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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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA United States District Court For the Northern District of California 8 9 10 11 12 13 14 15 16 DIGBY ADLER GROUP LLC, ) Case No. 10-cv-00617-SC ) Plaintiff, ) ORDER ON CROSS MOTIONS FOR ) SUMMARY JUDGMENT v. ) ) ) IMAGE RENT A CAR, INC., et al., ) ) Defendants. ) ) ) ) ) ) ) 17 18 I. INTRODUCTION 19 Now before the Court are two motions for summary judgment. 20 21 One is brought by Plaintiff Digby Adler Group, LLC. 22 ("Pl.'s Mot."). 23 No. 134 ("Sebag Mot."). 24 Court deems them suitable for disposition without oral argument 25 pursuant to Civil Local Rule 7-1(b). 26 below, Plaintiff Digby Adler Group, LLC's motion for summary 27 1 28 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"). 1 judgment is GRANTED in part and DENIED in part, and Defendant Gad 2 Sebag's motion for summary judgment is DENIED. 3 4 II. BACKGROUND Plaintiff Digby Adler Group, LLC ("Digby") has operated a van 7 rental service under the name Bandago, LLC ("Bandago") through its 8 United States District Court A. 6 For the Northern District of California 5 Factual Background website, bandago.com, since 2003. 9 1-2. ECF No. 124 ("Laguana Decl.") ¶¶ On August 31, 2010, the United States Patent and Trademark 10 Office ("PTO") issued federal trademark registration number 3839689 11 to Digby for the BANDAGO mark. 12 18. ECF No. 123 ("Rosenfeld Decl.") Ex. The defendants in this matter are two individuals -- Gad Sebag 13 14 and Schneior Zilberman -- and two companies -- Image Rent A Car, 15 Inc. ("Image") and Van Rental Co., Inc. ("Van") (Van and Image will 16 be referred to collectively as the "Corporate Defendants"). 17 Zilberman operated a third rental car company called Adir Rent A 18 Car, Inc., from 1996 through 2004. 19 ¶¶ 3-8. 20 dealership that supplied its inventory resulted in the supplier 21 refusing to let Adir use its cars. 22 personal finances and credit were seriously damaged in the process. 23 Id. ¶ 9. 24 law -- asking for financial assistance to start a new company. 25 ¶ 9. 26 CEO, loan money to the company, and allow Mr. Zilberman to use his 27 credit rating to obtain cars. 28 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. 2 1 Zilberman alone would control all of the company's operations. 2 Id.; Zilberman Decl. ¶¶ 14, 17-19. In October 2004, Defendant Image Rent A Car, Inc. ("Image") 3 ("Sebag Decl. II") at 1. 6 the company's CEO (though the corporate record kept by the New York 7 Department of State reflects the name "Gao Sebaf") and sole 8 United States District Court was incorporated under the law of New York State. 5 For the Northern District of California 4 ECF No. 21-4 shareholder; he also described Image as "my company." 9 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 10 and initiated [Image and Van]"), 44 at 30:10-13. 11 Zilberman served as Image's general manager. 12 Image operated a car and van rental service primarily in New York, 13 though it also had offices in Florida. 14 rental service through its website, imagerentacar.com. 15 5 at Responses 19-20. 16 bylaws, without even the name of the corporation filled in. 17 No. 137 Ex. 13 at 17-66. 18 directors with at least three directors, Image never had a board of 19 directors. 20 it ever held shareholder meetings or keep corporate minutes. 21 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 22 23 Id. Defendant Shneior the law of New York State in July 2007. Rosenfeld Decl.d. Ex. 17. 24 2 25 26 27 28 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. 3 into new areas, Van was defunct almost from the start and never 3 actually operated. 4 Van's CEO and sole shareholder. 5 Mr. Zilberman, who served as Van's president, recalls that Van 6 either owned "none or very few" vehicles. 7 42:14-19. 8 United States District Court Initially founded with the objective of expanding Image's business 2 For the Northern District of California 1 companies operated essentially as one entity. 9 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 10 11 (recall that Digby's website was bandago.com). 12 31. 13 owner, the contact email address supplied was 14 info@imagerentacar.com. 15 bandago.net; the site simply redirected visitors to Image's 16 website. 17 bandago.com domain, Defendants bid on the Google AdWords search 18 terms "bandago," "bandago van rental," and "bandago van rentals" 19 (the "Bandago Search Terms"). 