DocRx Incorporated v. DocRx Dispense Incorporated, No. 2:2014cv00815 - Document 28 (D. Ariz. 2015)

Court Description: DEFAULT JUDGMENT OPINION AND PERMANENT INJUNCTION ORDER: Plaintiff's 27 Motion for Entry of Default Judgment is granted in part and denied in part to the extent that plaintiff DocRX, Inc. seeks the entry of a permanent injunction and an award of its reasonable attorneys' fees and costs, and is denied to the extent that the plaintiff seeks an award of damages. Permanent injunctive relief is entered against defendants Martin V. Olson and DocRx Dispense, Inc. ORDERED that d efendant Martin V. Olson shall file with the Court and serve on plaintiff DocRx, Inc.'s counsel within thirty (30) days after being mailed a copy of this Order and the Court's Judgment, a report in writing, under oath, setting forth in detail the manner and form in which he has complied with the terms of the Court's injunction. Plaintiff shall file with the Court and serve a copy on defendants, a motion for attorneys' fees and a bill of costs no later than fourteen (14) days after the entry of the Court's Judgment in this action. Plaintiff shall use reasonable efforts to serve a copy of this Order and the Court's Judgment on defendants and shall file a notice of such service with the Court. IT IS FURTHER ORDERED the Clerk of the Court shall enter judgment in favor of plaintiff Doc.Rx, Inc. accordingly. Signed by Senior Judge Paul G Rosenblatt on 4/20/2015.(LFIG)
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DocRx Incorporated v. DocRx Dispense Incorporated 1 Doc. 28 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 DocRx, Inc., Plaintiff, 11 12 13 vs. DocRx Dispense, Inc.; Martin V. Olson, 14 Defendants. 15 ) ) ) ) ) ) ) ) ) ) ) No. CV-14-00815-PHX-PGR DEFAULT JUDGMENT OPINION AND PERMANENT INJUNCTION ORDER 16 Pending before the Court is Plaintiff’s Motion for Entry of Default Judgment 17 (Doc. 27). Having considered the motion in light of the relevant record, the Court 18 finds that the motion should be granted in part and denied in part pursuant to 19 Fed.R.Civ.P. 55(b)(2). 20 Background 21 Plaintiff DocRx, Inc. commenced this action, which is based on federal 22 question jurisdiction, on April 17, 2014. Its First Amended Complaint (“FAC”) (Doc. 23 9) alleges claims for Infringement of Federally Registered Trademark Under 15 24 U.S.C. § 1114 (First Cause of Action), Unfair Competition; False Designation of 25 Origin Under 15 U.S.C. § 1125(a) (Second Cause of Action), Anticybersquatting 26 -1- Dockets.Justia.com 1 Consumer Protection Act Under 15 U.S.C. § 1125(d) (Third Cause of Action), 2 Common Law Unfair Competition (Fourth Cause of Action), and Intentional 3 Interference with Contractual Relations and Business Expectancies (Fifth Cause of 4 Action.) 5 The plaintiff, which operates throughout the United States, focuses on 6 providing medications and software to pharmacies and clinics that allow them to 7 dispense medications directly to patients. The plaintiff owns a United States Patent 8 and Trademark Office Service Mark Registration for its “DocRx” mark (Reg. No. 9 4.504,977); the trademark was registered in April 2014 and the registration notes 10 that the trademark was first used in commerce in March 2009. 11 registered its Internet domain name of “docrxdispensing.com” in January 2009. The plaintiff 12 The defendants, DocRx Dispense, Inc. and its president/principal Martin V. 13 Olson, also provide similar pharmaceutical and medical supply-related services. 14 DocRx Dispense, Inc. was incorporated in Arizona in September 2012; the FAC 15 alleges that DocRx Dispense Inc. is the alter ego of Martin V. Olson. Olson 16 registered the Internet domain name “doxrxdispense.com” in October 2011, and the 17 defendants also do business using the domain names “docrxdispense.net,” 18 “docrxdispensevideo.com,” and “docrxdispensewebinar.com.” 19 plaintiff’s FAC is that the defendants’ subsequent use of confusingly similar 20 corporate name and domain names to compete with the plaintiff amounts to an 21 unauthorized use of the plaintiff’s DocRx mark and constitutes trademark 22 infringement and unfair competition. The gist of the 23 DocRx Dispense, Inc. was served with process through the Arizona 24 Corporation Commission on April 28, 2014 (Doc. 13), and Martin V. Olson was 25 personally served with process on May 17, 2014 (Doc. 15). The plaintiff filed its 26 Application for Entry of Default and served it on the defendants on July 8, 2014 -2- 1 (Doc. 17), and the Clerk of the Court entered default against the defendants on July 2 9, 2014 (Doc. 18). In its pending default judgment application, the plaintiff seeks 3 damages and injunctive relief against the defendants, as well as an award of its 4 attorneys’ fees and costs. 