MetroPCS v. Devor

215 F.Supp.3d 626

METROPCS, a brand of T-Mobile USA, Inc., a Delaware Corporation, Plaintlff,

v.Mark DEVOR a/k/a Marcus W. Devor and Sheldon Chase a/k/a Chase Sheldon a/k/a Blu Chase, Defendants.

Case No. 1:16-cv-02949

United States District Court, N.D. Illinois, Eastern Division.

October 7, 2016

Signed October 14, 2016

Alana E. Zorrilla-Gaston, James Blaker Baldinger, Stacey Kim Sutton, Carlton Fields Jorden Burt, P.A., West Palm Beach, FL, Lawrence Harris Heftman, Schiff Hardin LLP, Chicago, IL, for Plaintiff.

FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANTS

JUDGE MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE

Plaintiff T-Mobile USA, Inc., a Delaware corporation ("T-Mobile"), for itself and its MetroPCS brand (collectively referred to hereinafter as "MetroPCS") brought the above-captioned lawsuit against Defendants Mark Devor a/k/a Marcus W. Devor and Sheldon Chase a/k/a Chase Sheldon a/k/a Blu Chase (collectively "Defendants"), alleging that Defendants are engaged in an unlawful enterprise involving the unauthorized and deceptive acquisition and bulk resale overseas of specially-manufactured handsets designed for use on MetroPCS's wireless service (collectively, "MetroPCS Handsets"), the theft of MetroPCS's subsidy investment in the Handsets, the unlawful access of MetroPCS's protected computer systems and wireless network, the trafficking of MetroPCS's protected and confidential computer passwords, and the willful infringement of MetroPCS's trademarks (collectively, the "Handset Theft and Trafficking Scheme" or the "Scheme").

MetroPCS contends that Defendants and their co-conspirators perpetrated the Handset Theft and Trafficking Scheme by acquiring large quantities of MetroPCS Handsets ("Handsets") from MetroPCS and/or MetroPCS authorized retailers and dealers and by soliciting others to purchase MetroPCS Handsets in large quantities for the benefit of Defendants. Plaintiff asserts that Defendants and their co-conspirators acquired the MetroPCS Handsets with the knowledge and intent that the Handsets will not be used on the MetroPCS wireless network (as required by the MetroPCS terms and conditions), but instead, the Handsets are trafficked and the vast majority are ultimately resold as new overseas where the Handsets are not subsidized by wireless carriers (as they are in the United States). MetroPCS further asserts that Defendants acquired the Handsets with the knowledge and intent that the Handsets will be computer-hacked or "unlocked," to disable software installed in the Handsets by the manufacturers at the request and expense of MetroPCS, which enables the activation of the MetroPCS Handsets exclusively on MetroPCS's wireless system. The purpose of the software is to allow MetroPCS, which is a service provider not a cell phone retailer, to offer the Handsets at a discount to the consumer while protecting MetroPCS's subsidy investment in the Handset. MetroPCS asserts that the illegally unlocked Handsets are trafficked and resold as new by Defendants, at a premium, under the MetroPCS trademarks.

MetroPCS Handsets are sold subject to terms and conditions ("Terms and Conditions") which conspicuously restrict and limit the sale and use of the Handsets. The packaging of every MetroPCS Handset provides that by purchasing or opening the package, activating, using, or paying for MetroPCS service, the purchaser agrees to the MetroPCS Terms and Conditions posted on www.metropcs.com. Purchasers have the option to return the MetroPCS Handset in accordance with the return policy if they do not agree to the Terms and Conditions. The methods used by MetroPCS for obtaining its customers' agreement to the Terms and Conditions are legally valid and appropriate, and the Terms and Conditions constitute a valid and binding contract between MetroPCS and each of its customers. Pursuant to the Terms and Conditions of MetroPCS Handsets, purchasers agree, among other things: (a) to pay the applicable service charges and other related fees; (b) to activate the MetroPCS Handsets on the MetroPCS network; (c) not to resell the MetroPCS Handsets and related products and services; and (d) not to use the Handsets for a purpose that could damage or adversely affect MetroPCS.

In this case, as a result of Defendants' involvement in the Handset Theft and Trafficking Scheme, MetroPCS has asserted claims against Defendants for tortious interference with existing business relations and prospective economic advantage, conspiracy to defraud, unjust enrichment, common law fraud and fraudulent misrepresentation, trafficking in computer passwords, 18 U.S.C. § 1030(a)(6), unauthorized access, 18 U.S.C. § 1030(a)(5)(C), federal trademark infringement, 15 U.S.C. § 1114 [§ 32(1) of the Lanham Act], federal common law trademark infringement and false advertising, 15 U.S.C. §§ 1125(a)(1)(A) and (B) [§ 43(a) of the Lanham Act], contributory trademark infringement, conversion, deceptive trade practices (815 ILCS 505 et seq.) and common law unfair competition, tortious interference with contractual relations, and conspiracy to induce breach of contract.

