BEVERLY REID O'CONNELL, District Judge.
WHEREAS, Plaintiff SATA GmbH & Co. KG ("SATA" or "Plaintiff"), on the one hand, and Defendants A&F Auto Paint & Supply, Inc., Abdulahad Hanna, Fadi Hanna, Henin Hanna, and Abrahim Hannoun ("Settling Defendants"), on the other hand, have agreed to settle the disputes and claims in issue between them and have further stipulated to the entry of this Consent Judgment and Permanent Injunction, the Court finds as follows:
1. On October 16, 2015, Plaintiff filed a complaint against defendants Wenzhou New Century International, Ltd., A&F Auto Paint & Supply, Inc. ("A&F"), Abdulahad Hanna, and Does 1-10 alleging claims for trademark counterfeiting and infringement under 15 U.S.C. § 1114, trademark infringement and unfair competition under 15 U.S.C. § 1125, common law trademark infringement, violation of California Business & Professions Code § 17200, and patent infringement.
2. On December 29, 2015, Plaintiff filed a First Amended Complaint against defendants Wenzhou, A&F, Abdulahad Hanna, Fadi Hanna, Henin Hanna, Abrahim Hannoun, and Hangzhou Phoenix Automotive Refinishing Co., Ltd. a/k/a Hangzhou Kapai Tools Co., Ltd., alleging claims for trademark counterfeiting and infringement under 15 U.S.C. § 1114, trademark infringement and unfair competition under 15 U.S.C. § 1125, common law trademark infringement, violation of California Business & Professions Code § 17200, and patent infringement (the "Action").
3. This Court has subject matter jurisdiction over this Action pursuant to 15 U.S.C. §§ 1119 and 1121, and 28 U.S.C. §§ 1331, 1338, and 1367 because this Action presents questions arising under the trademark and patent laws of the United States to which Congress has granted concurrent or exclusive subject matter jurisdiction to the federal courts. This Court has supplemental jurisdiction over SATA's related claims under state law.
4. This Court has personal jurisdiction over A&F as its principal place of business and state of incorporation are in California, and based on its infringing acts of advertising, displaying, and offering counterfeit paint reservoirs and related products for sale in Los Angeles County, California.
5. This Court has personal jurisdiction over Abdulahad Hanna based upon Abdulahad Hanna's residence at 19617 Crystal Ridge Court, Canyon County, California 91351, and based upon his infringing acts of advertising, displaying, and offering paint reservoirs and related products for sale in Los Angeles County, California.
6. This Court has personal jurisdiction over Fadi Hanna, Henin Hanna, and Abrahim Hannoun (sued and served as Does 1 through 3, respectively), based upon their infringing acts of advertising, displaying, and offering counterfeit paint reservoirs and related products for sale in Los Angeles County, California and, upon information and belief, their residency in Los Angeles County, California.
7. Venue is proper in this judicial district pursuant to 28 U.S.C. §§ 1391(b), (c), (d), and 1400(b) because Defendants do business in California and have committed acts of infringement in California.
8. SATA is a German corporation established in 1907 and organized under the laws of Germany.
9. Over the past century, SATA has been a leader in the production of paint spray guns, the paint reservoirs that are used with the spray guns, and related equipment principally used to paint automobiles. SATA's products are designed and manufactured in Germany and are sold to distributors worldwide. SATA's paint spray guns are highly valued; well known for their quality, performance, and durability; and used by car repair businesses, automobile manufacturers, and hobbyists nearly worldwide. Since 2000, SATA has been repeatedly honored as one of the 100 most innovative mid-sized German companies.
10. SATA offers a wide variety of paint spray guns, including HVLP (high volume, low pressure), and RP (reduced pressure) spray guns as well as paint spray guns for automatic painting systems (e.g., robots). SATA has recently made pioneering changes to its products to achieve improved atomization and performance and to comply with Southern California Air Quality Management District rule 1151, which requires that the transfer efficiency of a compliant paint spray gun (e.g., of a "Reduced Pressure Technology" ("RP") spray gun) must be equal to or higher than a comparable "High volume-low pressure" ("HVLP") spray gun used in the market. SATA exceeds that standard by manufacturing "Reduced Pressure Technology" ("RP") spray guns and "High volume-low pressure" ("HVLP") spray guns having a maximum air cap pressure below 10 psi.
11. SATA's strong reputation and goodwill in the industry is reflected in its commitment to aiding users of SATA products through free online services, such as providing tips for painting, a forum for discussion, useful measurement calculators, video tutorials, and even an encyclopedia of terms.
12. SATA's U.S. distributor estimates that its sales of SATA's RPS brand paint reservoirs account for 20 percent of the entire U.S. market, and 25 percent of the Southern California disposable paint reservoir market. SATA enjoys sales of tens of millions of dollars of SATA parts in the United States, and millions of dollars of sales in the disposable paint reservoir market.
