Wright v. E-Systems, LLC

• Decision Date: 20 December 2016
• Docket Number: Civil No. 3:12-CV-4715-K-BK
• Parties: MICHAEL WRIGHT, Plaintiff, v. E-SYSTEMS, LLC, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

MICHAEL WRIGHT, Plaintiff, v. E-SYSTEMS, LLC, et al., Defendants.

Civil No. 3:12-CV-4715-K-BK

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

December 20, 2016

FINDINGS, RECOMMENDATIONS, AND CONCLUSION OF THE UNITED STATES MAGISTRATE JUDGE

Pursuant to the District Judge's Order of Reference, Doc. 71, this cause is before the Court on Plaintiff's Motion for Default Judgment with respect to damages, Doc. 70. Upon consideration of the motion, the record, and applicable law, the Court recommends that the Motion for Default Judgment as to damages be GRANTED IN PART.

I. BACKGROUND

In November 2012, Plaintiff sued Defendants for patent infringement, seeking damages, attorney's fees, and an injunction against further infringement. Doc. 1. Although Defendants were properly served, they did not file any responsive pleadings or otherwise appear. After the Clerk entered a default against Defendants, Doc. 22 & Doc. 24, Plaintiff filed a Motion for Default Judgment, Doc. 41. The undersigned recommended that default judgment be granted as to Defendants' liability, but not damages. Doc. 44. District Judge Kinkeade accepted that recommendation. Doc. 46.

Thereafter, Plaintiff attempted to conduct discovery as related to the damages issue, eventually requesting sanctions against Defendants due to their failure to respond. Doc. 57. Upon the recommendation of the undersigned, District Judge Kinkeade (1) found Defendants in contempt; (2) directed Defendants to certify to the Court that they had answered Plaintiff's previously served discovery requests as directed by the undersigned; and (3) ordered Defendants to pay Plaintiff's attorney's fees. Doc. 69.

When Defendants still failed to respond, Plaintiff moved for default judgment as to damages. Doc. 70. At the evidentiary hearing held on the motion, Plaintiff presented to the Court his requests for admission directed to Defendants. Doc. 70-1 at 12-27. Due to Defendants' failure to respond to Plaintiff's discovery attempts, all of the requests for admission are deemed to be admitted. FED. R. CIV. P. 36(a)(3) (providing that if a party does not respond to requests for admission within 30 days, the particular matter is deemed to have been admitted).

II. APPLICABLE LAW

A party is entitled to entry of a default by the clerk of the court if the opposing party fails to plead or otherwise defend as required by law. FED. R. CIV. P. 55(a). Once the clerk enters the default, the party may request that the court enter a default judgment. Id.; New York Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996). Standing alone, however, a defendant's default does not entitle a plaintiff to a default judgment. Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001); Nishimatsu Constr. Co. v. Hous. Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). The decision to grant a default judgment is one soundly within the district court's discretion. Lewis, 236 F. 3d at 767. There must be a sufficient basis in the pleadings for a court to enter judgment by default. Nishimatsu, 515 F.2d at 1206. In defaulting, a defendant does not admit facts that are not well-pleaded nor does he admit any conclusions of law. Id.

In patent actions, upon a finding in the plaintiff's favor, the court must award damages that are adequate to compensate for the infringement as well as interest and costs as fixed by the court. 35 U.S.C. § 284. When damages are not determined by a jury, the court must assess them. Id. In either event, the court may increase the damages up to three times the amountfound or assessed. Id. The court also may grant an injunction to prevent the violation of any right secured by patent on terms that the court deems reasonable. 35 U.S.C. § 283. In exceptional cases, the court also may award reasonable attorney's fees to the prevailing party. 35 U.S.C. § 285.

III. DISCUSSION

Plaintiff has submitted testimony and evidence that itemizes and supports the amount of damages Plaintiff incurred due to Defendants' conduct. Doc. 70-1 at 12-27. Moreover, the court has considered all affidavits and attached exhibits filed by Plaintiff and his counsel. The Court has previously entered a default judgment for Plaintiff on his contributory infringement and induced infringement claims.¹ Doc. 44 at 3-4.

1. Defendant E-Systems (d/b/a Tricplate)

The evidence of record establishes that after Plaintiff learned of Defendant E-Systems' sale of infringing products in early 2011, he contacted E-Systems by phone and spoke to a manager named Reggie Tan ("Tan"). Doc. 41-1 at 16-17 (Wright Affidavit). Tan told Plaintiff that E-Systems had sold many thousands of the infringing items over the course of several years. Doc. 41-1 at 16-17 (Wright Affidavit); Doc. 70-1 at 13-14 (E-Systems' deemed admissions). Shortly thereafter, Plaintiff emailed Tan, advising him that E-Systems' product was infringing on his patents, for which he provided the patent application numbers. Doc. 41-1 at 17 (Wright Affidavit); Doc. 41-1 at 19 (email string). A second email and a number of phone calls were left unanswered. Doc. 41-1 at 17 (Wright Affidavit).