20 AdWords is a service that lets customers bid on certain search 21 terms, so that the customer's website will show up as advertisement 22 when Google visitors search for those terms. 23 advertisements that would direct users to Image's website when they 24 searched for the Bandago Search Terms. 25 AdWords account was registered in Mr. Sebag's name, but Mr. 26 Zilberman operated the account. 27 28 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 4 1 Bandago's vans and rental services. Laguana Decl. ¶ 11, Ex. 3. 2 Digby applied for a copyright registration to cover the text of the 3 website, and the PTO granted the registration on January 31, 2011. 4 Rosenfeld Decl. Exs. 19-20. 5 modified very slightly to reflect Image's name and locations) 6 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 7 United States District Court For the Northern District of California 8 corporation called Group Travel Solution, Inc. ("GTS"). 9 49 at 8:6-23; 60. Id. Exs. Mr. Naim recalls that GTS purchased Image's 10 assets, including vehicles, phones, and websites. Id. Ex. 49 at 11 9:2-4. 12 but guesses that the number was "[b]etween fifty and sixty." 13 at 9:5-11. 14 each. 15 tax returns -- a 39-page exhibit -- with no pincite or explanation. 16 But those returns indicate only that GTS owned some large number of 17 vehicles, and the tax returns do not indicate the vehicles' source 18 or sources. 19 16-19, 22-27, 37-38. 20 sale of 20 of the vehicles, and the sale prices and proceeds show 21 that each was originally acquired for $1. 22 On March 24, 2011, Van and Image filed for bankruptcy. 23 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. 24 B. 25 This case was filed on February 11, 2010. Id. Exs. Procedural History See ECF No. 1 26 ("Compl."). The transfer of assets described above therefore took 27 place after the filing of this lawsuit but before Van and Image 28 declared bankruptcy. When the Corporate Defendants filed for 5 bankruptcy proceedings. 3 2014, the bankruptcy court dismissed both bankruptcy proceedings. 4 See ECF No. 96 Exs. A-B. 5 Digby's unopposed motion to lift the stay. 6 then moved for summary judgment, alleging that Mr. Sebag and Mr. 7 Zilberman are personally liable for Van and Image's actions because 8 United States District Court bankruptcy, the Court stayed this case pending the outcome of the 2 For the Northern District of California 1 all defendants are alter egos of one another and because officers 9 and directors of a corporation are liable for torts they authorize 10 11 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 12 Corporate Defendants are liable for trademark and copyright 13 infringement. 14 cybersquatting. 15 that Mr. Sebag and Mr. Zilberman are not alter egos of Van or Image 16 and that Mr. Sebag is not personally liable as an officer or 17 director. 18 that he cannot be held liable for the Corporate Defendants' 19 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. 20 21 III. LEGAL STANDARD 22 Entry of summary judgment is proper "if the movant shows that 23 there is no genuine dispute as to any material fact and the movant 24 is entitled to judgment as a matter of law." 25 56(a). 26 require a directed verdict for the moving party. 27 Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). 28 bears the initial burdens of production and persuasion. Fed. R. Civ. P. Summary judgment should be granted if the evidence would 6 Anderson v. The moving party Nissan 1 Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 2 1102 (9th Cir. 2000). 3 4 5 IV. DISCUSSION The Court begins with a discussion of the Corporate Sebag or Mr. Zilberman may be held liable for the Corporate 8 United States District Court Defendants' liability, and then proceeds to analyze whether Mr. 7 For the Northern District of California 6 Defendants' actions. 9 10 A. The Corporate Defendants Defendants do not vigorously contest the allegations against 11 the Corporate Defendants. 12 to the trademark infringement and copyright infringement claims. 13 Defendants also concede that two of the three elements of Digby's 14 cybersquatting claim are met, but they contest the third. 15 Court examines each cause of action in turn. 16 17 1. In fact, Defendants concede liability as The Trademark Infringement "To establish a trademark infringement claim . . . , [Digby] 18 must establish that [Defendants are] using a mark confusingly 19 similar to a valid, protectable trademark of [Digby's]." 