Aquavit Pharmaceuticals, Inc. v. U-Bio Med, Inc.

Background

Aquavit Pharmaceuticals, Inc. sued U-Bio Med, Inc. and Nyun Shi Eum, also identified in the caption as Nyun-Sik Eum, over the parties’ claimed rights to use the AQUAGOLD trademark and other marks in connection with a micro-injection device with medical and cosmetic applications. The court entered a modified preliminary injunction, meaning an order issued before final judgment, that restricted the defendants’ use of AQUAGOLD and other marks in the United States, South Korea, and other countries, subject to stated exceptions. The order also required disclaimers in certain countries, barred the defendants from associating their products with Aquavit’s marks or product, and prohibited disparagement of Aquavit’s devices.

The court had previously found the defendants in contempt on three occasions for violating the modified preliminary injunction. It had also ordered them to pay Aquavit $265,248 in attorneys’ fees and $2,614.89 in costs as compensatory sanctions for earlier violations, by September 10, 2021. The order states that the defendants did not pay that amount and had not provided proof that they could not pay it.

Magistrate Judge’s Recommendation and Review

The court referred the calculation of compensatory and coercive sanctions to Magistrate Judge Lehrburger. Coercive sanctions are penalties intended to encourage compliance. Judge Lehrburger recommended additional contempt findings and sanctions based on the defendants’ failure to timely correct omissions involving compliant disclaimers on five YouTube videos and their failure to correct a violation involving a defamatory news video.

The parties received fourteen days to object to the recommendation, along with a warning that failing to object would waive objections and appellate review. Neither party objected. The court therefore reviewed the recommendation for clear error—an obvious mistake apparent from the record—and found none.

Ruling

Judge Valerie Caproni adopted the recommendation in full. The court found the defendants in contempt for failing to pay the earlier compensatory sanctions. It ordered the defendants to pay $301,000 to the Clerk of Court by June 24, 2022, as coercive sanctions for violations through November 2, 2021. Additional coercive sanctions for the continuing news-video violation were to accrue under the earlier contempt order.

The defendants were also ordered to pay further coercive sanctions under the same formula used in the earlier contempt order until they paid the compensatory sanctions previously awarded to Aquavit and corrected the additional violations described in the recommendation. In addition, they were ordered to pay Aquavit further compensatory sanctions for attorneys’ fees and costs related to the matters addressed in the recommendation and the defendants’ continuing contempt.

If the defendants had not corrected all violations and paid all required sanctions by June 24, 2022, Aquavit was ordered to seek a judgment in its favor as a sanction by filing an order-to-show-cause motion before Judge Lehrburger by July 15, 2022. The court also stated that the failure to object barred appellate review and certified that any appeal would not be taken in good faith; it therefore denied permission to proceed without paying court fees for an appeal.