In June 2011, Plaintiff sent a cease and desist letter to E-Systems. Doc. 41-1 at 20-23 (Letter to John Vanhara); Doc. 70-1 at 15 (E-Systems' deemed admissions). E-Systems responded to the letter, refuting the allegations of infringement, and it continued to sell the infringing product. Doc. 41-1 at 24 (E-Systems' letter); Doc. 70-1 at 15 (deemed admission that E-Systems' actions were "willful, deliberate, and made with the full understanding that [their product] infringed Plaintiff Wright's patents.").

As established from E-Systems' deemed admissions, it sold at least 17,500 units of the infringing product since 2008. Doc. 70-1 at 14 (E-Systems' deemed admissions). E-Systems' admissions also acknowledged that its actions were solely responsible for Plaintiff's loss of $5,250,000 in sales because E-Systems flooded the market with the infringing product, thereby preventing Plaintiff from profiting from his patented inventions.² Doc. 70-1 at 14-15 (E-Systems' deemed admissions).

It is the Court's task to fix the amount of damages following the entry of a default judgment. 35 U.S.C. § 284; United States v. Shipco Gen., Inc., 814 F.2d 1011, 1014 (5th Cir. 1987) (noting that after entry of a default judgment, a plaintiff's well-pleaded factual allegations are taken as true except as to damages). As previously noted, the consequence of E-Systems' failure to object or answer Plaintiff's requests for admission is that they are deemed admitted. See FED. R. CIV. P. 36(a)(3). Moreover, E-Systems' failure to move to withdraw or amend them means that they are binding. In re Carney, 258 F.3d 415, 418-19 (5th Cir. 2001) (when a partyfails to timely respond to requests for admission, those requests were deemed admitted and could only be withdrawn or amended by motion as required by Rule 36(b)).

Because E-Systems' admissions are binding, they can be the basis for the entry of a default judgment on the issue of damages. See Dukes v. S. Carolina Ins. Co., 770 F.2d 545, 549 (5th Cir. 1985) ("[A]ny matter admitted under Rule 36(a) is conclusively established. Once the motion for admission established that [plaintiffs] had misrepresented the age of the tractor, no genuine issue remained as to this fact."). An established admission cannot be "ignored by the district court simply because it finds the evidence presented by the party against whom the admission operates more credible." American Auto. Ass'n v. AAA Legal Clinic of Jefferson Crooke, P.C., 930 F.2d 1117, 1120 (5th Cir. 1991). A district court also cannot amend or withdraw Rule 36 admissions sua sponte. Id. Because E-Systems admitted to the amount of damages it caused Plaintiff by way of its deemed admissions, the undisputed evidence of record dictates that Plaintiff is entitled to a default judgment against E-Systems in the amount of $5,250,000. 35 U.S.C. § 284.

2. Privacy Technology Corp. ("PTC")

Similarly, and by way of PTC's deemed admissions, the undisputed evidence of record establishes that PTC accrued profits from selling the infringing device of at least $500,000 based on a minimum profit of $200 on each of the 2,500 infringing devices it sold, distributed, or sold wholesale between 2008 and 2012. Doc. 70-1 at 20-21 (PTC's deemed admissions). PTC's actions prevented Plaintiff from earning those profits, and PTC's sale of the devices was willful, deliberate, and made with the full understanding that it was infringing on Plaintiff's patents. Doc. 70-1 at 20-21 (PTC's deemed admissions). But for PTC's actions, Plaintiff would havebeen able to sell his patented inventions at the volume necessary to have earned $500,000. Doc. 70-1 at 20 (PTC's deemed admissions).

PTC did not move to withdraw the admissions and, as such, they can be utilized to determine the amount of damages to be awarded upon the entry of default judgment. Dukes, 770 F.2d at 549. Because PTC admitted to the amount of damages, the undisputed evidence of record dictates that Plaintiff is entitled to a default judgment against PTC in the amount of $500,000. 35 U.S.C. § 284.

3. Covertglass.com, LLC

By way of Covertglass' deemed admissions, it is established that Covertglass accrued profits from selling the infringing device of at least $500,000 based on a minimum profit of $200 for each of the 2,500 infringing products it sold, distributed, or sold wholesale. Doc. 70-1 at 24-25 (Covertglass' deemed admissions). But for Covertglass' actions, Plaintiff would have been able to sell his patented inventions at the volume necessary to have earned $500,000. Doc. 70-1 at 25 (Covertglass' deemed admissions). Covertglass' sale of the devices was willful, deliberate, and made with the full understanding that it was infringing on Plaintiff's patents. Doc. 70-1 at 26 (Covertglass' deemed admissions).

Covertglass did not move to withdraw its admissions, so they can be the basis for the entry of a...