5 Discussion 6 A. Whether Default Judgment Should be Entered 7 The Court must consider seven factors in determining whether to exercise its 8 discretion to enter default judgment: (1) the possibility of prejudice to the plaintiff; 9 (2) the merits of the plaintiff’s substantive claim; (3) the sufficiency of the complaint; 10 (4) the sum of money at stake; (5) the possibility of a dispute concerning material 11 facts; (6) whether the default was due to excusable neglect; and (7) the strong policy 12 underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 13 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir.1986). In considering the Eitel 14 factors, the Court takes all factual allegations in the complaint as true, except for 15 those relating to damages. See TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 16 915, 917 (9th Cir.1987). 17 The first factor weighs in favor of granting the plaintiff’s motion because the 18 failure to enter default judgment will cause the plaintiff to continue to suffer damage 19 to its goodwill and business reputation due to the defendants’ infringement of its 20 trademark and may leave it without any other recourse for recovery. 21 The second and third factors favor a default judgment because the FAC is 22 both factually and legally sufficient at least as to the federal claims alleged in it, and 23 because the defendants, by defaulting, have admitted the factual allegations in the 24 FAC not related to damages. 25 The fourth factor also favors a default judgment because the plaintiff is 26 seeking significant damages and injunctive relief, as well as its fees and costs, and -3- 1 the requested relief is balanced in relation to the seriousness of the defendants’ 2 infringing conduct. 3 The fifth factor also favors a default judgment because the sufficiency of the 4 FAC and the defendants’ default, along with the plaintiff’s submission of evidence 5 supporting its allegations regarding the defendants’ infringing conduct, establish that 6 a dispute regarding material facts is not a genuine possibility. 7 The sixth factor further favors a default judgment because the likelihood of the 8 defendants’ default being the result of excusable neglect is not a non-frivolous 9 possibility since the record clearly establishes that the defendants have been aware 10 of this action: the defendants were properly served with the FAC and the default 11 application, and the plaintiff’s evidence shows that defendant Olson personally 12 communicated with the plaintiff’s counsel on May 15, 2014, May 19, 2014, May 22, 13 2014, and June 9, 2014 regarding the possibility of resolving this action. 14 The seventh factor favors default judgment notwithstanding the strong public 15 policy favoring decisions on the merits because the defendants’ failure to defend this 16 action renders an adjudication on the merits impractical, if not impossible. 17 18 Having reviewed all of the Eitel factors, the Court concludes that the entry of default judgment against the defendants is appropriate. 19 B. Monetary Recovery 20 Based on the arguments presented and supported in its memorandum, the 21 Court concludes that the plaintiff is seeking damages only pursuant to § 35 of the 22 Lanham Act, 15 U.S.C. § 1117, for the profits it allegedly lost due to the defendants’ 23 infringement of its trademark. Section 1117(a) governs the award of monetary 24 remedies in trademark infringement actions and provides for an award of the 25 defendants’ profits, any damages sustained by the plaintiff, and the costs of the 26 action. Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1405 (9th Cir.1993). -4- 1 The plaintiff seeks an award of $945,000 in damages resulting from the defendants’ 2 infringement. The amount sought consists of an award pursuant to § 1117(a) of 3 $315,000 in actual damages sustained by the plaintiff in the form of its lost profits, 4 trebled pursuant to 15 U.S.C. § 1117(a) or §1117(b)1. More specifically, the actual 5 damages claimed by the plaintiff are in two parts. First, the plaintiff states that its 6 discovery has disclosed five accounts the defendants have with clinical doctors’ 7 offices which the plaintiff asserts have conservatively cost it $240,000 in lost profits. 