Sec. USA Servs. v. Invariant Corp

• Docket Number: 1:20-cv-01100-KWR-KRS
• Decision Date: 07 June 2023
• Parties: SECURITY USA SERVICES, LLC, Plaintiff / Counter-defendant, v. INVARIANT CORP., and HYPERION TECHNOLOGY GROUP, INC., Defendants / Counterclaimants.
• Court: U.S. District Court — District of New Mexico

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SECURITY USA SERVICES, LLC, Plaintiff / Counter-defendant, v. INVARIANT CORP., and HYPERION TECHNOLOGY GROUP, INC., Defendants / Counterclaimants.

No. 1:20-cv-01100-KWR-KRS

United States District Court, D. New Mexico

June 7, 2023

INJUNCTION ORDER

KEA W RIGGS, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court upon the Defendants' Motion for Summary Judgment and Permanent Injunction (Doc. 136). For the reasons stated below, the Court will enter an injunction prohibiting Security USA Services, LLC from using the FIREFLY mark. This injunction order also applies to those in active concert or participation with Security USA Services, LLC with actual notice of the injunction, including successors in interest subsidiaries, and those in privity with Security USA Services.

Counterclaimants requested the Court enter summary judgment in their favor on their False Designation of Origin (15 U.S.C. § 1125(a)) counterclaim and enter an injunction prohibiting Security USA Services from using the FIREFLY trademark on their gunshot detection systems. Doc. 136.

The Court granted Counterclaimants' motion for summary judgment and entered an order finding an injunction was appropriate, but requested supplemental briefing on the scope of the injunction. See Doc. 147. Because Security USA Services' supplemental brief did not address the scope of the injunction, the Court ordered further supplemental briefing from Plaintiff. See Doc. 152.

Counterclaimants proposed the following injunction:

Prohibiting Plaintiff as well as its “principals, agents, servants licensees, employees, successors, assigns, affiliated entities, and all those in privity with it from:

• Using FIREFLY or any colorable imitation or confusingly similar trademark;

• Manufacturing, producing, distributing, circulating, selling, advertising or marketing goods bearing FIREFLY or any colorable imitation thereof;

• Using FIREFLY or any other term in a fashion likely to relate or connect FIREFLY with Security; and

• Assisting, aiding, or abetting another person or business entity in engaging in or performing any of the activities enumerated above.

Doc. 136 at 9. Now that Counterclaimants have provided supplemental briefing justifying the scope of the injunction, the Court generally finds their proposed injunction well-taken, as modified below:

Security USA Services, LLC as well as (1) its principals, officers, agents, servants, and employees, and (2) those who are in active concert or participation with it who receive actual notice of this injunction, including its successors in interest, subsidiaries, affiliates, and those in privity with it, are prohibited from:

• Using the FIREFLY trademark or any colorable imitation or confusingly similar trademark;

• Manufacturing, producing, distributing, circulating, selling, advertising or marketing goods bearing the FIREFLY mark or any colorable imitation or confusingly similar trademark; and

• Assisting, aiding, or abetting another person or business entity in engaging in or performing any of the activities enumerated above.

This injunction shall apply nationwide.

The Court directed the parties to opine on the scope of the injunction, including who should be bound by the injunction. Security USA Services made the following objections to the scope of the injunction: (1) it asserted that Counterclaimants had not shown that a nationwide geographic scope was appropriate, and (2) including EAGL Technology, LLC in the injunction order would violate its due process rights as it has not appeared in this case. Security USA also reargued the merits of entering summary judgment in Counterclaimants' favor on Count I. See Docs. 150, 153 (Security USA's supplemental briefing on scope of injunction).

The Court finds that those bound by the injunction should include (1) Security USA Services, (2) its officers, agents, servants, employees, and attorneys, and (3) those in active concert or participation with them. See Fed.R.Civ.P. 65. This includes successors in interest, subsidiaries, affiliates, and those in privity with Security USA Services. At this time, it appears the Court need not expressly name EAGL Technology, LLC in the injunction, as entities in active concert or participation with Security USA Services, LLC, including successors in interest and subsidiaries, are included in the scope of the injunction under Fed.R.Civ.P. 65. See Scalia v. Paragon Contractors Corp., 796 Fed.Appx. 962, 968 (10th Cir. 2019) (applying injunction to non-party who was not expressly named in injunction, but was in active concert and participation with enjoined party).

An injunctive order binds a nonparty who is “in active concert or participation with” a party and has actual notice of the order. Fed.R.Civ.P. 65(d)(2)(C). Such an order binds a participating nonparty because if courts didn't have the authority to do so “the named parties could easily thwart the injunction by operating through others.” ClearOne Commc'ns, Inc. v. Bowers, 651 F.3d 1200, 1215 (10th Cir.2011) (quoting Sec. & Exch. Comm'n v. Homa, 514 F.3d 661, 674 (7th Cir.2008)). Accordingly, the rule encompasses an alter ego or someone who aids or abets the named party. See Reliance Ins. Co. v. Mast Constr. Co., 84 F.3d 372, 377 (10th Cir.1996).