20 Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 21 1046 (9th Cir. 1999). 22 the Bandago mark. 23 "registration of the mark on the Principal Register in the Patent 24 and Trademark Office constitutes prima facie evidence of the 25 validity of the registered mark and of [Digby's] exclusive right to 26 use the mark on the goods and services specified in the 27 registration." 28 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' 7 Defendants do not dispute that Van and Image's conduct constitute 3 trademark infringement; in fact, Defendants concede that Van and 4 Image are liable for infringement of Digby's mark. 5 Opp'n at 1, 11-12. 6 liable for trademark infringement. 7 respect to the allegations that Van and Image infringed upon 8 United States District Court related Google AdWords constitute use of the Bandago mark. 2 For the Northern District of California 1 Digby's trademark. 2. 9 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) 10 11 ownership of a valid copyright; and (2) that the defendant violated 12 the copyright owner's exclusive rights under the Copyright Act." 13 Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004). 14 copyright registration is 'prima facie evidence of the validity of 15 the copyright and the facts stated in the certificate.'" 16 Fabrics Int'l, Inc. v. C&J Wear, Inc., 630 F.3d 1255, 1257 (9th 17 Cir. 2011) (quoting 17 U.S.C. § 410(c)). 18 Digby has a registered copyright for the text of the bandago.com 19 website. 20 that the Corporate Defendants used language copied almost verbatim 21 from Digby's website on the Image website (though they did so 22 before the copyright was registered). 23 again, Defendants concede that Van and Image infringed upon Digby's 24 copyright. 25 Image liable for copyright infringement. 26 summary judgment is GRANTED with respect to the allegations that 27 Van and Image infringed upon Digby's copyright. 28 /// 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. 8 "A Once The Court finds Van and Digby's motion for 3. 1 2 Cybersquatting "The Anti–Cybersquatting Consumer Protection Act ["ACPA"] proves that (1) the defendant registered, trafficked in, or used a 5 domain name; (2) the domain name is identical or confusingly 6 similar to a protected mark owned by the plaintiff; and (3) the 7 defendant acted 'with bad faith intent to profit from that mark.'" 8 United States District Court establishes civil liability for 'cyberpiracy' where a plaintiff 4 For the Northern District of California 3 DSPT Int'l, Inc. v. Nahum, 624 F.3d 1213, 1218-19 (9th Cir. 2010). 9 Digby alleges that (1) Defendants registered and used the 10 bandago.net domain name; (2) the bandago.net domain name is 11 identical to the Bandago mark; and (3) that Defendants acted with 12 bad faith intent to profit from that mark. 13 With respect to the cybersquatting claim, Defendants concede 14 the first two elements: they admit that Van and Image registered 15 the bandago.net domain name and that "bandago.net" is identical to 16 Digby's Bandago mark. 17 allege that there is a genuine dispute of material fact regarding 18 the bad faith requirement. 19 consider in determining whether an alleged cybersquatter acted in 20 bad faith. 21 factors are permissive and not exhaustive, the Ninth Circuit has 22 emphasized that courts "need not, however, march through the nine 23 factors seriatim . . . . 24 finding bad faith are the unique circumstances of the case . . . ." 25 Lahoti v. VeriCheck, Inc., 586 F.3d 1190, 1202 (9th Cir. 2009). 26 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 27 seems appropriate to begin the discussion there. 28 factors are uncontroversial: it is undisputed, for example, that 9 Some of the mark, that bandago.net does not consist of Defendants' legal name, 3 that Defendants never used the domain name in connection with the 4 bona fide offering of any goods or services, and that Defendants 5 never engaged in a bona fide noncommercial use of the mark in a 6 site accessible under the domain name. 7 clear that Defendants intended to divert consumers from Digby's 8 United States District Court Defendants have no intellectual property rights to the Bandago 2 For the Northern District of California 1 website. 9 bandago.net domain name -- which Defendants acknowledge is More importantly, it is Digby has shown that Defendants registered the 10 identical to Digby's Bandago mark -- and set up that domain to 11 redirect to Defendants' own website. 