Facebook, Inc. v. OnLineNic Inc

Background

Facebook, Inc. and Instagram, LLC sued the OnlineNIC defendants in 2019. The operative second amended complaint asserted four claims against OnlineNIC Inc., ID Shield, and Xiamen 35.com Technology Co., Ltd. (35.CN):

- cybersquatting under the Anticybersquatting Consumer Protection Act; - trademark and service-mark infringement under 15 U.S.C. § 1114; - trademark and service-mark infringement and false designation of origin under 15 U.S.C. § 1125(a); and - trademark dilution under 15 U.S.C. § 1125(c).

During discovery, the court appointed Thomas Howe as Special Discovery Master. The Special Master found ample evidence that OnlineNIC and ID Shield failed to preserve responsive electronically stored information, deleted information, withheld information, and used tactics such as data dumping, inconsistent search terms, and misleading or incomplete responses. The Special Master concluded that the conduct was intentional and had caused irreparable harm by permanently deleting records and attachments.

Judge van Keulen recommended terminating sanctions against the OnlineNIC defendants. Judge Illston adopted that recommendation, except for the relief section, while addressing the case against 35.CN. After converting the plaintiffs’ motion concerning 35.CN into a summary-judgment motion, the court found that 35.CN was the OnlineNIC defendants’ alter ego under a single-enterprise theory, struck 35.CN’s answer, extended the terminating sanctions to 35.CN, and directed the Clerk to enter default against it.

Jurisdiction and liability

The court found federal-question jurisdiction under 28 U.S.C. § 1331. It also found personal jurisdiction over all defendants because OnlineNIC maintained and operated its business in California and the court’s prior alter-ego findings allowed OnlineNIC’s contacts to be attributed to ID Shield and 35.CN. The court found venue proper under 28 U.S.C. § 1391(b)(2).

The court held that the second amended complaint adequately alleged cybersquatting and trademark violations. Because default had been entered against all defendants, the court treated the complaint’s well-pleaded allegations concerning liability as true. It then applied the factors used in the Ninth Circuit to decide whether default judgment is appropriate. The court found that most factors favored default judgment, including the plaintiffs’ substantial prejudice, the sufficiency of the allegations, the absence of excusable neglect, and the defendants’ intentional discovery misconduct. Although the amount at stake and the general preference for decisions on the merits weighed against default judgment, the court concluded that those considerations did not outweigh the other factors.

Relief

The court granted the plaintiffs’ motion for default judgment against all defendants.

The court ordered the defendants to reimburse $88,937 representing the plaintiffs’ payments to the Special Master. It also provisionally awarded reasonable attorneys’ fees and costs related to the Special Master proceedings, the motion for sanctions, and the motion for default judgment and summary judgment concerning 35.CN’s alter-ego status. The amount of those fees was left to a later determination.

The court awarded $3,135,000 in statutory damages under the Anticybersquatting Consumer Protection Act. The award covered 35 domain names: $80,000 for each of 10 names containing confusingly similar misspellings of the plaintiffs’ marks, $95,000 for each of 21 names containing an exact mark plus another commonly spelled word, and $85,000 for each of four names containing an exact mark.

The court ordered that the 35 infringing domain names identified in the complaint be transferred to the plaintiffs. The court also stated that it intended to grant a permanent injunction against cybersquatting on the plaintiffs’ trademarks and to require relevant compliance information, using language the parties had agreed upon after meeting and conferring. The conclusion stated that a separate judgment, including the permanent injunction, would issue. The plaintiffs were directed to submit their request for costs and attorneys’ fees within 14 days of the order’s filing date.