Telebrands Corp. v. VindEx Solutions LLC

Background

Telebrands alleged that Henan Derun New Material Technology Co. and XNH US sold competing transcutaneous electrical nerve stimulation units, or TENS units, in the United States without obtaining the required FDA 510(k) clearance for Class II medical devices. Telebrands marketed the Hempvana Rocket, a wireless TENS unit covered by a license agreement with Healthcare Innovations LLC, which had obtained FDA clearance for the product and its licensees.

Telebrands asserted claims under the unfair-competition and consumer-protection laws of California, Florida, Pennsylvania, Delaware, and Colorado. It alleged that the defendants’ sales gave them an unfair advantage, caused consumers to encounter similar products when searching for the Hempvana Rocket, and caused Telebrands to lose customers and market share. The other defendants originally named in the action were voluntarily dismissed, leaving Henan Derun and XNH as the remaining defendants.

Default and Service

Telebrands served Henan Derun and XNH through Amazon Seller Messaging after the court authorized that alternative method of service. The court found that this method was reasonably calculated to give notice and substantially complied with the federal service rules. The court also found that it had diversity jurisdiction and specific personal jurisdiction because the claims arose from the defendants’ alleged marketing and sales of TENS units to customers in California.

The defendants did not answer, appear, or oppose the motion. The court had entered default against them on July 20, 2021. In deciding whether to enter default judgment, the court considered the seven factors used in the Ninth Circuit, including prejudice, the merits and sufficiency of the claims, the amount at stake, the likelihood of factual disputes, whether the default resulted from excusable neglect, and the policy favoring decisions on the merits.

Claims and Injunction

The court found that Telebrands adequately alleged meritorious claims under each of the five state laws. Among other things, the court concluded that the alleged sale of TENS units without FDA clearance could support allegations of unfair or unlawful competition, deceptive or unfair practices, likely consumer confusion, and injury to Telebrands. Because the defendants defaulted, the complaint’s liability-related factual allegations were treated as true for purposes of the motion, but damages-related allegations were not automatically accepted as true.

Telebrands requested a permanent injunction preventing the defendants and those acting with them from selling the uncleared TENS units anywhere in the United States unless and until they obtained the required FDA clearance. The court found that the state statutes authorized injunctive relief and that the factors for a permanent injunction—irreparable injury, inadequate legal remedies, the balance of hardships, and the public interest—supported the request. The court also found that a nationwide injunction was appropriate and stated that the defendants could sell TENS units after obtaining the proper FDA clearance.

Disposition

The court GRANTED Telebrands’ motion for default judgment. It stated that it would issue a separate injunction and permitted notice of the order and judgment to be served on the defendants through Amazon Seller Messaging. The opinion does not state a monetary damages award.