Princeton Digital Image Corporation v. Nordstrom.com LLC, et al.

Filing 106

MEMORANDUM ORDER re 89 MOTION to Set Aside Default filed by Princeton Digital Image Corporation is GRANTED. Signed by Judge Leonard P. Stark on 8/16/16. (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

PRINCETON DIGITAL IMAGE
CORPORATION,

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Plaintiff,
v.

NORDSTROM.COM LLC,
NORDSTROM.COM INC., and
NORDSTROM INC.,
Defendants.

C.A. No. 13-408

MEMORANDUM ORDER

At Wilmington this 16th day of August, 2016, having reviewed the parties' briefing (D.I.
89, 91 , 99) 1 with respect to Plaintiff Princeton Digital Image Corporation' s ("Plaintiff' or
"PDIC") Motion to Set Aside Clerk' s Entry of Default (se e D.I. 89) ("Motion"), IT IS HEREBY
ORDERED that, for the reasons below and consistent with the Court's

instr~ctions

below,

(1) Plaintiffs Motion is GRANTED; (2) Plaintiff shall file an answer in response to Intervenor

Adobe System Incorporated's ("Adobe") 2 complaint (D.1. 50), no later than August 23, 2016,
which shall be substantively identical to Plaintiffs answer filed in C.A. No. 13-404,3 except that
said answer shall not include PDIC ' s counterclaim alleging breach of the implied covenant of

'All docket citations are to C.A. No. 13-408 unless otherwise specified.
2

The Court previously granted Adobe's Omnibus Motion to Intervene as a matter of right
pursuant to Rule 24(a)(2) and permissively pursuant to Rule 24(b)(l)(B). (See D.I. 48)
3

See C.A. No. 13-404 D.I. 50.
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good faith and fair dealing, which has been dismissed by the Court in related cases (see, e. g. ,
C.A. No. 13-404 D.I. 94); (3) Plaintiff shall compensate Adobe for attorney fees and related costs
associated with all default-related filings, including Adobe's original request for default and
Adobe ' s opposition to Plaintiffs Motion; and (4) the parties shall meet and confer and submit a
joint status report, no later than August 30, 2016, providing their position(s) on how the Court
should determine the appropriate amount to award Adobe.
In 2013 , PDIC fi led the above-captioned suit ("Nordstrom Suit"), along with related suits
(C.A. Nos. 13-239, -287, -288, -289, -326, -330, -331 , -404) (collectively, "Related Suits"),
against multiple defendants, including Nordstrom.com LLC, Nordstrom.com Inc., and Nordstrom
Inc. (collectively, "Nordstrom"). Nordstrom and the defendants in Related Suits are Adobe
customers. On November 26, 2014 Adobe moved to intervene in the Nordstrom Suit and
Related Suits. (See, e.g., D.I. 14) Adobe argued that it had a right to intervene due to its
customers' requests for indemnity and because of PD IC's refusal to "engage in further
discussions" with Adobe, which would be necessary to "clarify and resolve" the lawsuits. (See
D.I. 15 at 9, 11) The Court granted Adobe' s motion to intervene on May 5, 2015. (See D.I. 48)
On May 8, 2015 , Adobe filed a complaint in intervention in the Nordstrom Suit (D.I. 50)
("Complaint") and Related Suits. On May 29, 2015 , PDIC filed an answer to Adobe ' s complaint
in intervention and counterclaim in the Related Suits, but not in the Nordstrom Suit. (See, e. g. ,
C.A. No. 13 -404 D.I. 50) PD IC's counterclaim alleged breach of the implied covenant of good
faith and fair dealing. (See id. at 9-12) In the Related Suits, the Court granted Adobe' s motion
to dismiss PDIC's counterclaim on March 28, 2016. (D.I. 94 at 2) PDIC never responded to
Adobe's Complaint in the Nordstrom Suit. Consequently, on March 8, 2016, the Clerk of Court
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entered default against PDIC. (See D.I. 88) PDIC filed its Motion to set aside default on March
11. (D.I. 89) The parties completed briefing on PDIC ' s Motion on April 6. (D.I. 89, 91 , 99)
The Court of Appeals for the Third Circuit has instructed district courts to consider three
factors in deciding whether to set aside a default: (1) whether the party opposing a motion to set
aside default (Adobe) will be prejudiced, (2) whether the party against whom default was entered
(PDIC) has a meritorious defense, and (3) whether default was the result of the defaulting party' s
(PDIC's) culpable conduct. See Sourcecorp Inc. v. Croney, 412 F. App'x 455 , 459 (3d Cir.
2011 ). The Third Circuit "does not favor entry of defaults or default judgments." United States
v. $55,51 8.05 in US Currency, 728 F.2d 192, 194 (3d Cir. 1984).
Regarding the fi rst factor, whether Adobe will be prejudiced if PDIC ' s Motion is granted,
Adobe argues that it will be prejudiced if PDIC is permitted to "re-assert its counterclaim that the
parties have fully briefed" in the Related Suits. (D.1. 91 at 6-7) The Court agrees with Adobe
that this would be prejudicial. Therefore, PDIC will not be permitted to reassert its counterclaim
when it answers Adobe ' s complaint in the Nordstrom Suit, as that precise counterclaim has now
been dismissed in the Related Suits. Adobe does not allege any other form of prejudice.
Therefore, this factor weighs in favor of granting PDIC ' s Motion.
The second factor, whether PDIC has a meritorious defense, also weighs in favor of
granting PDIC ' s Motion. "To show a meritorious defense, a plaintiff must assert defenses that
would constitute a complete defense to the action." World Entm 't Inc. v. Brown, 487 F. App 'x
758, 761 (3d Cir. 2012). The Court previously commented on the relative strength of PDIC ' s
defenses. (See, e.g., D.I. 93 at 33) ("Importantly, given the plausible (and possibly strong) theory
of unlicensed infringement of a valid patent that has been (belatedly) articulated by PDIC, it is

