
Inc., 572 F. App'x 517, 518 (9th Cir. 2014) ("In resolving summary
17
judgment motions, a court must not weigh the evidence, make
18
credibility determinations, or draw inferences from the facts
19
adverse to the non-moving party.").
20
Id. at 267.
The Court cannot make such a
It is, therefore, inappropriate for the Court to make
See His & Her Corp. v. Shake-N-Go Fashion,
Because the Court cannot discount Mr. Sebag's declaration, the
21
evidence provides for at least two reasonable interpretations of
22
the facts.
23
credibility it assigns to Mr. Sebag and Mr. Zilberman's statements.
24
If the trier of fact believed Mr. Sebag and Mr. Zilberman, then it
25
could find that Mr. Sebag did not direct or participate in any of
26
the Corporate Defendants' torts.
27
not be directly liable.
28
also reasonably discount Mr. Sebag and Mr. Zilberman's testimony
A trier of fact could select either depending on the
In that scenario, Mr. Sebag would
On the other hand, a trier of fact could
16
a much larger role in Image and Van than he admits.
3
certainly be possible for the trier of fact to infer from the
4
documentary evidence that Mr. Sebag was heavily involved in the
5
management and operation of the Corporate Defendants.
6
case, Mr. Sebag might be held liable for Image and Van's torts as a
7
participant.
8
United States District Court
and find that the documentary evidence indicates that Mr. Sebag had
2
For the Northern District of California
1
from the evidence in favor of the non-moving party.
9
the Court cannot draw the inferences required to hold Mr. Sebag
It would
In that
However, the Court is required to draw inferences
As a result,
10
directly liable.
11
such a way as to find that Mr. Sebag was not involved in the
12
Corporate Defendants' torts.
13
dispute of material fact exists as to whether Mr. Sebag was
14
involved in the Corporate Defendants' torts.
15
summary judgment are DENIED as to Mr. Sebag's direct liability.
ii.
16
17
However, nor can the Court weigh the evidence in
The Court finds that a genuine
Both motions for
Alter Ego Liability
"The alter ego doctrine arises when a plaintiff comes into
18
court claiming that an opposing party is using the corporate form
19
unjustly and in derogation of the plaintiff's interests. . .
20
certain circumstances the court will disregard the corporate entity
21
and will hold the individual shareholders liable for the actions of
22
the corporation . . . ."
23
290, 300, 702 P.2d 601 (Cal. 1985) (internal citation omitted).
24
The parties agree that California law governs the alter ego dispute
25
in this case.
26
general requirements" for a plaintiff to pierce the corporate veil:
27
"(1) that there be such unity of interest and ownership that the
28
separate personalities of the corporation and the individual no
In
Mesler v. Bragg Mgmt. Co., 39 Cal. 3d
See Mot. at 21 n.7; Opp'n at 14-15.
17
There are "two
1
longer exist and (2) that, if the acts are treated as those of the
2
corporation alone, an inequitable result will follow."
Id.
3
California courts have developed a long list of factors to
4
consider when deciding whether it is proper to pierce the corporate
5
veil.
Those factors are:
6
7
United States District Court
For the Northern District of California
8
9
10
11
12
13
14
15
16
the commingling of funds and other assets; the failure to
segregate funds of the individual and the corporation;
the unauthorized diversion of corporate funds to other
than corporate purposes; the treatment by an individual
of corporate assets as his own; the failure to seek
authority to issue stock or issue stock under existing
authorization; the representation by an individual that
he is personally liable for corporate debts; the failure
to maintain adequate corporate minutes or records; the
intermingling of the individual and corporate records;
the ownership of all the stock by a single individual or
family; the domination or control of the corporation by
the stockholders; the use of a single address for the
individual and the corporation; the inadequacy of the
corporation's capitalization; the use of the corporation
as a mere conduit for an individual's business; the
concealment of the ownership of the corporation; the
disregard of formalities and the failure to maintain
arm's-length transactions with the corporation; and the
attempts to segregate liabilities to the corporation.
17
Mid-Century Ins. Co. v. Gardner, 9 Cal. App. 4th 1205, 1213 n.3
18
(Cal. Ct. App. 1992).
