A Del. Corp.. v. Snd Cellular Inc. A

715 F.Supp.2d 1246

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

v.SND CELLULAR, INC. a/k/a S & D Cellular, Inc., a California corporation; and Dilip Daswani, individually, Defendants.

Case No. 10-CIV-20525-DLG.

United States District Court,S.D. Florida.

May 21, 2010.

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

FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANTS SND CELLULAR, INC. a/k/a S & D CELLULAR, INC. AND DILIP DASWANI

DONALD L. GRAHAM, 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, SND CELLULAR, INC. a/k/a S & D CELLULAR, INC., a California limited liability company (“SND”), and DILIP DASWANI, individually (“DASWANI”) (collectively “Defendants”).

Upon review of the Motion, the record, and being otherwise duly advised in the premises, the Court 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, Net 10, SafeLink and Straight Talk brands (hereinafter referred to as “TracFone Prepaid Phones” or “Phones”). (Complaint ¶ 28) 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 ¶ 130.

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 ¶ 31. 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 ¶¶ 31, 37-43.

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 ¶¶ 32, 34. The Marks constitute the lawful, valued, subsisting and exclusive property of TracFone. Id. at ¶¶ 33, 35. Only TracFone and its authorized, affiliated agents are permitted to use the Marks. Id. at ¶ 76.

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 ¶¶ 32, 34 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 ¶ 46. 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 ¶ 47. The Phones are removed from their original packaging, shipped overseas, and “unlocked” or “reflashed.” Id. at ¶ 47. ³ 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 ¶¶ 49, 66.

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 ¶ 2. For example, from 2006-2008, Defendants sold 4,548 Phones. Id. at ¶ 58. These Phones were unlocked, not in the original packaging and did not carry TracFone's manufacturer's warranty. Id. at ¶ 67.

III. The Present Litigation

As a result of Defendants' business activities, TracFone asserted claims against the Defendants for Federal Trademark Infringement in violation of 15 U.S.C. § 1114; Federal Unfair Competition in violation of 15 U.S.C. § 1125; Breach of Contract; Contributory Trademark Infringement; Copyright Infringement of Software in violation of Title 17 of the United States Code; Circumvention of Copyrighted Software Protection System and Trafficking in Circumvention Technology in violation of the Digital Millennium Copyright Act (“DMCA”); Tortious Interference with a Contractual right in Violation of Florida Common Law; Conspiracy to Induce Breach of Contract; Civil Conspiracy in Violation of Florida Common Law; and Unjust Enrichment in Violation of Florida Common Law. 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.

This Court has personal jurisdiction over Defendants because they have had continuous and substantial business connections to the State of Florida, including conducting business with companies located in Florida. Defendants are further subject to the personal jurisdiction of this Court pursuant to: Fla. Stat. § 48.193(1)(a) because they have conducted, engaged in and carried out business ventures within the State of Florida; § 48.193(1)(b) because they have committed tortious acts within the State of Florida; and § 48.193(1)(g) by failing to perform acts required by a contract to be performed in the State of Florida. Moreover, Defendants are also subject to this Court's personal jurisdiction pursuant to § 48.193(2) because they have engaged in substantial and not isolated business activity within the State of Florida.

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' misconduct 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 plaintiff's well-pleaded allegations of fact,” as set forth in the operative complaint. Eagle Hosp. Physicians, 561 F.3d at 1307. “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. 08-20546-CIV, 2009 WL 1585995 at *2 (S.D.Fla. June 4, 2009) (internal quotations and citations omitted). Accordingly, TracFone can establish the amount of damages by submitting sufficient evidence to support the request for damages. Id. (internal quotations omitted). In assessing damages without a hearing, it is appropriate for the Court to utilize “mathematical calculations.” Adolph Coors Co. v. Movement Against Racism and the Klan, 777 F.2d 1538, 1544 (11th Cir.1985).

DISCUSSION

I. TracFone's Trademark Related Claims (Counts One. Two and Four)

Section 32(1) of the Lanham Act protects against the use in commerce of “any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.” 15 U.S.C. § 1114(1)(a). Section 43(a) of the Lanham Act states that:

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection or association of such person with another person, or as to the origin, sponsorship or approval of his or her goods, services, or commercial activities by another person,

or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any

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