SDS KOREA CO., LTD. v. SDS USA, INC. et al

Filing 57

ORDER granting 56 Motion for Default Judgment; amount to be determined; Plaintiff shall submit a concise letter brief within 14 days addressing the issue of damages, etc. Signed by Judge William J. Martini on 5/10/12. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 2:10-cv-4053 (WJM)

SDS KOREA CO. LTD.,
Plaintiff,

MEMORANDUM
OPINION & ORDER

v.
SDS USA, INC., et al.,
Defendants.

THIS MATTER comes before the Court on Plaintiff’s motion for default
judgment against Defendant XM Systems, Inc. (“XM”), a South Korean
corporation, pursuant to Federal Rule of Civil Procedure 55(b)(2). Plaintiff also
seeks a permanent injunction against XM, enjoining it from infringing Plaintiff’s
intellectual property. For the reasons stated below, the Court grants Plaintiff’s
motion in part and reserves on the remainder.
Plaintiff commenced this action on August 6, 2010 against SDS USA, Inc.,
iBend, LLC, Simon Song, and various John Doe defendants, seeking damages and
injunctive relief for federal trademark infringement, copyright infringement, unfair
competition, and related claims. Defendants all filed answers. Plaintiff thereafter
represented that it learned that XM was also involved in the allegedly wrongful
conduct and sought leave to amend to add XM and several related claims arising
from the same factual allegations. Defendants opposed. The Court granted leave,
and, on February 21, 2011, Plaintiff filed the Amended Complaint naming XM as a
party and adding new, but related, claims against all Defendants.
Because XM is based in Korea, service on it is governed by the Hague
Convention on the Service Abroad of Judicial and Extra Judicial Documents in
Civil or Commercial Matters (the “Convention). See F. R. Civ. P. 4(f)(1). After
filing the Amended Complaint, Plaintiff began the arduous process of attempting
to serve XM pursuant to the Convention. Plaintiff simultaneously entered into
settlement discussion with the three other Defendants. On August 16, 2011, this
Court so ordered the parties’ stipulation of partial dismissal, thereby dismissing the
Amended Complaint without prejudice as against all Defendants other than XM
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and dismissing with prejudice related counterclaims and a Third Party Complaint.
On February 27, 2012, Plaintiff received a certificate from the proper South
Korean authority attesting to the fact that XM was served on July 19, 2011 via
personal service on one of its employees.
The time for XM to answer or otherwise respond to the Complaint has
expired, and XM has failed to do so. Pursuant to Federal Rule of Civil Procedure
55(a), the Clerk has entered default against XM. Thereafter, Plaintiff filed the
instant motion for default judgment. No opposition has been filed.
Prior to granting default judgment, the Court must undertake certain
analysis, as the mere fact of default does not entitle Plaintiff to judgment. First, the
Court must determined whether a sufficient cause of action has been stated, taking
as true the factual allegations of the Amended Complaint. See, e.g., Chanel, Inc. v.
Gordashevsky, 558 F. Supp. 2d 532, 535-36 (D.N.J. 2008). Once a cause of action
has been established, “district courts must make explicit factual findings as to: (1)
whether the party subject to default has a meritorious defense, (2) the prejudice
suffered by the party seeking default, and (3) the culpability of the party subject to
default.” Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D.
171, 177 (D.N.J. 2008) (citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d
Cir. 1987)).
In this case, the Court finds that the facts set forth in the Amended
Complaint, the motion, and the attached exhibits merit entry of a default judgment.
The Amended Complaint alleges that Brian Song, Plaintiff’s President, obtained a
number of patents relating to Plaintiff’s machine tooling business, including U.S.
Patents 5787750, 5870919, 6128940, 6405574, and 7694543 (collectively, the
“SDS Patents”). By March 1, 2006, all of the SDS Patents had been assigned to
Plaintiff. The Amended Complaint further alleges that XM is designing,
manufacturing, marketing, and selling a line of machine tools in the United States
that are virtually identical to Plaintiff’s products and that incorporate elements
protected by the SDS Patents. In sum, the factual allegations of the Amended
Complaint, taken as true, are sufficient to establish that XM is liable to Plaintiff for
direct infringement of the SDS Patents. 1 Second, the Court finds that there is no
basis for XM to claim a meritorious defense, and Plaintiff has provided ample
evidence that XM is in fact still engaged in the practice of selling the infringing
products. Third, it is clear that Plaintiff has been prejudiced by XM’s failure to
answer because Plaintiff has incurred additional costs, has been unable to move