19
exhaustive. The enumerated factors may be considered [a]mong others
20
under the particular circumstances of each case."
21
Chen, 185 Cal. App. 4th 799, 812 (Cal. Ct. App. 2010) (internal
22
quotation marks omitted).
23
However, "[t]his long list of factors is not
Zoran Corp. v.
Some of the enumerated factors favor Digby, and some favor
24
Defendants.
For example, it is undisputed that Van and Image
25
failed to maintain corporate minutes or records, that Mr. Sebag was
26
Image's only shareholder, that Van and Image were inadequately
27
capitalized (they declared bankruptcy shortly after this lawsuit
28
was filed), and that Van and Image completely disregarded corporate
18
and Image were Mr. Sebag's alter egos.
3
conflicting evidence regarding control of the corporations by their
4
stockholders: Digby asserts that Mr. Sebag ran both corporations,
5
while Mr. Sebag says he was only nominally involved.
6
while there is some evidence that Van may have been a shell
7
corporation to shield Image, there is not much evidence that
8
United States District Court
formalities.
2
For the Northern District of California
1
Defendants tried to conceal Mr. Sebag's involvement in either
9
corporation.
10
Those factors, therefore, favor a finding that Van
On the other hand, there is
Additionally,
When considering the facts of this case, the outcome is again
11
heavily dependent on the credibility of Mr. Sebag's and Mr.
12
Zilberman's statements and the inferences drawn from the
13
documentary evidence.
14
and Mr. Zilberman unreliable, it might infer from the documentary
15
evidence that Mr. Sebag was deeply involved in controlling the
16
Corporate Defendants.
17
Van and Image truly were Mr. Sebag's alter egos.
18
trier of fact were to find Mr. Sebag and Mr. Zilberman to be
19
credible, then it would be reasonable to find that there was little
20
unity of interest and ownership between Mr. Sebag and the Corporate
21
Defendants or that it would be equitable to find piercing the
22
corporate veil unnecessary.
23
If the trier of fact were to find Mr. Sebag
Such a finding might support a decision that
However, if the
Digby points out that corporate officers are generally not
24
excused from their responsibilities merely because they consider
25
themselves to be figureheads.
26
true, but the cases Digby cites are all in the context of
27
establishing the officer's duties to his company.
28
may have done the Corporate Defendants and their shareholders (in
See Digby Opp'n at 18-19.
19
That is
While Mr. Sebag
1
this case, only Mr. Sebag himself) a disservice by failing to
2
fulfill his role as CEO, that failure does not require the Court to
3
overlook his general lack of involvement when determining alter ego
4
liability.
5
automatically make him an alter ego of Image simply by virtue of
6
the fact that he was the CEO and sole shareholder.
7
Mr. Sebag's neglect of his official duties does not
Deciding the issue of Mr. Sebag's liability as an alter ego of
United States District Court
For the Northern District of California
8
Image or Van requires drawing inferences from the evidence and
9
weighing the credibility of evidence and witnesses.
At this stage,
10
all inferences must be drawn in favor of the non-moving party, and
11
it is inappropriate to determine credibility.
12
least two reasonable explanations of the evidence, each of which
13
requires drawing inferences in favor of the moving party or making
14
a credibility determination, it is inappropriate to grant summary
15
judgment for either party on this issue.
16
judgment are DENIED as to Mr. Sebag's liability as an alter ego for
17
the Corporate Defendants.
Because there are at
Both motions for summary
18
C.
Damages
19
Digby seeks statutory damages for its cybersquatting claim and
20
disgorgement of profits for its trademark and copyright
21
infringement claims.
22
23
1.
See Digby Mot. at 24.
Statutory Damages for Cybersquatting
A party that prevails on a claim of cybersquatting may elect
24
to recover "instead of actual damages and profits, an award of
25
statutory damages in the amount of not less than $1,000 and not
26
more than $100,000 per domain name, as the court considers just."
27
15 U.S.C. § 1117(d).
28
of $100,000.
Digby requests the maximum statutory damages
Digby Mot. at 24.
