Kustom Cycles, Inc. et al v. Dragonfly Cycle Concepts, LLC et al

Filing 13

ORDER granting 11 Motion for Default Judgment. Signed by Chief Judge Jeffrey L. Viken on 7/9/19. (SB)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
KUSTOM CYCLES, INC., a South Dakota
corporation d/b/a KLOCK WERKS
KUSTOM CYCLES; BRIAN KLOCK,
Plaintiffs,

CIV. 18-5024-JLV
ORDER

vs.
DRAGONFLY CYCLE CONCEPTS, LLC,
a California Limited Liability Company;
KEVIN MICHAEL MARTIN, individually,
Defendants.
INTRODUCTION
Plaintiffs Kustom Cycles, Inc. (“Klock Werks”) and Bryan Klock allege
defendants Dragonfly Cycle Concepts, LLC (“Dragonfly”) and Kevin Martin
infringed upon their patent for a motorcycle windshield. (Docket 1).
Defendants failed to answer the complaint and the Clerk of Court entered default
against them. (Docket 9). On December 20, 2018, plaintiffs moved for default
judgment, seeking the court’s order finding defendants infringed the patent, a
permanent injunction enjoining defendants from infringing the patent, statutory
damages, and attorneys’ fees. (Docket 11). Despite receiving service of the
pleadings, defendants failed to enter an appearance in this case. For the
reasons given below, the court enters default judgment in favor of plaintiffs,
enters a permanent injunction, and grants statutory damages and attorneys’
fees.

DISCUSSION
I.

Facts
“Once a default has been entered on a claim for an indefinite or uncertain

amount of damages, facts alleged in the complaint are taken as true, except facts
relating to the amount of damages, which must be proved in a supplemental
hearing or proceeding.” Cutcliff v. Reuter, 791 F.3d 875, 882 (8th Cir. 2015).
“A defaulted claim thus precludes a party from contesting the facts in the
complaint that establish liability.” Id. Because defendants defaulted on the
patent claim at issue here, the court takes all facts in plaintiffs’ complaint
establishing liability as true.
In 2009, plaintiff Brian Klock obtained a design patent (Patent No.
D586,275) for his motorcycle windshield. (Docket 1-1). Mr. Klock is the
founder and CEO of Klock Werks, which has its principal place of business in
Mitchell, South Dakota. (Docket 1 at ¶¶ 5, 9). Klock Werks designs,
manufactures and sells custom motorcycle parts. Id. at ¶ 5. Klock Werks sells
“Flare” windshields, which are the commercialized version of the patented
design. Id. at ¶¶ 9, 13.
Defendant Dragonfly manufactures and sells motorcycle parts from its
principal place of business in Fullerton, California. Id. at ¶ 7. Defendant Kevin
Martin is the sole owner of Dragonfly. Id. Defendants previously sold
motorcycle windshields manufactured by Klock Werks, including the Flare
windshield, apparently with permission. Id. at ¶¶ 7, 23.
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However, Dragonfly also manufactures and sells a “Flip-Out” batwing
motorcycle windshield which “embod[ies] the design” patented by plaintiffs. Id.
at ¶¶ 15-18. The Flip-Out windshield is “virtually indistinguishable” from
plaintiffs’ Flare windshield. Id. at ¶ 24. Dragonfly sells its Flip-Out
windshields in Sturgis, South Dakota, at the annual Sturgis Motorcycle Rally. 1
Id. at ¶ 3. In 2017, a Klock Werks representative purchased a Flip-Out
windshield from a Dragonfly staff member in Sturgis. Id. at ¶ 19.
Defendants knew, or reasonably should have known, that the Flare
windshield design was patented because they sold the Flare windshield before
creating the Flip-Out windshield. Id. at ¶ 25. Defendants have not licensed
the patented design or otherwise obtained permission to manufacture
windshields embodying that design. Id. at ¶ 39. Because of defendants’
actions, plaintiffs suffered “prior and continued financial loss as well as
significant harm to [their] goodwill within the motorcycle industry and [their]
ability to control the use and commercial exploitation of [their] patented design.”
Id. at ¶ 27. Defendants’ infringement was and is “knowing, intentional, and
willful.” Id. at ¶ 40.