12 competing van rental companies, it is evident that this was an 13 attempt to divert Digby's business. 14 Defendants do not contest this factor in their opposition brief. 15 See Defs.' Opp'n at 10-11. 16 On the other hand, it also undisputed that Defendants never offered 17 to sell or transfer the domain to Digby, so that factor favors 18 Defendants. 19 Court will address each in turn. 20 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 21 false contact information. The bandago.net domain was registered 22 to Van. 23 fictitious entity designed only to shield Image from liability, and 24 so the contact information was misleading because it concealed 25 Image's involvement, even though it provided Image's true phone 26 number, email, and address. 27 cites no authority in support of that interpretation of 28 "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 10 1 address. 2 previously argued that Van and Image shared a physical address, 3 phone numbers, and email addresses, see Digby Mot. at 7, it seems 4 that little concealment was actually involved. 5 favors Digby at all, the Court assigns it very little weight. 6 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. 8 For the Northern District of California 7 Here, Digby points out that Defendants registered the domains 9 whizzcarhire.com and albacarhire.com, which are similar to other 10 car rental companies' internet domains. 11 Defendants respond that Whizz Car appears to be located in 12 Singapore, Alba Car appears to be located in Spain, and that 13 Plaintiffs have provided no evidence that either company existed 14 when Defendants registered those domains. 15 that this factor is not terribly persuasive in this situation. 16 See Digby Mot. at 14-15. Again, the Court finds The ninth bad faith factor is the extent to which the mark at 17 issue is or is not distinctive and famous. 18 acknowledge that the Bandago mark is distinctive, but they contest 19 whether it is famous. 20 factor is not very persuasive for either side. 21 Defendants apparently See Defs.' Opp'n at 11. Once more, this Ultimately, the statutory factors are not hugely helpful in 22 making a bad faith determination in this case, except for the 23 intentional diversion factor. 24 Digby; the sixth favors Defendants; and the last three are either 25 neutral or not very important given the facts of this case. 26 Court finds that the most important factor in this case is the 27 fifth: that Defendants intended to divert consumers from Digby's 28 website. Five of the factors undeniably favor The Combined with the first four factors, which establish 11 1 that Defendants had no legitimate interest in using the Bandago 2 mark, the intent to divert consumers is a powerful indication of 3 Defendants' bad faith. 4 it is the broader circumstances of this case that finally resolve 5 the issue. 6 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 8 For the Northern District of California 7 consideration in determining bad faith. 9 in this case are that Defendants not only registered a domain name 10 that they admit was identical to the Bandago mark, but they bid on 11 Google AdWords to redirect consumers to the Image website. 12 is, Defendants were not content merely to redirect visitors who 13 accidently typed "bandago.net" instead of "bandago.com" into their 14 browsers. 15 search engines to show the Image website as a result when consumers 16 searched for "bandago" and related terms. 17 why Defendants would want to do that, unless they intended to use 18 the Bandago mark to generate business for themselves. 19 Defendants offer no alternative explanation. 20 the Court finds that there is only one reasonable interpretation of 21 the evidence: Defendants acted in bad faith because they registered 22 the bandago.net domain solely to take advantage of Digby's 23 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 26 cybersquatting are satisfied. 27 are liable for cybersquatting. 28 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 1 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 8 United States District Court the registration of the bandago.net domain name and that Mr. 7 For the Northern District of California 6 marketing," managed Image and Van's website and internet accounts, 9 and ran Image and Van's day-to-day operations. See Defs.' Opp'n at 10 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 16 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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