In determining appropriate
20
1
statutory damages for cybersquatting,
2
courts generally consider a number of factors . . .
including the egregiousness or willfulness of the
defendant's cybersquatting, the defendant's use of false
contact information to conceal its infringing activities,
the defendant's status as a "serial" cybersquatter -i.e., one who has engaged in a pattern of registering and
using a multitude of domain names that infringe the
rights of other parties -- and other behavior by the
defendant evidencing an attitude of contempt towards the
court or the proceedings.
3
4
5
6
7
United States District Court
For the Northern District of California
8
Verizon Cal. Inc. v. Onlinenic, Inc., C 08-2832 JF (RS), 2009 WL
9
2706393 (N.D. Cal. Aug. 25, 2009).
10
Courts in similar cases have
awarded a range of damages. 4
In this case, the Court has found that Defendants'
11
12
cybersquatting was willful and, if not egregious, certainly more
13
pernicious than simply registering a suspiciously similar domain
14
name.
15
Defendants' status as "serial cybersquatters" is decidedly mixed.
16
There is no evidence of an attitude of contempt toward the court or
17
proceedings.
18
awarded $50,000 in statutory damages where there was powerful
19
evidence of the defendant's bad faith and status as a serial
20
cybersquatter, and where the defendant had shown contempt for the
However, the evidence of false contact information and
In a recent cybersquatting case, the undersigned
21
4
22
23
24
25
26
27
28
See, e.g., Partners for Health & Home, L.P. v. Yang, 488 B.R. 109
(C.D. Cal. 2012) (awarding $25,000 for domain through which
defendant had sold products willfully infringing on plaintiff's
trademarks); Wecosign, Inc. v. IFG Holdings, Inc., 845 F. Supp. 2d
1072, 1085-87 (C.D. Cal. 2012) (awarding $50,000 where defendant
had provided false contact information to the domain registrar but
no other factors were present); Verizon Cal. Inc. v. Onlinenic,
Inc., C 08-2832 JF (RS), 2009 WL 2706393 (N.D. Cal. Aug. 25, 2009)
(awarding $50,000 per violation where all four factors were
present); Citigroup, Inc. v. Shui, 611 F. Supp. 2d 507, 513 (E.D.
Va. 2009) (awarding $100,000 where defendant's use of the domain
was "sufficiently willful, deliberate, and performed in bad
faith").
21
1
Court by refusing to appear or respond to summonses.
2
Inc. v. iPloom, LLC, No. 13-CV-05813 SC, 2014 WL 1942218, at *7-8
3
(N.D. Cal. May 12, 2014).
4
$25,000 appropriately captures the egregiousness of Defendants'
5
violation of the law.
2.
6
United States District Court
For the Northern District of California
Actual Damages for Trademark and Copyright
Both the Lanham Act and the Copyright Act permit a prevailing
8
10
Here, the Court finds that an award of
Infringement
7
9
See Ploom,
plaintiff to recover the defendant's profits.
1117(a); 17 U.S.C. § 504(b). 5
See 15 U.S.C. §
In the copyright context, "the
11
5
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Defendants argue briefly that that Digby must elect between
statutory and actual damages because Digby's claims are based on
the same underlying conduct. In support they cite a single
unreported case from this District, in which the court declined to
award both statutory and actual damages. However, the court
emphasized that the decision was discretionary. See Media Lab,
Inc. v. Collis, No. C08-04732 HRL, 2010 WL 3893582, at *6 (N.D.
Cal. Sept. 30, 2010). Digby responds by pointing to a number of
out-of-district cases in which courts held that the ACPA permits an
award of both statutory and actual damages. See St. Luke's
Cataract & Laser Inst., P.A. v. Sanderson, 573 F.3d 1186, 1204
(11th Cir. 2009) ("Congress, by statute, has prescribed recovery
under the ACPA even if it is duplicative of other damages
awarded."); Wecosign, Inc. v. IFG Holdings, Inc., 845 F. Supp. 2d
1072, 1085 (C.D. Cal. 2012) ("A prevailing plaintiff may recover
statutory damages under this provision in addition to actual
damages for infringement of its trademark."). The Court agrees and
holds that a plaintiff recover both statutory damages for
cybersquatting and actual damages for trademark or copyright
infringement. However, it is also true that Defendants' copyright
violation (the use of text from Digby's website on the Image
website) arose from different conduct than the trademark and
cybersquatting claims (registration of the bandago.net domain).
