Tracfone Wireless Inc v. Anadisk LLC

• Decision Date: 18 February 2010
• Docket Number: Case No. 09-23670-CIV.
• Citation: 685 F.Supp.2d 1304
• Parties: TRACFONE WIRELESS, INC., a Delaware Corporation, Plaintiff, v. ANADISK LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

685 F.Supp.2d 1304

TRACFONE WIRELESS, INC., a Delaware Corporation, Plaintiff,

v.ANADISK LLC, et al., Defendants.

Case No. 09-23670-CIV.

United States District Court, S.D. Florida.

Decided: Feb. 18, 2010.

COPYRIGHT MATERIAL OMITTED

Aaron Stenzler Weiss, Steven Jeffrey Brodie, Carlton Fields, Miami, FL, James Blaker Baldinger, Carlton Fields PA, West Palm Beach, FL, for Plaintiff.

FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANTS, ANADISK LLC DNMA66, LLC AND DAVUT KILINC a/k/a DAVID KILINC

JAMES LAWRENCE KING, District

Judge.

THIS CAUSE is before the Court upon Plaintiff, TRACFONE WIRELESS INC.'s ("TracFone"), motion for entry of default final judgment and a permanent injunction (the "Motion") brought in the above-captioned lawsuit against Defendants, ANADISK LLC, a Pennsylvania limited liability company ("Anadisk") DNMA66, LLC. a Florida limited liability company ("DNMA66"), and DAVUT KILINC a/k/a DAVID KILINC, individually ("Kilinc") (collectively, "Defendants").

Upon review of the Motion, the record and being otherwise duly advised in the premises, the undersigned makes the following findings.

FACTUAL BACKGROUND

I. Plaintiff, TracFone Wireless, Inc.'s Business

TracFone is the largest provider of prepaid wireless telephone service in the United States, and markets its service under the TracFone, NetlO, SafeLink and Straight Talk brands (hereinafter referred to as "TracFone Prepaid Phones" or "Phones"). (Amended Complaint ¶34) TracFone customers prepay for wireless service by purchasing TracFone airtime cards and wireless phones specially manufactured for TracFone by leading mobile phone manufacturers, such as Motorola and Nokia. Id. Under this business model TracFone delivers affordable Phones to consumers who often cannot afford the fees for traditional monthly service. Id. at ¶36

TracFone subsidizes its customers' acquisition of its Phones by selling the Phones to retailers for much less than the phones cost TracFone from the manufacturers. Id. TracFone recoups this subsidy by selling prepaid airtime to customers who buy subsidized Phones. Id. TracFone takes several steps to protect its investment in the subsidized Phones, which are designed to make sure that the Phones can only be used on TracFone's wireless network. Id. at ¶ 37 Specifically,

• the Phone manufacturers install TracFone's proprietary software on the Phones that prevents them from being used on other wireless systems and,

• the Phones are sold subject to terms and conditions—which are printed on the outside of the retail packaging of the Phones ¹ and are set forth in printed inserts included in the packaging of

the Phones—that restrict and limit the sale and use of the Phones.

Id. at ¶¶ 37, 43-53

In connection with advertising and selling its Phones, TracFone has used, and continues to use, several trademarks (the "Marks") in commerce including the marks TracFone, NET10, SafeLink and Straight Talk.² Id. at ¶¶38, 40 The Marks constitute the lawful, valued, subsisting and exclusive property of TracFone. Id. at ¶¶ 39, 41 Only TracFone and its authorized, affiliated agents are permitted to use the Marks. Id. at ¶ 82

TracFone's Marks are well known and established to customers and the trade as symbols identifying and distinguishing TracFone's products and services. Id. at ¶¶ 39, 41 The Marks also signify distinctive products and services of high quality and provide actual notice that TracFone's Phones are intended for use solely within TracFone's network. Id. Accordingly, the Marks have become an intrinsic and essential part of the valuable goodwill and property of TracFone. Id.

TracFone has learned that although large quantities of its TracFone Prepaid Phones are being purchased at retailers throughout the United States, a significant number of these TracFone Prepaid Phones are not being activated for use on the TracFone network. Id. at ¶ 54 Instead, entities and individuals are purchasing and selling TracFone Prepaid Phones in bulk quantities for use outside of the TracFone Prepaid Wireless Service and Coverage Area. Id. at ¶ 55. The Phones are removed from their original packaging, shipped overseas, and "unlocked" or "reflashed." Id. at ¶ 55³ As a result of these actions, TracFone loses both: (1) the subsidy that it provided when selling the phone to the retailer; and (2) the revenue from selling airtime on that handset. Id. at ¶57

II. Defendants'Business

Defendants are engaged in business practices involving the bulk purchase and resale of TracFone Prepaid Phones, computer unlocking or reflashing of TracFone Prepaid Phones, alteration of TracFone's copyrighted and proprietary software installed in the Phones, and trafficking of the Phones for profit. Id. at ¶ 58