1In

their complaint, plaintiffs asserted the court has personal jurisdiction
over defendants—who are domiciled in California—because of their purposeful
availment of the rights, privileges and protections of South Dakota law through
their repeated attendance at the Sturgis Motorcycle Rally. (Docket 1 at ¶ 3).
Taking the factual allegations in the complaint relating to defendants’ sale of the
infringing windshield at the Rally as true, the court concludes it may exercise
specific jurisdiction over defendants in this action because “the cause of action
arise[s] from or relate[s] to [the] defendant[s’] actions within” South Dakota.
Wells Dairy, Inc. v. Food Movers Intern., Inc., 607 F.3d 515, 518 (8th Cir. 2010).
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II.

Legal Standard
The Patent Act provides that “whoever without authority makes, uses,

offers to sell, or sells any patented invention . . . infringes the patent.” 35 U.S.C.
§ 271(a). “A determination of patent infringement under 35 U.S.C. § 271(a)
requires a two step analysis—first, the language of the claim at issue must be
interpreted to define its proper scope and, second, the evidence before the court
must be examined to ascertain whether the claim has been infringed[.]” Minn.
Min. and Mfg. Co. v. Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559,
1570 (Fed. Cir. 1992).
The court “may grant injunctions in accordance with the principles of
equity to prevent the violation of any right secured by patent[.]” 35 U.S.C.
§ 283. The Supreme Court set out a “four-factor test” that applies “to disputes
arising under the Patent Act”:
A plaintiff must demonstrate: (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 v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).
In “exceptional” Patent Act cases, the court “may award reasonable
attorney fees to the prevailing party.” 35 U.S.C. § 285.
[A]n “exceptional” case is simply one that stands out from others
with respect to the substantive strength of a party’s litigating
position (considering both the governing law and the facts of the
case) or the unreasonable manner in which the case was litigated.
District courts may determine whether a case is “exceptional” in the
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case-by-case exercise of their discretion, considering the totality of
the circumstances.
Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014).
The moving party in a patent infringement case must establish its “entitlement to
fees under § 285 . . . by a preponderance of the evidence standard[.]” Id. at 557.
III.

Analysis
A.

Infringement

Accepting the complaint’s factual assertions as true, plaintiffs have shown
defendants infringed on their design patent. Defendants are selling a
motorcycle windshield, its Flip-Out model, that embodies the design patented by
plaintiffs. (Docket 1 at ¶ 38). Defendants do not have permission from the
patent holder to sell their own version of the patented design. Id. at ¶ 39. The
scope of the patent plaintiffs attached to their complaint, see Docket 1-1,
appears to encompass defendants’ Flip-Out windshield. See also Docket 1 at
pp. 12-13 (comparing photographs of plaintiffs’ Flare windshield and defendants’
Flip-Out windshield). The court finds defendants’ Flip-Out windshield infringes
on plaintiffs’ design patent.
B.

Injunction

Plaintiffs request a permanent injunction enjoining defendants from
infringing their design patent. (Docket 11 at pp. 8-11). The court concludes
plaintiffs have met their burden under the eBay factors and grants the
injunction.