Digby argues that the trademark claim also arose from different
conduct than the cybersquatting claim, because the trademark claim
is based on Defendants' Google AdWords bids, while the
cybersquatting claim is based on registration of the bandago.net
domain. Whether bidding on AdWords alone is sufficient to
establish a trademark violation is a question that the parties have
not briefed and that is not before the Court. To resolve the
current case, it is sufficient to hold that Digby may recover both
statutory damages for cybersquatting and actual damages for the
same conduct, and that Defendants' copyright infringement arose
22
infringer's gross revenue, and the infringer is required to prove
3
his or her deductible expenses and the elements of profit
4
attributable to factors other than the copyrighted work."
5
U.S.C. § 504.
6
required to prove defendant's sales only; defendant must prove all
7
elements of cost or deduction claimed."
8
United States District Court
copyright owner is required to present proof only of the
2
For the Northern District of California
1
Lanham Act also provides some additional guidance for assessing
9
damages in trademark cases:
17
In the trademark context, "the plaintiff shall be
15 U.S.C § 1117(a).
The
10
In assessing damages the court may enter judgment,
according to the circumstances of the case, for any sum
above the amount found as actual damages, not exceeding
three times such amount. If the court shall find that the
amount of the recovery based on profits is either
inadequate or excessive the court may in its discretion
enter judgment for such sum as the court shall find to be
just, according to the circumstances of the case.
11
12
13
14
15
16
Id.
"Trademark remedies are guided by tort law principles. . . .
17
As a general rule, damages which result from a tort must be
18
established with reasonable certainty."
19
Corp., 982 F.2d 1400, 1407 (9th Cir. 1993) (internal citations and
20
quotations omitted).
21
of credible evidence demonstrating injury to plaintiff resulting
22
from defendant's sales.
23
may not be based upon the assumption that a trademark infringement
24
resulted in commercial injury."
25
Mego Corp., 523 F. Supp. 619, 624 (S.D.N.Y. 1981) (cited in Lindy,
26
982 F.2d at 1408).
Lindy Pen Co. v. Bic Pen
Damages "will not be awarded in the absence
Damage awards for lost sales and profits
Invicta Plastics (USA) Ltd. v.
Thus Digby must show some evidence of injury as
27
28
from different underlying conduct than Defendants' cybersquatting.
23
1
a result of Defendants' conduct before it can recover Defendants'
2
ill-gotten profits.
Digby asserts that Defendants reaped $3,583,264.00 in revenues
3
Mot at 25.
6
every deposit to Defendants' various bank accounts during that
7
period.
8
United States District Court
between January 2009 and May 2010.
5
For the Northern District of California
4
figures vastly overstate the Corporate Defendants' profits -- in
9
fact, they assert that Van and Image operated at a loss.
10
See Rosenfeld Decl. Exs. 28-29;
Apparently, that figure was reached simply by adding up
See Rosenfeld Decl. Ex. 29.
Defendants argue that Digby's
Defs.'
Opp'n at 22-25.
It is true that Digby's damages calculations are based on a
11
12
number of astonishingly unreasonable assumptions.
13
assumes that it suffered some commercial injury sufficient to
14
support an award of actual damages.
15
deposit in the Corporate Defendants' accounts was a sale or
16
revenue.
17
evidence that Mr. Sebag loaned Image over $200,000.
18
at 7.
19
revenues were attributable to their infringement. 6
20
Digby's claimed damages are simply ludicrous in light of the
21
evidence, Defendants are also culpable for the difficulty involved
22
in calculating damages in this case: Image claims it has no profit
23
and loss statements or balance sheets, and Mr. Zilberman indicated
24
that he "might have disposed of" Image's books and records.
25
6
26
27
28
First, Digby
Next, Digby assumes that every
That is not necessarily the case; for example there is
See Digby Mot.
Third, Digby assumes that all of the Corporate Defendants'
However, while
See
The law does permit Digby to make this assumption and places the
burden of showing the portion of profits not attributable to
infringing activity on the defendant. However, the Lanham Act
makes clear that principles of equity must guide the Court in
determining damages. The unreasonableness of this assumption is
described in greater detail below.