13. SATA owns almost 100 United States trademark registrations and pending trademark applications for marks that it uses to identify and distinguish its products. The trademarks at issue in this case include:
14. SATA's U.S. trademark registrations and applications include a SATA family of marks. Those marks include SATA, registration no. 1,381,057, issued February 4, 1986, for, inter alia, "paint spray guns and parts thereof"; SATAJET, registration no. 1,310,808, issued December 25, 1984, for "paint spray guns and parts thereof"; SATA word and design mark, registration no. 3,641,606, issued June 23, 2009, for paint spray guns; SATA AIR TESTER, registration no. 3,805,149, issued June 22, 2010; SATA HYBRID, registration no. 4,185,029, issued August 7, 2012, for spray guns and spray gun systems for paint; SATAJET HYBRID, registration no. 4,185,030, issued August 7, 2012, for paint spray guns and paint spray systems and parts, including in particular paint reservoirs; SATAMINIJET HYBRID, registration no. 4,185,031, issued August 7, 2012, for paint spray guns and paint spray systems including in particular paint reservoirs; SATA MINIJET1000 H HVLP, registration no. 4,440,855, issued November 26, 2013, for, inter alia, paint spraying guns and assembly materials, including liquid supply containers; SATA MINIJET1000 K HVLP, registration no. 4,444,491, issued December 3, 2013, for, inter alia, paint spraying guns and assembly material, including liquid supply containers; SATA, registration no. 4,388,571, issued August 20, 2013, for, inter alia, paint spray guns and paint spray systems including in particular paint reservoirs; SATAMINIJET 1000, registration no. 4,440,858, issued November 26, 2013, for, inter alia, paint spraying guns and assembly devices including liquid supply containers; SATA LIGNUM, registration no. 4,541,559, issued June 3, 2014, for, inter alia, spray guns for paint in the nature of airbrush guns; SATAJET LIGNUM, registration no. 4,535,633, issued May 27, 2014, for, inter alia, spray guns for paint in the nature of airbrush guns; SATA DOCK, registration no. 4,824,752 issued October 6, 2015, for, inter alia, pressure reducing valves for use in the field of paint spray guns; and SATA MINIJET 1000 B HVLP IC, application no. 85,549,751, filed February 22, 2012, for, inter alia, paint spraying guns and liquid supply containers; and SATA ANTI-DUST, application no. 85,491,396, filed December 9, 2011, for, inter alia, spray guns for paint.
15. In addition to the foregoing, SATA's U.S. trademark registrations and applications include an RPS family of marks. They include RPS, registration no. 2,981,217, issued August 2, 2005, for paint spray guns and parts for paint spray guns, namely, paint containers and paint container closures"; RPS ROTAWALL, registration no. 4,631,084, issued November 4, 2014; RPS ROTAFLOOR, registration no. 4,635,616 issued November 11, 2014; and RPS, registration no. 4,820,464, issued September 29, 2015.
16. Still further, SATA's U.S. trademark registrations and applications include a SATA RPS family of marks. They include SATA RPS WALL DISPENSER, registration no. 4,619,824, issued October 14, 2014; SATA RPS ROTAWALL, registration no. 4,631,083, issued November 4, 2014; SATA RPS, application no. 86,087,642, filed October 9, 2013; and SATA RPS ROTAFLOOR, registration no. 4,775,047, issued July 21, 2015.
17. Collectively, the SATA family of marks, RPS family of marks and SATA RPS family of marks are referred to as the "SATA MARKS." They are used commercially or in commerce by SATA.
18. In addition to its federal trademark registrations, SATA also owns 14 patents (both utility and design) registered with the United States Patent and Trademark Office, including U.S. Patent No. 6,877,677 ("the `677 Patent") at issue herein.
19. The `677 Patent was based on the objective of developing a connection for the material supply device (i.e., the paint reservoir) of a paint spraying gun which could be manufactured less expensively and handled more easily. The paint spraying gun and the paint reservoir can be connected to one another by a screw-wedge connection wherein the screw-wedge connection comprises, in part, an essentially hollow-cylindrical connection part of the material supply device or paint reservoir. That portion of the invention is used in the SATA paint reservoirs at issue herein and is precisely copied by the infringing paint reservoirs.
20. One of SATA's major business challenges and a significant threat to its market are the sale of counterfeit products. SATA believes that its spray guns and accessories are the world's most widely counterfeited.
21. In or about August 2015, SATA learned from its distributors of defective SATA RPS paint reservoirs, as well as SATA RPS paint reservoirs, at below-market prices, all being sold to customers by a mobile dealer in Southern California.