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difficult for the Court to conclude that these cases are of a type that the Court should seek to
deter from being filed. ") For the reasons already articulated by the Court in its earlier opinion on
Adobe' s motion for sanctions (see generally id. at 19-39), the Court determines that PDIC ' s
defenses are strong enough to potentially constitute a complete defense against Adobe's claims.
For example, the Court determined that PD IC's interpretation of the license agreement between
PDIC and Adobe was not "unreasonable." (Id. at 32) If proven, PDIC's interpretation of the
license agreement could provide a complete defense to Adobe ' s claims.
With respect to the third factor, PDIC ' s culpable conduct, the Court agrees with Adobe' s
assertion that the default resulted from PDIC's culpable conduct. (See generally D.I. 91 at 1114) Adobe repeatedly contacted PDIC, offering PDIC numerous opportunities to respond to
Adobe' s complaint in this action. (See id. at 12) PDIC's refusal to answer the complaint was
inexcusable, given the Court' s repeated references to all nine cases (Related Suits plus the
Nordstrom Suit) as being pending before the Court, even after Adobe filed its motion for entry of
default. (See D.I. 89 at 3-4) This factor weighs against granting PDIC's Motion.
Weighing the three factors, the Court determines that, given the circumstances of this
case, PDIC ' s Motion should be granted. This case will turn on issues related to interpretation of
the PDIC-Adobe license agreement, issues which are common to this case and all Related Suits.
Therefore, PDIC will be permitted to file an answer to Adobe' s complaint in this case that only
asserts defenses that are identical to those asserted in the Related Suits (other than PDIC will not
be permitted to reassert the dismissed counterclaim). Given the identicality of the claims and
defenses in this case and the claims and defenses in the Related Suits, there are no significant
concerns of inefficiency or prejudice that would warrant deciding the issues in this case in

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Adobe' s favor based solely on PDIC ' s default.
Adobe requests that the Court impose monetary sanctions. (See D.I. 91 at 14 n.12) The
Court agrees with Adobe that monetary sanctions are appropriate in light of PDIC ' s culpable
conduct in failing to answer Adobe' s complaint in this action. Therefore, the parties shall meet
and confer and attempt to agree on the amount PDIC must pay Adobe as a monetary sanction. If
no agreement can be reached, the parties shall present their competing proposals with the joint
status report due on August 30.

L~i. fb

HON. LEONARD P. STARK
UNITED STA TES DISTRICT JUDGE

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