24
1
2
ECF No. 137 Exs. 13 at 11-12; 43 at 65:2-66:8.
To succeed on its claim for disgorgement of profits, Digby
from their van rentals.
5
bank accounts is insufficient.
6
without any evidentiary basis on which to rest such an award."
7
Louis Vuitton S.A. v. Spencer Handbags Corp., 597 F. Supp. 1186,
8
United States District Court
must provide a reasonably reliable estimate of Defendants' profits
4
For the Northern District of California
3
1190 (E.D.N.Y. 1984) aff'd, 765 F.2d 966 (2d Cir. 1985).
9
failed to establish Defendants' revenues to a reasonable certainty.
10
The sum of all deposits to Defendants'
"The court cannot award profits
Digby has
Nor is it clear that Digby suffered any actual loss at all
11
from Defendants' trademark or copyright infringement.
12
Defendants bid on 14,057 keywords with their AdWords accounts.
13
Rosenfeld Decl. ¶ 22.
14
included the word "bandago."
15
only three generated any clicks at all.
16
keywords generated exactly one click.
17
words, Defendants' bids on infringing keywords from November 2008
18
to April 2009 resulted in a total of three visits to Defendants'
19
website.
20
that each would have rented from Bandago absent the advertisements,
21
and that each of those users proceeded to rent vans from Defendants
22
instead, Digby's actual damages attributable to the infringing
23
AdWords must have been vanishingly small.
24
Apparently,
See
The evidence shows that 14 (or 0.1%)
See id. Ex. 23.
Of those 14 AdWords,
Each of those three
See id. Ex. 23.
In other
Even assuming all three visits were from different users,
With respect to Defendants' copyright infringement, Defendants
25
copied only a few paragraphs of text from the Bandago website.
26
That text was fairly generic, and tended to describe a
27
specialization in large vans for extended trips.
28
Decl. Exs. 52-53.
See Rosenfeld
The copied text invariably appeared at the very
25
1
bottom of a long page of non-infringing text describing Image's
2
passenger van rental options.
3
sold the copyrighted material, so the only cognizable lost profits
4
attributable to copyright infringement are the proceeds from those
5
customers induced by the infringement to rent vans from Defendants
6
instead of Bandago.
7
that a single customer was swayed by the infringing text. 7
United States District Court
For the Northern District of California
Neither Digby nor Defendants
There is no evidence whatsoever indicating
Digby's motion for summary judgment is therefore DENIED with
8
9
Id.
respect to its claim for disgorgement of profits.
10
///
11
///
12
///
13
///
14
///
15
///
16
///
17
///
18
///
19
///
20
///
21
///
22
///
23
///
24
///
25
///
26
7
27
28
Digby mentions actual confusion only once in its moving papers.
It asserts, with no evidentiary basis, that it "received several
inquiries about the relationship between Plaintiff and Defendants."
Digby Mot. at 17.
26
1
V. CONCLUSION
LLC's motion for summary judgment is GRANTED in part and DENIED in
4
part.
5
infringement, trademark infringement, and cybersquatting against
6
Defendants Image Rent A Car, Inc., Van Rental Co., Inc., and
7
Schneior Zilberman.
8
United States District Court
For the reasons set forth above, Plaintiff Digby Adler Group,
3
For the Northern District of California
2
Defendant Gad Sebag's liability.
9
judgment is also DENIED.
The motion is granted as to Digby's claims for copyright
Digby's motion is DENIED with respect to
Mr. Sebag's motion for summary
The Court finds that Digby is entitled to
10
$25,000 in statutory damages, but that Digby's evidence is
11
insufficient to support summary judgment for disgorgement of
12
profits.
13
liability, both directly and as an alter ego, for the Corporate
14
Defendants' torts; and (2) the amount of actual damages to which
15
Digby is entitled (if any).
16
judgment in this matter until those remaining issues are fully
17
adjudicated.
Thus two issues remain in this case: (1) Mr. Sebag's
The Court will refrain from entering
18
19
20
IT IS SO ORDERED.
21
22
Dated: February 6, 2015
23
UNITED STATES DISTRICT JUDGE
24
25
26
27
28
27
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