8 The plaintiff’s computational reasoning is that transactions of this nature with clinical 9 doctors’ offices average profits of $2,000 to $2,500 each month, that if the 10 defendants began infringing the plaintiff’s mark in July 2012, they would have done 11 so for over two years before default was entered, so the plaintiff’s lost profits equal 12 $2,000/month x 24 months x 5 accounts, which is $240,000 (before trebling.) The 13 evidence supplied by the plaintiff supporting its $240,000 lost profit figure consists 14 (1) of three unauthenticated pages obtained from a company named Bryant Ranch 15 Prepack (Ex. F to Doc. 27-1) that apparently purport to show that the defendants had 16 a business arrangement with Bryant Ranch Prepack of some unspecified nature that 17 involved five other listed businesses, although there is no explanation in those 18 documents as to what the defendants’ connection is with those other five 19 businesses, and (2) the declaration of Brian Ward (Ex. E to Doc. 27-1), who has 20 been the plaintiff’s CEO for over 10 years and has been in the pharmaceutical 21 industry for over 18 years, who merely states in relevant part regarding these 22 purported five accounts of the defendants: “Based upon my experience in the 23 24 25 26 1 The plaintiff’s memorandum cites in different places to both § 1117(a) and § 1117(b) as the statutory authority for trebling damages so the Court is not clear as to which section the plaintiff is actually relying on. -5- 1 industry, on average, a clinic that is set up to dispense medication directly to patients 2 will net profits between $2000 and $2500 monthly.” 3 Second, the plaintiff also contends that it lost the opportunity to obtain the 4 business of Mackenzie HealthCare for drug testing services because that company 5 decided not to do business with either the plaintiff or the defendants, which also 6 sought Mackenzie Healthcare’s business, due to the confusion caused by the 7 similarity of their company names. The plaintiff’s computation reasoning as to its lost 8 profits from not obtaining the Mackenzie HeathCare account is that the contract 9 would have netted the plaintiff, on average, $150,000 to $200,000 in profit every six 10 months, and if Mackenzie HealthCare had entered into a deal with the plaintiff for the 11 three months before default was entered against the defendants the plaintiff would 12 have conservatively netted $75,000 in profits since $150,000/every six months 13 equates to $25,000/month. The evidence supplied by the plaintiff supporting this lost 14 profit figure consists (1) of a declaration from Keith Barkley (Ex. C to Doc. 27-1), the 15 founder and managing director of Mackenzie HealthCare, who states in relevant 16 part: “I was approached by both companies to establish a business relationship. Due 17 to the trouble I had distinguishing between DocRx, Inc. and DocRx Dispense, Inc. 18 and the potential for confusion in the marketplace, I decided not to authorize any 19 business transactions between Mackenzie HealthCare and either company[,]” and 20 (2) the declaration of Brian Ward (Ex. E to Doc. 27-1), the plaintiff’s CEO, who 21 merely states in relevant part: “Based upon my experience in the industry, the 22 business deal contemplated with Mackenzie Healthcare for drug testing and 23 compounding services would have net profits, on average, $150,00 to $200,000 24 every six months.” 25 In order to be awarded § 1117 damages, the plaintiff “must prove both the fact 26 and amount of damages.” Lindy Pen Co. v. Bic Pen Corp., 892 F.2d at 1407. Since -6- 1 trademark remedies are guided by tort law principles, the plaintiff must establish its 2 damages “with reasonable certainty,” which means that while requested damages 3 need not be calculated with absoluteness exactness, the evidence submitted by the 4 plaintiff must provide a reasonable basis for their computation. Id. The Court 5 concludes that it cannot award any lost profit damages to the plaintiff because the 6 evidence submitted by the plaintiff is simply too conclusory and/or speculative to 7 provide a sufficient basis for a damages determination in any amount. See id., at 8 1408 (“Many courts have denied a monetary award in infringement cases when 9 damages are remote and speculative.”) 10 Even if the Court were to accept the Bryant Ranch Prepack documents as 11 sufficiently establishing that the defendants had five competing accounts, which they 12 do not, no sufficient evidence has been presented that the plaintiff would have 13 obtained those accounts but for the defendants’ infringement. The plaintiff has not 14 established that the defendants are its sole competitor or that it ever attempted to 15 obtain those five accounts, nor has it sufficiently established that its profits from 16 those accounts, had it obtained them, would have been in the range conclusorily 17 stated by Mr. Ward. 18 Healthcare-related evidence, i.e., there is no sufficient evidence that Mackenzie 19 HealthCare would in fact have awarded its contract to the plaintiff but for the 20 defendants’ infringement or that the plaintiff would have profited from that contract 21 in the range conclusorily noted by Mr. Ward. As the Ninth Circuit has stated, “[t]o 22 establish damages under the lost profits method, a plaintiff must make a prima facie 23 showing of reasonably forecast profits[,]” id., at 1407, and the plaintiff has not shown 24 that its suffered any lost profits with the required reasonable certainty. Since the 25 plaintiff has not provided a reasonable basis for computing damages, any 26 determination of actual damages would be improperly based on speculation and The Court has the same problems with the Mackenzie -7- 1 would amount to an improper windfall to the plaintiff. 