Cisco Systems, Inc. v. Shenzhen Usource Technology Co.

Background

Cisco Systems, Inc., Cisco Technology, Inc., and Ciena Corporation sued Shenzhen Usource Technology Co., Warex Technologies Limited, and Shenzhen Warex Technologies, Co., Ltd. The plaintiffs alleged that the defendants advertised, sold, and distributed transceiver products using unauthorized copies of Cisco and Ciena trademarks. Plaintiffs’ investigators purchased products from the defendants, and plaintiffs’ engineers concluded that the products were not genuine Cisco or Ciena products and had a high probability of malfunctioning.

The amended complaint asserted claims under the Lanham Act for trademark infringement and counterfeiting, false designation of origin and false advertising, and trademark dilution. It also asserted claims under California’s False Advertising Law and Unfair Competition Law. The court had previously issued a temporary restraining order and preliminary injunction concerning the alleged infringement.

Default and Jurisdiction

None of the defendants appeared or defended the action. The clerk entered default against them on July 12, 2021. The court concluded that it had federal-question jurisdiction over the Lanham Act claims and supplemental jurisdiction over the related California claims. It also concluded that the defendants’ advertising, sales, and distribution activities in the district and California supported personal jurisdiction. The plaintiffs served the complaints and summonses by email under court authorization.

Default-Judgment Analysis

The court applied the seven factors used in the Ninth Circuit to evaluate a request for default judgment, including prejudice to the plaintiffs, the merits and sufficiency of the claims, the amount at stake, the possibility of disputed facts, excusable neglect, and the policy favoring decisions on the merits.

The court found that Cisco and Ciena owned valid federal trademark registrations and had sufficiently alleged that the defendants’ products were counterfeit and likely to confuse consumers. Because the trademark-infringement allegations were sufficient, the court also found the false-designation-of-origin claim adequately pleaded. The court likewise found that the plaintiffs had stated claims under California’s Unfair Competition Law and False Advertising Law.

The plaintiffs did not seek default judgment on the Lanham Act false-advertising claim, and the court understood the motion as not seeking default judgment on that claim. The court also treated the plaintiffs’ omission of trademark dilution from their argument as meaning that they were not seeking default judgment on that claim.

Ruling and Relief

The court granted the plaintiffs’ motion for default judgment as to the trademark-infringement, false-designation-of-origin, Unfair Competition Law, and False Advertising Law claims. It did not award monetary damages because the plaintiffs sought a declaration of liability and injunctive relief rather than damages.

The court also granted a permanent injunction. It found good cause to convert the preliminary injunction into a permanent injunction based on the allegations, which were treated as true for liability purposes after the defendants’ default. The February 24, 2022 hearing was vacated.