Core Distribution, Inc. v. Doe

Background

Core Distribution, Inc. sued several Amazon sellers for patent infringement under the Patent Act, false advertising under the Lanham Act, false advertising and deceptive trade practices under Minnesota law, and common-law unfair competition. Core owns U.S. Patent No. 7,048,094, concerning telescoping ladders.

The court identified seven defaulting defendants: JOHN DOE 3, doing business as ladderpro; JOHN DOE 4, doing business as Honey-Blue Super Outlet; JOHN DOE 6, doing business as toolspro1; JOHN DOE 7, doing business as Abundant Store; JOHN DOE 8, doing business as go2buy; JOHN DOE 11, doing business as Easyfashion; and JOHN DOE 12, doing business as Wow Direct. The opinion states that the defendants were served, failed to answer or otherwise respond, and did not participate in discovery. The clerk entered defaults against them.

Liability

Under Federal Rule of Civil Procedure 55, a court may enter default judgment against a defendant who fails to plead or otherwise defend. The court accepted the complaint’s factual allegations as true, except allegations concerning the amount of damages.

The defendants sold telescoping ladders through Amazon. Except for go2buy, they sold one ladder identified as Infringing Ladder 1; go2buy sold a similar product identified as Infringing Ladder 2. The ladders were advertised as supporting a maximum load of 330 pounds and as meeting the EN-131 standard. The court found that the representations were likely to mislead customers into believing that the ladders met that standard, could safely support 330 pounds, and were as safe as Core’s products. The court also found that Infringing Ladder 2 could not safely support 330 pounds.

The court found that the defendants infringed at least claims 1 through 5 of the ’094 patent. It also found that their Amazon sales violated the Lanham Act’s false-advertising provisions and the Minnesota Deceptive Trade Practices Act. The court concluded that the defendants were liable for willful patent infringement, false advertising, and deceptive trade practices.

Permanent injunction

The court applied the four-factor test for a permanent injunction: irreparable injury, inadequate legal remedies, the balance of hardships, and the public interest. It found that all four factors favored Core. The court cited harm from price erosion, lost or threatened retailer relationships, damage to Core’s market share and goodwill, and the risk that customers would be misled about ladder safety.

The court permanently enjoined the defaulting defendants, their officers, agents, employees, affiliated entities, and persons acting in concert with them from further infringing the ’094 patent; importing, manufacturing, using, selling, or offering to sell the ladders identified in the complaint or other ladders that infringe the patent; and using or distributing materials, labels, promotional materials, advertising, or other goods containing the false or misleading statements described in the complaint or similar messages.

The defendants were also ordered to preserve records concerning their telescoping-ladder transactions and, upon Core’s request, provide information in their possession about the sources of ladders they purchased.

Damages and monetary awards

The court determined that a 12% royalty on sales was an appropriate minimum measure of patent damages. It also allocated a $50,000 transaction-cost estimate among twelve defendants, producing a $4,166.67 allocation per defendant. The court calculated base damages for the seven defaulting defendants and then trebled those amounts because it found the infringement and false advertising willful.

The operative order awarded treble damages as follows:

- ladderpro: $155,780.70 - Honey-Blue: $34,467.57 - toolspro1: $32,169.90 - Abundant Store: $28,839.93 - go2buy: $28,098.12 - Easyfashion: $21,024.03 - Wow Direct: $20,769.27

The order also required each defaulting defendant to pay attorneys’ fees and costs listed as $9,751.36 per defendant. The opinion’s earlier findings state a total of $66,621 in attorneys’ fees, or $9,517.29 per defendant, and $1,638.51 in costs, or $234.07 per defendant. The operative order’s fee figure therefore differs from the earlier fee calculation in the opinion.

The court awarded prejudgment interest at the Minnesota statutory rate from the dates it identified as the beginning of each defendant’s infringement. The final monetary judgments, including damages, fees, costs, and prejudgment interest, were:

- JOHN DOE 3, doing business as ladderpro: $210,837.96 - JOHN DOE 4, doing business as Honey-Blue Super Outlet: $70,059.75 - JOHN DOE 6, doing business as toolspro1: $70,829.70 - JOHN DOE 7, doing business as Abundant Store: $50,189.82 - JOHN DOE 8, doing business as go2buy: $50,033.90 - JOHN DOE 11, doing business as Easyfashion: $43,566.15 - JOHN DOE 12, doing business as Wow Direct: $40,245.42

Disposition

The court GRANTED Core’s motion for default judgment. It entered judgment holding the seven identified defendants liable for willful patent infringement, false advertising, and deceptive trade practices; entered a permanent injunction; awarded damages, attorneys’ fees, costs, and prejudgment interest; and ordered judgment to be entered for the amounts listed above.