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The first factor requires plaintiffs to show they have suffered an irreparable
injury. eBay, 547 U.S. at 391. “The essential attribute of a patent grant is that
it provides a right to exclude competitors from infringing the patent. In view of
that right, infringement may cause a patentee irreparable harm not remediable
by a reasonable royalty.” Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1328
(Fed. Cir. 2008). The court concludes plaintiffs have shown irreparable harm to
their right to exclusively control the use of their patented motorcycle windshield
design. Without an injunction to enforce plaintiffs’ exclusivity rights, their
patent would become worthless.
The second factor requires plaintiffs to show remedies at law are
inadequate to compensate for their injury. eBay, 547 U.S. at 391. “[T]he
simple fact that one could, if pressed, compute a money damages award does not
always preclude a finding of irreparable harm[.]” Celsis In Vitro, Inc. v.
CellzDirect, Inc., 664 F.3d 922, 930 (Fed. Cir. 2012). Here, the court cannot
determine with any specificity the amount of money which would compensate
plaintiffs for the infringement because defendants did not appear in this case.
See Docket 11 at p. 11 (plaintiffs explaining they do not know defendants’
“infringing sales or . . . profits” because defendants did not participate in
discovery). Resolving this dispute with monetary damages, even if the court
could calculate them, would not stop defendants from infringing the patent in
the future. The court’s inability to ascertain monetary damages, coupled with

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the necessity of an injunction to prevent future infringement, show that a legal
remedy is inadequate in this case.
The third factor requires plaintiffs to show the balance of hardships tips in
their favor. eBay, 547 U.S. at 391. Defendants will not be harmed by an
injunction ordering them to cease infringing on plaintiffs’ design patent, while
plaintiffs suffer continual harm from the loss of their exclusive right over the
design occasioned by defendants’ infringement. The balance of hardships
weighs in plaintiffs’ favor.
Finally, the last factor requires plaintiffs to show that granting an
injunction would not disserve the public interest. eBay, 547 U.S. at 391. “As a
general matter, the public maintains an interest in protecting the rights of patent
holders[.]” Smith & Nephew, Inc. v. Synthes (U.S.A.), 466 F. Supp. 2d 978, 985
(W.D. Tenn. 2006). The court finds this factor weighs in favor of an injunction.
Relying on the presumptively true facts in plaintiffs’ complaint, the court
finds the balance of equities favors entering a permanent injunction.
C.

Monetary damages

Plaintiffs request the statutory minimum award of monetary damages for
defendants’ infringement of their patent. (Docket 11 at pp. 11). They also
request the statutory minimum award be trebled to account for defendants’
willful infringement. Id. at pp. 11-12. The Patent Act allows patentees to
recover “the extent of [the infringer’s] total profit” but sets a minimum award of

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$250. 35 U.S.C. § 289. The Act also allows the court to treble damages. Id. at
§ 284.
Awards of enhanced damages under the Patent Act . . . are not to be
meted out in a typical infringement case, but are instead designed as
a “punitive” or “vindictive” sanction for egregious infringement
behavior. The sort of conduct warranting enhanced damages has
been variously described . . . as willful, wanton, malicious, bad-faith,
deliberate,
consciously
wrongful,
flagrant,
or—indeed—characteristic of a pirate. . . . [S]uch damages are
generally reserved for egregious cases of culpable behavior.
Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1932 (2016).
Two factors in the present case support an award of treble damages.
First, plaintiffs pled that defendants’ infringement was “willful . . . and without
any reasonable basis for believing [they] had the right to engage in the infringing
conduct.” (Docket 1 at ¶ 26). Because the court must take this allegation as
true, the willfulness of the infringement weighs in favor of treble damages.
Second, plaintiffs’ statutory minimum damages request is unlikely to
approximate the full measure of the benefit defendants reaped from their
infringement. The court cannot determine the extent of defendants’
infringement profits because they refused to participate in this litigation.
Circumventing the ability of a fact-finder to determine the extent of the harm by
refusing to participate in litigation is “conduct warranting enhanced damages”
because it is “deliberate, conscious[]” and “wrongful.” Halo Elecs., 136 S. Ct. at
1932.
The court finds the statutory minimum damage award of $250 is
appropriate for defendants’ infringement and trebles that award to $750 to
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account for defendants’ willful infringement and refusal to participate in this
litigation.
D.