22. SATA's exclusive authorized distributor determined that they were counterfeit. Consumers could, however, easily be fooled into thinking they were genuine SATA RPS paint reservoirs because the boxes in which the counterfeit products were packaged displayed the SATA MARKS and were very similar to SATA's boxes. The counterfeit packaging used German and English language descriptions of the product, similar colors and packaging design, and the SATA MARKS.
23. SATA engaged investigators to determine the source of the defective and counterfeit products. SATA's investigators determined that a telephone number from a business card provided by the mobile supplier was associated with Defendant Abdulahad Hanna, who is both the principal and registered agent for service of process for Defendant A&F.
24. SATA's Investigators then arranged to meet the mobile dealer, who proved to be defendant Abrahim Hannoun, at A&F to purchase SATA RPS paint reservoirs.
25. There, Mr. Hannoun agreed to sell the investigator a box of genuine SATA RPS paint reservoirs for $125, but told the investigator that he could provide "fake" SATA RPS paint reservoirs for $85 a box.
26. During subsequent visits to A&F in September 2015, the investigator bought four boxes of paint reservoirs and was given an additional box for free. All five boxes of paint reservoirs were labeled with the SATA MARKS.
27. SATA also inspected the paint reservoirs that SATA's investigators purchased from A&F. The A&F were capable of being connected to a SATA paint spray gun by a screw-wedge connection wherein the screw-wedge connection comprises, in part, an essentially hollow-cylindrical connection part of the material supply device or paint cup. The portion of the `677 Patent used in the SATA paint reservoirs was precisely copied by the infringing paint reservoirs.
28. Settling Defendants Abdulahad Hanna, Fadi Hanna, and Henin Hanna own and/or operate A&F. Settling Defendants A&F, Abdulahad Hanna, Fadi Hanna, Henin Hanna, and Abrahim Hannoun sold, marketed, advertised, promoted and distributed the infringing paint spray gun paint reservoirs to customers in the United States, including in the Central District of California and other districts within the State of California.
29. With actual or constructive notice of SATA's federal trademark registration rights under 15 U.S.C. § 1072, and long after SATA commenced using the SATA MARKS, Settling Defendants made unauthorized commercial uses in commerce of the SATA MARKS.
30. Settling Defendants' continued counterfeit use of the SATA MARKS would be likely to cause confusion in the minds of the public, falsely leading the public to believe that counterfeit paint spray gun paint reservoirs and related products supplied by Settling Defendants emanate or originate from, or are affiliated with, SATA and/or that SATA has approved, sponsored or otherwise associated itself with the products sold by Settling Defendants.
31. Settling Defendants' conduct was intended to exploit the goodwill and reputation associated with SATA's registered trademarks and to take competitive advantage without expenditure of resources through willful infringement.
32. SATA had no control over the nature and quality of the goods or services offered by Settling Defendants under the SATA MARKS. Absent injunctive relief SATA's reputation and goodwill would be damaged and the value of SATA's MARKS diminished by Settling Defendants' continued use of the SATA MARKS. Because Settling Defendants' continued counterfeit use of the SATA MARKS would likely cause confusion in the minds of the public, any defects, objections, or faults found with Settling Defendants' products or services marketed under the SATA MARKS would negatively reflect upon and injure the reputation that SATA has established for the products and services it offers in connection with the registered SATA MARKS.
33. SATA has been and will continue to be irreparably harmed by the actions of Settling Defendants unless Settling Defendants are permanently enjoined from manufacturing, supplying, selling, offering or delivering Settling Defendants' counterfeit paint reservoirs to others. Unless permanently enjoined by this Court, Settling Defendants would continue to use the infringing marks, causing irreparable injury to SATA's business, identity, goodwill and reputation. SATA has no adequate remedy at law because monetary damages would be inadequate to compensate SATA for the injuries caused by Settling Defendants.
34. As a result of Settling Defendants' infringement of the SATA MARKS, SATA incurred damages.
35. Settling Defendants' infringement of the SATA MARKS was deliberate, willful, fraudulent, and without extenuating circumstances, and constituted a knowing use of the SATA MARKS, making this an exceptional case within the meaning of Lanham Act section 35, 15 U.S.C. § 1117.
36. By using the SATA MARKS in connection with counterfeit paint reservoirs and to advertise, promote, and sell counterfeit paint reservoirs, Settling Defendants used the SATA MARKS in commerce as false designations of origin and false or misleading descriptions and representations in violation of 15 U.S.C. § 1125(a).
37. Settling Defendants' continued counterfeit use of the SATA MARKS would likely cause confusion in the minds of the trade and consumers, falsely leading the public to believe that counterfeit paint reservoirs and related products supplied by Settling Defendants emanate or originate from, or are affiliated with, SATA and/or that SATA has approved, sponsored or otherwise associated itself with the products sold by Settling Defendants.