2 C. Injunctive Relief 3 In its motion, the plaintiff seeks the entry of both prohibitory and mandatory 4 injunctive relief. This requested relief consists of a permanent injunction prohibiting 5 the defendants from using any variant of the plaintiff’s DocRx service mark and from 6 registering or using a domain name containing, confusingly similar to, or identical to 7 the DocRx service mark, as well as requiring the defendants to transfer the 8 registration and ownership rights of their “docrxdispense.com” domain name to the 9 plaintiff. 10 Injunctive relief is the preferred remedy in trademark infringement and unfair 11 competition cases because “there is no adequate remedy at law for the injury 12 caused by a defendant’s continuing infringement.” Century 21 Real Estate Corp. v. 13 Sandlin, 846 F.2d 1175, 1180 (9th Cir.1988); 15 U.S.C. § 1116(a). The Court has the 14 authority under the Lanham Act to “grant injunctions according to principles of equity 15 and upon such terms as the court may deem reasonable, to prevent the violation of 16 any right of the trademark owner.” Reno Air Racing Ass’n, Inc. v. McCord, 452 F.3d 17 1126, 1137 (9th Cir.2006) (Internal quotation marks omitted); § 1116(a). As part of 18 its authority under the Anticybersquatting Consumer Protection Act, the Court has 19 the power to order the transfer of an infringing domain name to the owner of the 20 mark. 15 U.S.C. § 1125(d)(1)(C). 21 Notwithstanding the plaintiff’s failure in its memorandum to set forth any 22 argument specifically directed at its request for injunctive relief, the Court concludes 23 that broad injunctive relief is appropriate here in light of the likelihood of confusion 24 arising from the defendants’ use of the DocRx mark in offering services very similar 25 to those offered by the plaintiff. See GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 26 1199, 1211 (9th Cir.2000) (“When the infringing use is for a similar service, a broad -8- 1 injunction is especially appropriate.”) (Internal quotation marks omitted). More 2 specifically, the Court concludes that a permanent injunction is appropriate because 3 the record, viewed in light of the totality of the circumstances, sufficiently establishes 4 that the plaintiff has suffered an irreparable injury, that the remedies available at law, 5 such as monetary damages, are inadequate in this case to compensate the plaintiff 6 for its injury, that a remedy in equity is warranted upon consideration of the balance 7 of hardships between the plaintiff and the defendants, and that the public interest 8 would be served by a permanent injunction. La Quinta Worldwide LLC v. Q.R.T.M., 9 S.A. de C.V., 762 F.3d 867, 879 (9th Cir.2014). 10 D. Attorneys’ Fees 11 The plaintiff seeks an award of its attorneys’ fees in its motion solely pursuant 12 to the Lanham Act, which provides that “[t]he Court in exceptional cases may award 13 reasonable attorneys fees to the prevailing party.” 15 U.S.C. § 1117(a). The Ninth 14 Circuit reasons that “generally a trademark case is exceptional for purposes of an 15 award of attorneys’ fees when the infringement is malicious, fraudulent, deliberate 16 or willful.” Gracie v. Gracie, 217 F.3d 1060, 1068 (9th Cir.2000). 17 concludes that an award of reasonable attorneys’ fees pursuant to § 1117(a) is 18 appropriate here due to the defendants’ refusal to defend this action, and because 19 the factual allegations in the FAC, which the defendants have admitted by their 20 default, together with the evidence submitted by the plaintiff reflecting the 21 defendants’ knowledge that they were infringing on the plaintiff’s DocRx mark, see 22 e.g., Keith Barkley’s declaration (Ex. C to Doc. 27-1) and the plaintiff’s counsel’s 23 correspondence with defendant Olson (Ex. I to Doc. 27-1), sufficiently indicate that 24 the defendants engaged in willful, deliberate infringement. The Court 25 IT IS THEREFORE ORDERED that Plaintiff’s Motion for Entry of Default 26 Judgment (Doc. 27) is granted in part to the extent that plaintiff DocRX, Inc. seeks -9- 1 the entry of a permanent injunction and an award of its reasonable attorneys’ fees 2 and costs, and is denied to the extent that the plaintiff seeks an award of damages. 