Attorneys’ fees and costs

Plaintiffs ask the court to order defendants to pay the attorneys’ fees and
costs they have incurred in this matter. (Docket 11 at pp. 12-13). Plaintiffs
assert they have incurred $30,446.63 in attorneys’ fees and $525 in costs. 2
(Dockets 11-2 & 11-5). Citing only to nonbinding district court precedent,
plaintiffs argue this case is exceptional and thus merits attorneys’ fees because
they pled defendants willfully infringed their design patent. (Docket 11 at
p. 12).
This court previously rejected the proposition that willful infringement is
sufficient to support an award of attorneys’ fees under the Lanham Act. 3 Sturgis
Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc., CIV. 11-5052, 2017 WL
2Plaintiffs

request multiple different figures for their total attorneys’ fees.
Within two adjacent pages of their motion for default judgment, plaintiffs request
both $322,282.63 and $31,757.63 in fees. (Docket 11 at pp. 13-14). In
attorney T. Earl LeVere’s affidavit, he stated the total fees incurred by plaintiffs
from his firm was $29,085. (Docket 11-2 at ¶ 8). In calculating the fees
described in the hour logs Mr. LeVere attached to his affidavit, the court found
only $27,774 in fees. The court added this figure to the $2,672.63 in fees
attested by attorney Richard Rylance II to reach the above figure. (Docket 11-5
at ¶ 8). The court (and apparently plaintiffs) did not include in its calculation
$3,500 worth of fees attested for Mr. LeVere and another unnamed attorney
because no hourly rate was given for the work. (Docket 11-3 at pp. 5-6).
Additionally, 3.20 hours of research billed at a rate of $360 per hour was noted
on the hour logs as not charged. Id. at pp. 33-34.
3Fee

requests under the Lanham and Patent Acts are governed by the
same standard. See SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., 839
F.3d 1179, 1181 (9th Cir. 2016) (en banc) (collecting appellate cases applying
Octane Fitness Patent Act fees standard to Lanham Act cases).
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1052575 at *3-4, aff’d 908 F.3d 313, 346 (8th Cir. 2018). The court instead
looked to whether defendants’ conduct was unreasonable. Id. at *4; see also
Octane Fitness, 572 U.S. at 554 (holding fees may be merited where the
“substantive strength of a party's litigating position . . . or the unreasonable
manner in which the case was litigated” are exceptional). This standard does
not necessarily demand fees be awarded simply because the infringement was
willful. Many patent infringement cases involve willful infringement, suggesting
a pleading of willfulness does not automatically entitle a plaintiff to attorneys’
fees.
However, the “unreasonable manner in which [this] case was litigated”
“stands out from others” because defendants refused to appear and defend the
action. 4 Octane Fitness, 572 U.S. at 554. The court accordingly finds this case
is exceptional and awarding attorneys’ fees is appropriate. The question
remains whether plaintiffs’ requested fees are “reasonable,” as required by the
Patent Act. 35 U.S.C. § 285.
“In calculating an attorney fee award, a district court usually applies the
lodestar method, which provides a presumptively reasonable fee amount, by
multiplying a reasonable hourly rate by the reasonable number of hours required
to litigate a comparable case.” Lumen View Tech. LLC v. Findthebest.com, Inc.,
811 F.3d 479, 483 (Fed. Cir. 2016) (citing Perdue v. Kenny A. ex rel. Winn, 559

