Rhino Associates v. Berg Mfg. and Sales Corp.

531 F.Supp.2d 652

RHINO ASSOCIATES, L.P., Plaintiff, v. BERG MANUFACTURING AND SALES CORPORATION and Cencor Plastics, Inc., Defendants.

Civil Action No. 1:04-CV-1611.

United States District Court, M.D. Pennsylvania.

November 14, 2007.

COPYRIGHT MATERIAL OMITTED

David R. Fairbairn, Kinney & Lange, Minneapolis, MN, Mary P. Patterson, Robert J. Tribeck, Rhoads & Sinon LLP, Harrisburg, PA, for Plaintiff.

MEMORANDUM

CONNER, District Judge.

Presently, before the court is the motion (Doc. 142) of plaintiff Rhino Associates, L.P. ("Rhino") for default judgment against defendant Berg Manufacturing and Sales Corporation ("Berg").¹ For the reasons that follow, the motion will be granted in part and denied in part.

I. Background

Rhino commenced the instant action on July 22, 2004 alleging willful patent infringement against Berg. (See Doe. 1.) Berg answered the complaint on August 25, 2004 and filed a counterclaim against Rhino asserting that the patent at issue (patent no. Re. 34,889, hereinafter "the '889 patent") was invalid and unenforceable. (Doc. 7.)

On June 16, 2005, Berg's counsel filed a motion to withdraw contending that Berg owed over $100,000 for services rendered and that Berg was "judgment proof' as it had transferred all of its assets to another party. (Doc. 25.) The memorandum and order of court dated June 24, 2005 (Doc. 35) directed counsel to confer with Berg regarding the ramifications of being unrepresented, that is, the likely entry of default judgment against Berg. On July 1, 2005 after a telephone conference hearing, the court granted Rhino's motion for a temporary restraining order. (Doc. 44.) Despite the likely entry of default judgment, the temporary restraining order against it, and Rhino's motions for summary judgment (Docs.26, 27, 28) and for a preliminary injunction (Doc. 42),² Berg consented to the withdrawal of its counsel (see Doc. 45). The order of court dated July 12, 2005 (Doc. 46) granted counsel's motion to withdraw and directed Berg to secure representation or face the entry of default judgment against it.

On July 25, 2005, Berg secured new counsel and subsequently opposed Rhino's motions for summary judgment. (See Does.` 49-52, 74-79.) Berg also participated, through counsel, in the hearing on claim construction and the motions for summary judgment. (See Does. 84, 91.) In. July and August, 2006, counsel for Berg moved to withdraw (Docs.117, 120), contending that Berg owed over $50,000 for services rendered and had failed to make payment for over a year (Doc. 130).³ The court directed Berg to show cause why the motions to withdraw should not be granted. (See Does. 119, 132.) Berg did not respond to the court's directive and the order of court dated May 1, 2007 (Doc. 134) granted counsel's motions to withdraw.

On May 11, 2007, Rhino filed its initial motion for default judgment (Doc. 136). The order of court dated May 14, 2007 (Doc. 137) directed Berg to secure the appearance of counsel and show cause why default' judgment should not be entered against it 6y May 25, 2007. Rhino subsequently filed the instant motion for default judgment (Doc. 142) and supporting documents (Docs.145, 150), requesting damages of $1,364,160.00 and attorney's fees and costs of $488,392.28.⁴ The order of court dated September 11, 2007 (Doc. 147) permitted Berg to respond to Rhino's requested damages, attorney's fees, and costs. As of the date of this memorandum, Berg has not secured representation, shown cause why default judgment should not be entered against it, responded to Rhino's requested damages, attorney's fees, and costs, or otherwise communicated with the court.

II. Discussion

An entry of default under Rule 55(a) of the Federal Rules of Civil Procedure must precede an entry of default judgment under Rule 55(b)(2). See Nationwide Mut. Ins. Co. v. Starlight Ballroom Dance Club, Inc., 175 Fed.Appx. 519, 521. n. 1 (3d. Cir. 2006). An entry of default is appropriate "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules and that fact is made to appear by affidavit or otherwise." FED. R. CIV. P. 55(a).⁵