38. SATA has been, and would continue to be, irreparably harmed by the actions of Settling Defendants unless Settling Defendants are permanently enjoined from manufacturing, supplying, distributing, offering, selling and delivering Settling Defendants' counterfeit paint reservoirs. Settling Defendants would continue to use the infringing marks, causing irreparable injury to SATA's business, identity, goodwill and reputation, unless enjoined. SATA has no adequate remedy at law as monetary damages would be inadequate to compensate SATA for the injuries caused by Settling Defendants. SATA is entitled to injunctive relief pursuant to 15 U.S.C. § 1116 to enjoin and restrain Settling Defendants from further violating 15 U.S.C. § 1125(a).
39. With full knowledge of the SATA MARKS and SATA's prior use of them commercially in commerce, Settling Defendants used the SATA MARKS without authorization on counterfeit paint reservoirs and in advertising, promoting, and selling counterfeit paint reservoirs.
40. Settling Defendants traded on the goodwill associated with the SATA MARKS to cause confusion or mistake or to deceive consumers and therefore infringed SATA's rights in the SATA MARKS in violation of common law.
41. Settling Defendants' acts resulted in the "passing off" of their products as those of SATA, or as related or associated with, or sponsored or endorsed by, SATA. Settling Defendants' conduct therefore constituted trademark infringement and unfair competition under California common law.
42. Settling Defendants' wrongful use of the SATA MARKS was deliberate, willful, and in reckless disregard of SATA's common law and statutory trademark rights.
43. Settling Defendants' acts described above constituted unlawful and unfair business practices that injured SATA in its business and property in violation of California Business & Professions Code §§ 17200, et seq.
44. Settling Defendants' continued engagement in such wrongful acts would likely cause confusion, or cause mistake, or deceive as to the affiliation, connection, or association of Settling Defendants with SATA, or as to the origin, sponsorship or approval of Settling Defendants' infringing products by SATA.
45. Because SATA has no adequate remedy at law, it is entitled to an injunction restraining Settling Defendants, their agents, employees, officers, alter egos, and all persons acting in concert with them, from engaging in any further such unfair business practices in violation of California Business & Professions Code § 17200.
46. Settling Defendants infringed the `677 Patent under 35 U.S.C. § 271 by offering for sale in the United States devices that included each and every limitation of one or more claims of the `677 Patent.
47. Settling Defendants' offers to sell such infringing paint reservoirs were unauthorized and without license, and constituted direct infringement under 35 U.S.C. § 271(a).
48. As a result of Settling Defendants' direct infringement, SATA was damaged, and without permanent injunctive relief, will continue to suffer damage.
49. Settling Defendants will continue to infringe unless Settling Defendants, their officers, agents, servants, employees, and representatives, and all others acting in active concert with Settling Defendants, are enjoined from infringing the `677 Patent.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED, based on the evidence submitted to this Court, including in the parties' Stipulation for Entry of Consent Judgment and Permanent Injunction ("Stipulation"), that judgment be entered in favor of Plaintiff SATA GmbH & Co. KG and against Settling Defendants A&F Auto Paint & Supply, Inc., Abdulahad Hanna, Fadi Hanna, Henin Hanna, and Abrahim Hannoun in this Action as follows:
1.
2.
a. Using any reproduction, counterfeit, copy, or colorable imitation of the
SATA Marks in commerce including, without limitation, by selling, offering for sale, distributing, promoting, advertising or marketing any good or service in connection with any reproduction, counterfeit, copy, or colorable imitation of any of the SATA Marks;
b. Manufacturing, using selling, offering to sell, distributing or importing into the United States, paint spray gun paint reservoirs in connection with any reproduction, counterfeit, copy, or colorable imitation of any of the SATA Marks;
c. Communicating, directly or indirectly, with any person or persons from whom the Settling Defendants purchased or obtained the counterfeit products bearing the SATA Marks or whom the Settling Defendants know or reasonably believe to possess, control or have access to any counterfeit products bearing any of the SATA Marks pending further order of the Court; or
d. Knowingly instructing, aiding or abetting any other person or business entity in engaging in any of the activities referred to in Paragraphs 2(a) through 2(c) above.
3. Service by mail upon Settling Defendants, care of their attorney, Arthur H. Barens, Esq., Law Offices of Arthur H. Barens, 10209 Santa Monica Boulevard, Los Angeles, California 90067, of a copy of this Consent Judgment and Permanent Injunction once entered by the Court is deemed sufficient notice to Settling Defendants under Federal Rule of Civil Procedure 65. It shall not be necessary for Settling Defendants to sign any form of acknowledgment of service.
4. This Permanent Injunction shall bind Settling Defendants, who are ordered to provide a copy of this Permanent Injunction to their respective affiliates, agents, servants, employees, attorneys, and all those working in concert with them.
5. Any violation of this Permanent Injunction shall expose Settling Defendants and all other persons bound by this Permanent Injunction to all applicable penalties and remedies.