3 IT IS FURTHER ORDERED that the following permanent injunctive relief is 4 entered against defendants Martin V. Olson and DocRx Dispense, Inc.: 5 1. Defendants Martin V. Olson and DocRx Dispense, Inc., their agents, 6 representatives, employees, and assigns, and all persons in active concert and/or 7 participation with Martin V. Olson or DocRx Dispense, Inc. who receive notice of this 8 Order and/or the Court’s Judgment in this action, are permanently enjoined from 9 registering, trafficking, using, or maintaining the registration of any domain name that 10 uses the term “DocRx.” 11 2. Defendants Martin V. Olson and DocRx Dispense, Inc., their agents, 12 representatives, employees, and assigns, and all persons in active concert and/or 13 participation with Martin V. Olson or DocRx Dispense, Inc. who receive notice of this 14 Order and/or the Court’s Judgment in this action, are permanently enjoined from 15 using any of plaintiff DocRx, Inc.’s trademarks, specifically its “DocRx” mark as 16 shown in the exhibit to the First Amended Complaint (Ex. A to Doc. 9-1), including 17 formatives thereof, any reproduction, counterfeit, copy or colorable imitation of the 18 infringing mark, or any other name, mark, designation or depiction in connection with 19 the defendants’ activities or business in a manner that is likely to cause confusion 20 regarding whether defendant DocRx Dispense, Inc. is affiliated or associated with, 21 or sponsored by plaintiff DocRx, Inc., or that is likely to dilute the distinctiveness of 22 plaintiff DocRx, Inc.’s trademark or any other marks owned by plaintiff DocRx, Inc. 23 3. Defendants Martin V. Olson and DocRx Dispense, Inc., their agents, 24 representatives, employees, and assigns, and all persons in active concert and/or 25 participation with Martin V. Olson or DocRx Dispense, Inc. who receive notice of this 26 Order and/or the Court’s Judgment in this action, are permanently enjoined from -10- 1 assisting, aiding, or abetting any other person or business entity in engaging in or 2 performing any of the activities referred to in paragraphs 1 and 2. 3 4. Defendants Martin V. Olson and DocRx Dispense, Inc. are permanently 4 enjoined from possessing all stationery, forms, printed matter, advertising, and paper 5 goods containing the infringing mark and formatives thereof, and shall immediately 6 destroy all such infringing materials in their possession. 7 IT IS FURTHER ORDERED that the registration and ownership rights to any 8 infringing domain name that uses the term “DocRx,” including, but not limited to, the 9 domain name “docrxdispense.com” shall be transferred from defendant Martin V. 10 Olson and transferred to plaintiff DocRx, Inc. Defendant Martin V. Olson is hereby 11 ordered to take all actions necessary to transfer the infringing domain name(s) to 12 plaintiff DocRx, Inc. Such transfer shall take place immediately, and no later than 13 fourteen (14) calendar days from the date defendant Martin V. Olson is served with 14 a copy of this Order and the Court’s Judgment. 15 IT IS FURTHER ORDERED that defendant Martin V. Olson shall file with the 16 Court and serve on plaintiff DocRx, Inc.’s counsel within thirty (30) days after being 17 mailed a copy of this Order and the Court’s Judgment, a report in writing, under oath, 18 setting forth in detail the manner and form in which he has complied with the terms 19 of the Court’s injunction. 20 IT IS FURTHER ORDERED that plaintiff DocRx, Inc. shall file with the Court 21 and serve a copy on defendants Martin V. Olson and DocRx Dispense, Inc., a 22 motion for attorneys’ fees and a bill of costs, pursuant to Fed.R.Civ.P. 54 and Local 23 Rule 54.1 and 54.2 no later than fourteen (14) days after the entry of the Court’s 24 Judgment in this action.2 25 26 2 The plaintiff is advised that any motion it files for attorneys’ fees -11- 1 IT IS FURTHER ORDERED that in the event that Defendants Martin V. Olson 2 and DocRx Dispense, Inc. fail to comply with the material terms of this Order and the 3 Court’s Judgment, plaintiff DocRx, Inc. shall be entitled to recover any reasonable 4 attorneys’ fees and costs incurred in securing the defendants’ compliance. 5 IT IS FURTHER ORDERED that plaintiff DocRx, Inc. shall use reasonable 6 efforts to serve a copy of this Order and the Court’s Judgment on defendants Martin 7 V. Olson and DocRx Dispense, Inc. and shall file a notice of such service with the 8 Court. 9 10 11 IT IS FURTHER ORDERED that the Clerk of the Court shall enter judgment in favor of plaintiff Doc.Rx, Inc. accordingly. DATED this 20th day of April, 2015. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 pursuant to 15 U.S.C. § 1117(a) must include a good faith effort by it to apportion litigation-related time between the Lanham Act claims and the non-Lanham Act claims, as required by the Ninth Circuit. See Gracie v. Gracie, 217 F.3d at 1069-70 (“[W]e hold that as a general matter, a prevailing party in a case involving Lanham Act and non-Lanham Act claims can recover attorneys’ fees only for work related to the Lanham Act claims.”) -12-