4Only

a prevailing party is entitled to attorneys’ fees. 35 U.S.C. § 285.
Because the court grants default judgment in their favor, plaintiffs are the
prevailing party in this litigation.
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U.S. 542, 551, 554 (2010)). Plaintiffs here hired two law firms, Ice Miller LLP, a
firm from Columbus, Ohio, and Morgan Theeler LLP, a firm from Mitchell, South
Dakota.
Ice Miller asserts that three attorneys, one partner and two associates
worked on this case for a total of 65.3 hours, 3.20 hours of which was not
charged to the client. (Docket 11-3). The partner, Mr. LaVere, charged 5 hours
at a rate of $485 per hour and 41.4 hours at a rate of $505. The associate,
Nicole Woods, charged 15.7 hours at a rate of $360 per hour. Mr. LaVere states
he has been practicing law since 1994, but does not state he has any particular
expertise in patent law. (Docket 11-2 at ¶ 4). MorganTheeler states three
attorneys worked a total of 11.7 hours on this case. One attorney, notated as
“JT,” billed .8 hours at a rate of $245 per hour. (Docket 11-6 at p. 1). The
second attorney, notated as “ZF,” worked 1 hour at a rate of $185 per hour. Id.
Mr. Rylance worked 9.9 hours on this matter at a rate of $215 per hour. Id. at
pp. 1-2. Mr. Rylance did not state in his affidavit that he has any particular
experience in patent law. (Docket 11-5). Plaintiffs also filed tables from the
American Intellectual Property Law Associations 2017 Report of the Economic
Survey which state the average private firm partner billing rate in the “other
central region”—which apparently includes both Ohio and South Dakota—is
between $290 and $593 per hour, with the mean fee at $398 per hour. (Docket
11-1 at p. 3). For associates, the rates range from $218 to $387, with the mean
fee at $283.
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The court cannot say these fees are unreasonable. Although Ice Miller’s
rates are at the top end of the averages plaintiffs provided and are high by South
Dakota standards—especially for attorneys who conspicuously did not attest to
any particular proficiency in patent law—they do not strike the court as per se
unreasonable. Nor do the hours logs show any unreasonably duplicative
billings that give the court pause. Because defendants failed to appear in this
case, the court lacks any opposing argument to bring perspective to plaintiffs’ fee
request. The court finds fees of $27,774 to Ice Miller and $2,672.63 to Morgan
Theeler are reasonable. 5
ORDER
For the reasons given above, it is
ORDERED that plaintiffs’ motion for default judgment (Docket 11) is
granted.
IT IS FURTHER ORDERED that defendants are immediately and
permanently enjoined from directly or indirectly infringing, contributing to the
infringement of, or inducing infringement of Patent No. D586,275 including, but
not limited to, by making, using, selling or offering for sale the Dragonfly 6.5″
Flip-Out windshield.

5Ice

Miller’s billing records are a model of neither clarity nor arithmetic.
See Docket 11-3 at pp. 5-6, 18-19, 26-28, 33-34 (neglecting to include hourly
rates, committing serious formatting and spelling errors, failing to account for
fees not charged to clients). The court calculated the above figure from the
provided Ice Miller figures, but notes it does not match any of the various figures
Ice Miller provided in its affidavit or briefing.
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IT IS FURTHER ORDERED that this permanent injunction is binding upon
any of the following persons who receive actual notice of this order: defendants’
employees, agents, officers, directors, attorneys, successors, affiliates,
subsidiaries, assigns of either defendant, and all those in active concert with
defendants. Defendants are ordered to give actual notice to those listed persons
and entities by supplying each with a copy of this order.
IT IS FURTHER ORDERED that statutory damages in the amount of $750
are assessed against defendants, jointly and severally.
IT IS FURTHER ORDERED that attorneys’ fees in the amount of $27,774
to Ice Miller LLP and $2,672.63 to Morgan Theeler LLP are assessed against
defendants, jointly and severally.
IT IS FURTHER ORDERED that the Clerk of Court shall tax the
appropriate costs in this action in favor of plaintiffs pursuant to Civil Local Rule
54.1.
IT IS FURTHER ORDERED that this judgment shall accrue interest,
compounded annually, pursuant to 28 U.S.C. § 1961.
IT IS FURTHER ORDERED that defendant Dragonfly Cycle Concepts, LLC
and defendant Kevin Michael Martin shall be jointly and severally liable to
plaintiffs for this judgment.
Dated July 9, 2019.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
CHIEF JUDGE
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