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The Amended Complaint states various causes of action against all Defendants jointly, but
Plaintiff’s motion for default judgment against XM focuses entirely on its claims for patent
infringement. As such, the Court assumes that Plaintiff’s motion only seeks default judgment as
to these claims.
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forward with the case, and has been delayed in receiving the requested relief,
including an injunction to prevent further infringement. See Malik v. Hannah, 661
F. Supp. 2d 485, 490-91 (D.N.J. 2009). Finally, where, as here, a defendant has
failed to respond, there is a presumption of culpability. See Teamsters Pension
Fund of Phila. & Vicinity v. Am. Helper, Inc., No. 11-624, 2011 U.S. Dist. LEXIS
115142, at *10 (D.N.J. Oct. 5, 2011).
The Court further finds that Plaintiff has established his entitlement to the
entry of a permanent injunction under 35 U.S.C. § 283 preventing XM from further
infringement in the United States. A plaintiff seeking a permanent injunction
pursuant to Section 283 must satisfy a four-factor test before a court may grant
such relief by demonstrating: (1) that it has suffered an irreparable injury; (2) that
remedies available at law, such as monetary damages, are inadequate to
compensate for that injury; (3) that, considering the balance of hardships between
the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public
interest would not be disserved by a permanent injunction. eBay Inc. v.
MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Plaintiff has easily satisfied all
four factors. XM, a direct competitor, is marketing and selling infringing machines
in the United States and has thus far refused to stop or to even respond to
Plaintiff’s legal demands and submissions. XM has not appeared and thus has
made no showing explaining how the balance of hardships might somehow tip in
its favor. And protecting intellectual property is presumptively within the public
interest.
Finally, Plaintiff requests that the Court award damages and attorney’s fees.
Under 35 U.S.C. § 284, Plaintiff is clearly entitled to an award of damages. But
Plaintiff has not provided a sufficient basis for the Court to make the necessary
factual determinations regarding the amount of damages, nor has the Plaintiff
provided an adequate legal argument supporting its request for treble damages.
Plaintiff must provide some legal and factual basis for its requests for damages,
and must discuss the propriety of enhanced damages pursuant to relevant law. See,
e.g. Air Vent, Inc. v. Vent Right Corp., No. 08-cv-00146, 2011 WL 1237923, at *34 (W.D. Pa. Apr. 4, 2011) (discussing damage analysis for claims of patent
infringement after entry of default judgment). Plaintiff did provide evidence
supporting its assertion that XM had sold 21 infringing machines in the United
States, but did not provide adequate evidence that but-for XM’s infringement,
Plaintiff would have sold the machines at issue. Nor did Plaintiff explain why it
would be entitled to the entire sale value of those machines as opposed to a
reasonable profit from the sale of those machines.
And although Plaintiff has provided sufficient evidence pursuant to local
rules to support its request for attorney’s fees, the Court will reserve on the award
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of attorney’s fees until after briefing on this motion is complete. Plaintiff may
augment its request for fees to incorporate additional fees expended in responding
to the Court’s direction for additional briefing.
For the foregoing reasons and for good cause shown;
IT IS on this 10th day of May 2012, hereby,
ORDERED that default judgment is entered against Defendant XM
Systems, Inc. in an amount to be determined; and it is further
ORDERED that XM Systems, Inc., together with its officers, employees,
agents, successors, and assigns, are hereby permanently enjoined from
manufacturing, importing, advertising, marketing, selling, leasing, offering for sale
or lease, trading in, anywhere in the United States, any cutting or bending
machines practicing or embodying any of the SDS Patents, including the following
models identified in Plaintiff’s submissions: C, E200, R400, M320, M320H,
M400, M430, M430H, and P320; and it is further
ORDERED that Plaintiff shall have 14 days from the date of this Order in
which to submit a concise letter brief addressing the issue of damages. Plaintiff
may rely on its previous evidentiary filings, including the invoices, as it sees fit to
support its letter brief, and may submit any additional evidence it deems
appropriate. And it is further
ORDERED that Plaintiff shall send a copy of this Order to XM Systems,
Inc. and such of its agents, successors, and assigns, and all others acting for, by, or
in concert with XM Systems, Inc. as are known or become known.

/s/William J. Martini
WILLIAM J. MARTINI, U.S.D.J.

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