Sony Computer Entertainment America v. Gamemasters

• Decision Date: 04 November 1999
• Docket Number: No. C 99-02743 TEH.,C 99-02743 TEH.
• Citation: 87 F.Supp.2d 976
• Parties: SONY COMPUTER ENTERTAINMENT AMERICA INC., Plaintiff, v. GAMEMASTERS, Michael Chaddon, and Carol Chaddon, Defendants.
• Court: U.S. District Court — Northern District of California

87 F.Supp.2d 976

SONY COMPUTER ENTERTAINMENT AMERICA INC., Plaintiff, v. GAMEMASTERS, Michael Chaddon, and Carol Chaddon, Defendants.

No. C 99-02743 TEH.

United States District Court, N.D. California.

November 4, 1999.

Scott D. Baker, William R. Overend, Crosby Heafey Roach & May, San Francisco, CA, for Plaintiff.

Glen L. Moss, Ann Murphy, Moss & Murphy, Hayward, CA, Albert J.C. Chang, law Offices of Albert J.C. Chang, Rowland Heights, CA, David R. Schwarz, Law Offices of David R. Schwarcz, Los Angeles, CA, Manny D. Pokotilow, Caesar Rivise Bernstein & Cohen, Inc., Philadelphia, PA, David Pressman, San Francisco, CA, for Defendants.

ORDER GRANTING PLAINTIFF'S REQUEST FOR PRELIMINARY INJUNCTION

HENDERSON, District Judge.

1. This civil action is brought by Sony Computer Entertainment America Inc., against Michael and Carol Chaddon, d.b.a. GameMasters, Inc., for trademark and copyright infringement, contributory trademark and contributory copyright infringement, violation of the Digital Millennium Copyright Act, and state and federal unfair competition laws.

2. This matter is now before the Court on plaintiff's motion for a preliminary injunction. Based upon the evidentiary record, the parties' moving papers, and arguments of counsel, IT IS HEREBY ORDERED, ADJUDGED AND DECREED:

I. Procedural Posture

3. In January 1999, SCEA learned that Defendants were selling allegedly counterfeit accessories for SCEA's PlayStation video game. An SCEA employee, Jerry Jessop, purchased an allegedly counterfeit PlayStation memory card, video game controller, and a device known as the "Game Enhancer" from the GameMaster's store in San Leandro on January 17, 1999. After some analysis, SCEA concluded that the peripheral items were counterfeit. Plaintiff has attached copies of the packaging of both products as exhibits. (Jessop Decl. Ex. B).

4. On June 10, 1999, SCEA filed ex parte for a Temporary Restraining Order ("TRO"). On June 11, 1999, this Court granted SCEA's request for a TRO and Order for Seizure and Impoundment of Counterfeit Goods and directed that all motions and papers be filed under seal. We also directed the parties to appear and Show Cause why a Preliminary Injunction should not Issue and ordered an Expedited Discovery schedule.

5. On June 15, 1999, SCEA carried out the Seizure Order impounding numerous allegedly counterfeit accessories (including 41 memory cards, 2 CD-ROM mechanism boxes; a Japanese Dual Shock Controller, and 7 PlayStation cases) totaling approximately $4,000 in value. (M.Chaddon Decl. at 4:13). Upon closer scrutiny, Sony determined that about $3,000 of these products were not counterfeit and returned them (45 Dual Shock Controllers and 6 Digital Controllers). (M.Chaddon Decl. Ex. D, Pltf. M. at 8 n. 6). Defendants claim that the remaining goods were being sold legally and were not counterfeit. These goods consisted of such items as "replacement housing" repair parts and Sony products initially sold in Japan or foreign jurisdictions. Plaintiff SCEA claims that in addition to the allegedly counterfeit games and peripheral accessories SCEA originally targeted, the seizure uncovered counterfeit PlayStation memory cards and alternate versions of the "Game Enhancer" device.

6. On July 26, 1999, the parties stipulated to an extension of the TRO which the Court signed the same day.

7. On November 1, 1999, the Court heard arguments from the parties on Why a Preliminary Injunction Should Not Issue.

The Court adopts the following Findings of Fact and Conclusions of Law:

Findings of Fact

The Parties

1. Plaintiff, Sony Computer Entertainment America Inc. is a corporation organized and existing under the laws of Delaware, with its principal place of business in Foster City, California.

2. Defendants, Michael Chaddon and Carol Chaddon are the co-owners of GameMasters, Inc. Michael Chaddon works as the Manager, while Carol Chaddon works as a retail sales person. GameMasters, Inc., is a small retail shop in San Leandro, California which sells used games and peripheral accessories for use with the Sony PlayStation, in addition to new games and accessories purchased from third party vendors other than Sony. The Chaddon's have operated this business since 1992.¹

3. Defendants have impleaded several of their wholesalers and suppliers as third party defendants to this lawsuit: TOMMO, Inc.; S & I MARKETING Inc.; BRIAN BROWN IMPORTS; MAT ELECTRONICS, Inc.; and INNOVATION TECHNOLOGY, Inc. Of the Third Party defendants named in this lawsuit, only TOMMO, Inc. filed an answer within the 20 days allotted by Rule 12 of the Federal Rules of Civil Procedure. All other Third Party defendants are technically in default.