In the matter sub judice, the court finds that the entry of default against Berg is warranted. As a corporation, Berg must be represented in court by counsel. See Simbraw, Inc. v. United States, 367 F.2d 373, 373 (3d Cir.1966) (per curiam) (holding that "a corporation [must], to litigate its rights in a court of law, employ an attorney at law to appear for it and represent it in the court"), cited with approval in Rowland. v. Cal. Men's Colony, Unit II Men's Advisory Council, 506 U.S. 194, 203, 113 S.Ct. 716, 121 L.Ed.2d 656 (1993). The order of court dated May 1, 2007 (Doc. 134) granted the motions to withdraw by counsel for Berg.⁶ To date, Berg has not secured representation or otherwise communicated with the court despite the order of court dated May 14, 2007 (Doc. 137) which directed Berg to secure the appearance of counsel and show cause why default judgment should not be entered against it and the order of court dated September 11, 2007 (Doc. 147) which permitted Berg to respond to Rhino's claims for damages, attorney's fees, and costs. Although Berg filed an answer in this action (see Docs. 7, 107), the entry of default against Berg is nonetheless appropriate for Berg's failure to "otherwise defend" itself. See FED. R. CIV. P. 55(a); see also Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 918 (3d Cir.1992) ("The failure to plead is no greater an impediment to the orderly progress of a case than is the failure to appear at trial or meet other required time schedules, and we see no reason why the former would be subject to a sanction [under Rule 55] not equally applicable to the latter."); id. at 918-19 ("[T]he district court in this case could have' imposed a default judgment against the defendants for failure to comply with its own unambiguous orders to obtain substitute counsel, file a pretrial memorandum, and respond to the plaintiffs' discovery requests.").

Having concluded that default against Berg is warranted, the court turns to the issue of default judgment. See FED, R. Ow. P. 55(b)(2). In accordance with the notice requirement of Rule 55(b)(2), the order of court dated May 14, 2007 (Doc. 137) directed Rhino to serve a copy of the motion for default judgment on Berg. See FED. R. CIV. P. 55(b)(2) ("If the party against whom judgment by default, is sought has appeared in the action, the party (or, if appearing by representative, the party's representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application."). The following day, Rhino served Berg with its motion for default judgment, its proposed order, and the order of court which directed Berg to secure the appearance of counsel and show cause why default judgment should not be entered against it. (See Doc. 138.) In an abundance of caution, the court again permitted Berg to respond to Rhino's requested damages, attorney's fees, and costs. (See Doc. 147.) Given the evidence on damages and fees submitted by Rhino (see Doc. 145, Exs. 2-3; Doc. 150), which remains unopposed by Berg, the court finds that a hearing on damages is not required. See 10A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2688 (3d ed. 2007) ("Rule 55 does not require that testimony be presented as a prerequisite to the entry of a default judgment, and thus several courts have determined that a hearing is not required before entering a default."). Therefore, the court will address Rhino's request for injunctive relief, damages, and attorney's fees and costs.

A. Injunctive Relief

Section 283 of the Patent Act provides that the court "may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent." 35 U.S.C. § 283. Without a trial on the merits, Rhino has not proved that Berg's ramp infringes the '889 patent. However, "a consequence of the entry of default judgment is that the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.'" Whelan v. A. Ward Enters., Inc., No. 01-2874, 2002 WL 1745614, at *2 (E.D.Pa. July 23, 2002) (quoting Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir,1990)). Therefore, the allegation of infringement is taken as true for the purpose of the instant motion only and the court will issue a permanent injunction. See id.

B. Damages

Section 284 of the Patent Act provides: "Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." 35 U.S.C. § 284. In the matter sub judice, the undisputed evidence of record reveals that Berg sold at least 90,948 sets of infringing ramps from January 1, 2004 through May 25, 2005. (Doc. 145, Ex. 3.) Rhino seeks a reasonable royalty of $5.00 per set of infringing ramps sold by Berg.

A reasonable royalty is the amount "a prudent licensee ... would have been willing to pay ... and yet be able to make a reasonable profit and which amount would have been' acceptable by a prudent patentee who was willing to grant a license." Sightsound.com, Inc. v. N2K Inc., 391 F.Supp.2d 321, 355 (W.D.Pa.2003) (citation omitted); see also id. at 355 n. 30 (setting forth other factors to consider in determining a reasonable royalty). The court finds that $5.00 is a reasonable royalty. Rhino entered into an exclusive license agreement with Blitz, Inc. ("Blitz") regarding the '889 patent. (Doc. 150, Ex. 5 ¶ 4.) Blitz sold the ramps to customers for $20.00 per set and instructed Rhino that it would require a $5.00 royalty to waive its exclusive rights. (Id. ¶¶ 9, 12.) During the relevant time period, Berg sold the infringing ramps at more than $5.00...