This Court has jurisdiction over all of the parties and all of the claims set forth in MetroPCS's Complaint.

I. Standard of Review

"Pursuant to Federal Rule of Civil Procedure 55, the court may enter a judgment by default when the non-moving party has 'failed to plead or otherwise defend' itself." Kinsey v. Jambow, Ltd. , 76 F.Supp.3d 708, 710 (N.D. Ill. 2014). "The decision to grant or deny default judgment lies within the district court's discretion and is reviewed only for an abuse of discretion." Id. (citing Domanus v. Lewicki , 742 F.3d 290, 301 (7th Cir. 2014) (citation omitted)). "Upon default, the well-pled allegations of the complaint relating to liability are taken as true, but those relating to the amount of damages suffered ordinarily are not." Wehrs v. Wells , 688 F.3d 886, 892 (7th Cir. 2012). As Defendants have not responded to any of the allegations against them in this action, all of the Plaintiff's factual allegations, except as to damages, are taken as true.

II. MetroPCS Has Properly Pled Its Claims For Default Judgment Against Defendants

A. Trademark Claims (Counts 7-9)

To establish trademark infringement, a plaintiff must prove that it has a valid, protectable mark, and that Defendants' use of the mark is likely to create confusion. See CAE, Inc. v. Clean Air Eng'g, Inc. , 267 F.3d 660, 673–74 (7th Cir. 2001) ; 15 U.S.C. §§ 1114(1)(a) and 1125(a)(1)(A). Contributory infringement extends to "all those who knowingly play a significant role in accompanying the unlawful purpose."

TracFone Wireless, Inc. v. Anadisk LLC , 685 F.Supp.2d 1304, 1311 (S.D. Fla. 2010).

Plaintiff has properly alleged that it has the right to use and enforce the MetroPCS Marks on and in connection with its telecommunications products and services. MetroPCS has the right to use and enforce rights in the standard character and stylized MetroPCS® mark (collectively, the "MetroPCS Marks"), as depicted below:

metroPCS.               metroPCS

MetroPCS uses the MetroPCS Marks on and in connection with its telecommunications products and services. The MetroPCS Marks are valid, distinctive, protectable, famous, have acquired secondary meaning, and are associated exclusively with MetroPCS.

Defendants use the federally-registered MetroPCS Marks without authorization in connection with their conspiracy to sell and offer for sale materially different MetroPCS Handsets, removed from packaging, carrying a bad IMEI, and/or devoid of the manufacturer's warranty. Further, Defendants' use of certain federally registered MetroPCS Marks has caused, and will further cause, a likelihood of confusion, mistake and deception as to the source or origin of Defendants' infringing products, and the relationship between Plaintiff and Defendants. By misappropriating and using the MetroPCS Marks in connection with their Scheme, Defendants knowingly aided and enabled distributors and/or sellers of the products to market them to members of the general public in a way that infringes the MetroPCS Marks by placing in the hands of distributors and/or sellers an instrument of consumer deception. Defendants' commission of the foregoing intentional acts in commerce has damaged and will continue to damage MetroPCS.

Under a claim for false advertising, Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a) ) makes it unlawful for "[a]ny person who ... 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." 15 U.S.C. § 1125(a)(1)(B). As supported by the allegations within the Complaint, the Court finds Defendants' use of the MetroPCS Marks misrepresents the nature, characteristics, and/or qualities of their infringing products. Defendants' use of the MetroPCS Marks is false or misleading, deceives, or has the capacity to deceive, consumers and their deception and misrepresentations have a material effect on purchasing decisions and affect interstate commerce. As such, entry of default judgment against Defendants on MetroPCS's trademark claims is warranted.

B. Deceptive Trade Practices (815 ILCS 505 et seq.) and Common Law Unfair Competition (Count 11)

Under Illinois law, the same test for federal trademark infringement applies to deceptive trade practices and common law unfair competition claims. See Rust Env't & Infrastructure, Inc. v. Teunissen , 131 F.3d 1210, 1219 (7th Cir. 1997). As set forth above, MetroPCS has established liability under the Lanham Act. Therefore, MetroPCS is entitled to default judgment against Defendants on its deceptive trade practices and common law unfair competition claim.

C. Tortious Interference with Existing Business Relations and Prospective Economic Advantage Claim (Count 1)

"Under Illinois law, the elements of a tortious interference claim are: "(1) the plaintiff's reasonable expectation of...