The Suit

4. This suit is for 1) trademark infringement, 2) trademark counterfeiting, 3) contributory trademark infringement, 4) contributory copyright infringement in violation of federal law (15 U.S.C. § 1114, "Lanham Act"), 5) violation of the Digital Millennium Copyright Act, 17 U.S.C. § 1201, 6) unfair competition in violation of state law, CAL. BUS. & PROF.CODE § 17500 and 7) unfair competition in violation of federal law pursuant to the Lanham Act;

5. Defendants assert counterclaims against SCEA for 1) copyright and trademark misuse, 2) declaratory relief and 3) antitrust violations.

6. Though not at issue in the pending motion, Defendants assert claims against the Third Party defendants for 1) breach of warranty of title in violation of CAL. COMM.CODE § 2312 et. seq., 2) equitable indemnity, 3) declaratory relief, and 4) implied indemnity.

Plaintiff SCEA's Trademarks and Copyrights

7. SCEA is a worldwide manufacturer of home entertainment products, including the PlayStation game console. The PlayStation is an electronic game system designed to allow users to play CD-Rom video games at home on a television. The device is popular; since 1994, approximately 50 million of these consoles have been sold worldwide. (Hopkins Decl. ¶ 4.) SCEA is the exclusive United States licensee of the federally registered trademarks that correspond to its PlayStation game console.

8. SCEA owns federally registered trademarks to the "PLAYSTATION" trademark (U.S. Registration Nos. 1,903,261), "PlayStation" stylized trademark (U.S. Registration Nos. 2,053,625), and "PS" stylized letter and design trademark (U.S. Registration Nos. 1,975,267), along with trademarks for titles and logos of video games compatible with the PlayStation console (U.S. Registration Nos. 2,181,062 ("Jet Moto"); U.S. Registration Nos. 2,012,799 ("Twisted Metal"); and 2,088,405 ("Football Gamebreaker")). (Hopkins Decl. Ex. A,B,D).

9. The PlayStation stylized "PS" trademark is a four-color, three-dimensional graphic design in which a vertically-oriented "P" is connected to a horizontally-oriented "S" appearing in a black box. (Hopkins Decl. ¶ 6). The trade dress in which PlayStation products have been continuously packaged and marketed since 1995 by SCEA includes use of the trademarks and other features as follows:

I. Cover Panel

1. A picture of the peripheral device appears in a slightly diagonal position across the front of the cover.

2. The picture is presented on a black background with a nimbus of light behind and above the upper left portion of the device.

3. (a) The PS insignia appears on the upper right corner of the cover in a black box framed by a white border and a "TM" just outside the lower right corner of the box. (b) The "P" is red and vertically angled as if it represents the front side of a three dimensional cube. The "S" is yellow, green and blue, and is horizontally angled below the "P" in the position of the bottom face of a three dimensional cube. (c) The bottom of the "P" meets with the bottom of the "S." (d) Below the PS insignia, "PlayStation" appears in small white print.

4. The trademark "PlayStation" appears in the trademarked design font in large white letters across the bottom of the cover with a smaller "TM" at the end of the text. The "P" and "S" in PlayStation are capitalized and the other letters are lowercase.

5. "Sony" appears in large white letters below the lower left half of the peripheral device picture.

II. Side Panels

1. The side panels have a smaller picture of the device on a grey and white background and the "PS" insignia is reproduced in a black box similar to that on the cover.

2. "PlayStation" appears in the design font in large grey letters across the bottom of the panel much as it is presented on the cover.

III. Top Panel

The top panel is a black background with the "PS" logo reproduced in a black box in the upper right corner similar to that on the cover, and "PlayStation" appears in the design font in large white letters in the lower left corner much as it is presented on the cover.

(See Hopkins Decl. Ex. C).

10. All of said registrations are valid, subsisting, remain in full force and effect, and under 15 U.S.C. § 1057(B), are "prima facie evidence of the validity of the registration, of registrants' ownership of the mark and of registrants' exclusive right to use the mark in commerce...." 15 U.S.C. § 1057(B).

11. SCEA distributes the PlayStation game console, authorized video games and other related products only to retailers, sales representatives and distributors, who then sell the authorized products bearing the protected marks to the public. SCEA's trademarks have been extensively used, advertised and promoted throughout the United States and worldwide. As a result, the marks have achieved broad national recognition as identifying SCEA as the exclusive source of its products and distinguishing such products from those of others.

12. SCEA has built up extensive goodwill in its PlayStation marks through the world-wide sale of PlayStation products, games and accessories. This goodwill represents a valuable asset to plaintiff.

Defendant's Use of the Marks

A. Video Game Controller

13. Among the items SCEA seized from defendants' store on June 15, 1999, were 52 game...