“Rule 65 ... is derived from the common law doctrine that a decree of injunction not only binds parties but also those identified with them in interest, in privity with them, represented by them or subject to their control.” Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973). Under Subsection (2)(C), injunctions may reach nonparties if: (1) the nonparty “aids or abets a named defendant” in committing the underlying violation or disobeying the court's order, Reliance Ins. Co. v. Mast Const. Co., 84 F.3d 372, 377 (10th Cir. 1996) (citations omitted); or (2) the nonparty is “captured under the general rubric of privity, includ[ing] nonparty successors in interest and nonparties otherwise legally identified with the enjoined party,” ADT LLC v. NorthStar Alarm Servs., LLC, 853 F.3d 1348, 1352 (11th Cir. 2017) (citing Nat'l Spiritual Assembly, 628 F.3d at 848-49) (internal quotations omitted). Courts tend to recognize two types of relationships that constitute privity under Rule 65(d)(2)(C): (1) nonparty successors-in-interest and (2) nonparties otherwise ‘legally identified' with the enjoined party. ADT LLC v. NorthStar Alarm Servs., LLC, 853 F.3d 1348, 1352 (11th Cir. 2017); Scalia v. Paragon Contractors Corp., 796 Fed.Appx. 962, 968-69 (10th Cir. 2019) (unpublished) (successor in interest not expressly named in injunction order was appropriately bound by injunction order).

Successor in interest is defined broadly and according to the context of the specific facts before the Court. See United States v. Conoco Phillips Co., 744 F.3d 1199 (10th Cir. 2014) (defining successor in interest by examining the context of two parties' contractual relationships).

Moreover, injunctions may bind nonparties that are otherwise legally identified with the enjoined party. ClearOne Commc'ns, Inc. v. Bowers, 643 F.3d 735, 752 (10th Cir. 2011). This includes “persons who are not technically agents or employees” that “may be specifically enjoined from knowingly aiding a defendant in performing a prohibited act if their relation is that of associate or confederate.” Pimentel & Sons Guitar Makers, Inc. v. Pimentel, 477 F.3d 1151, 1155 (10th Cir. 2007), quoted in BMW of N. Am., LLC v. Issa, No. 2:19-CV-220, 2020 WL 1325278, at *7 (D. Utah Mar. 20, 2020).

This rule is necessary so “that defendants may not nullify a decree by carrying out prohibited acts through aiders and abettors, although they were not parties to the original proceeding.” Regal Knitwear Co. v. N.L.R.B., 324 U.S. 9, 14, 65 S.Ct. 478, 89 L.Ed. 661 (1945). As explained below, Security USA Services has transferred its rights or interest in the FIREFLY mark to successor or affiliate entities, which has since sold gunshot detection systems with the FIREFLY mark. Therefore, the Court will apply the injunction to those in active concert or participation with Security USA Services. “If courts did not have the authority to do so, the named parties could easily thwart the injunction by operating through others.” ClearOne Communs., Inc. v. Bowers, 651 F.3d 1200, 1215-16 (10th Cir. 2011). That would be the case there.

Based on Security USA Service's admissions or statements by its officers, and the statements of EAGL Technology's officers, Security USA transferred its rights to the FIREFLY mark to EAGL Technology, a successor in interest or wholly owned affiliate of Security USA Services, LLC. See Doc. 8 at 18, Ex. 4 (affidavit of Boaz Raz, CEO of Security USA Services), at 23 Ex. 5(affidavit of Jennifer Russell, VP of Sales at EAGL Technology, and former VP of Security USA Services); Id. at 26 Ex. 6 (Mr. Boaz Raz stating that that EAGL is a wholly owned affiliate of Security USA Services, LLC).

In its complaint, Plaintiff Security USA pled that “in 2018 Plaintiff Security USA assigned all right, title and, interest in and to the trademark and trade name FIREFLY to EAGL.” Doc. 1-1 at 4, ¶ 9. Moreover, Security USA and EAGL Technology appear to share officers. They appear to have the same CEO, Boaz Raz. Doc. 8 at 18. Moreover, Jennifer Russel, who is the current VP of sales for EAGL, was the VP of sales for Security USA. Doc. 8 at 18, 23. Mr. Raz stated that he is “the Chief Executive Officer of Security USA and [has] served in that position continuously since beginning the company and rolling its interests into EAGL Technology, LLC on or about June 26, 2017. As such, I am familiar with EAGL Technology, LLC, [and] Security USA Services LLC...” Doc. 8 at 18. He stated that “Security USA,...