For example, in January 2009, TracFone was made aware that Defendants Anadisk, DNMA66, and Kilinc were selling TracFone W175g Phones. TracFone retained a private investigation company, Stumar Investigations ("Stumar"), to investigate the situation and determine the extent of their unlawful activities. (Garcia Decl. ¶18). On Wednesday, March 18, 2009, Stumar received a COD shipment of 40 TracFone W175 Phones from Defendant Kilinc. (Talatham Decl. ¶8). The shipment consisted of 40 handsets, 40 battery covers, 40 batteries and 40 charges. Id. TracFone's logo was clearly evident on the back of the Phones. Id. However, the Phones were not in the original packaging and the warranty information, instruction manuals and Subscriber Identity Module's (SIM) cards⁴ were missing. Id. TracFone has also submitted evidence that Defendants solicited to sell an additional 4, 950 TracFone Prepaid Phones.

A genuine TracFone W175 is sold with a SIM card, warranty information and instruction manuals. (Garcia Decl. ¶ 20). If a user removes the SIM card, the TracFone Prepaid Phone will be inoperable. Id. For example, without a SIM card, the TracFone Prepaid Phone will turn on and the user will see a splash banner identifying the Phone as a TracFone Prepaid Phone. Id. The splash banner appears for approximately ten (10) seconds and is then replaced with a screen the instructs the user to insert the SIM card. Id. Unless the Phone is "unlocked" or "reflashed", the Phone will not operate without inserting a TracFone SIM card. Id.

III. The Present Litigation

As a result of Defendants' business activities, TracFone asserted claims against the Defendants for Breach of Contract; Federal Trademark Infringement in violation of 15 U.S.C. § 1114.; Federal Unfair Competition in violation of 15 U.S.C. § 1125(a); Common Law Unfair Competition; Contributory Trademark Infringement; Copyright Infringement of Software in violation of Title 17 of the United States Code; Circumvention of Technological Measures That Control Access to Copyrighted Software and Trafficking in Services That Circumvent Technological Measures Protecting Copyrighted Software in violation of the Digital Millennium Copyright Act ("DMCA"); dilution of TracFone's marks, 17 U.S.C. § 1201, et seq.; Tortious Interference with Business Relationships and Prospective Advantage; Tortious Interference with Contract; Dilution of TracFone's Trademarks under common law unfair competition; conspiracy to induce breach of contract; civil conspiracy; and unjust enrichment. TracFone has succeeded in proving its claims and Defendants are hereby permanently enjoined and jointly and severally liable to TracFone for the damages set forth herein.

JURISDICTION AND VENUE

This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1331, 1338, and 17 U.S.C. § 1203 because TracFone's claims arise under federal law, specifically, the United States Copyright Act, Title 17 of the United States Code, and United States Trademark Act, Title 15 of the United States Code. This Court has supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over TracFone's state law claims because those claims are so related to the federal claims that they form part of the same case or controversy.

Defendants are subject to the general personal jurisdiction of this Court because they have had continuous and substantial business connections to the State of Florida, including conducting business with companies located in Florida. DNMA66 is a Florida business entity operated by Defendant Davut Kilinc and Defendant Kilinc routinely uses both business entities— DNMA66 and Anadisk—during the same transaction. (Amended Complaint ¶¶ 1821). Moreover, invoices that Kilinc issues on DNMA66 forms, bearing DNMA66's logo, list Anadisk's website and an Anadisk email as the relevant contact information. Id. ¶ 18 In this regard, Defendant Kilinc has treated each company—DNMA66 and Anadisk—as alter egos of each other, and Anadisk is thus, like DNMA66, subject to jurisdiction in Florida. Id.

Venue is proper in this Court pursuant to 28 U.S.C. § 1391(a) and (b), and 28 U.S.C. § 1400, because a substantial part of the events or omissions giving rise to the claim occurred in this District, the impact of Defendants' conduct occurred in this District, and the Defendants are subject to personal jurisdiction in this District.

STANDARD OF REVIEW

A "defendant, by his default, admits the plaintiffs well-pleaded allegations of fact, " as set forth in the operative complaint. Eagle Hosp. Physicians v. SRG Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009). "With regard to the measure of damages, the allegations contained in the complaint are not considered admissions by virtue of the default; [r]ather, the Court determines the amount and character of damages to be awarded." Zambrana v. Geminis Envios Corp., No. 0820546-CIV, 2009 WL 1585995 at *2 (S.D.Fla. June 4, 2009) (internal quotations and citations omitted). According TracFone can establish the amount of damages by submitting sufficient evidence to support the request for damages. Id. (internal quotations omitted). In accessing damages without a hearing, it is appropriate for the Court to utilize "mathematical calculations." Adolph Coors...