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The Executive Corp v. Oisoon, LLC

United States District Court, M.D. Tennessee, Nashville Division

September 28, 2017

THE EXECUTIVE CORPORATION, Plaintiff,
v.
OISOON, LLC, and LI JIN XU, Defendants.

          MEMORANDUM AND ORDER

          ALETA A. TRAUGER, UNITED STATES DISTRICT JUDGE.

         On May 18, 2106, Plaintiff The Executive Corporation (TEC) sued defendants Oisoon, LLC, and Li Jin Xu for appropriating images from its website and using those images to sell products similar (or perhaps identical) to those marketed by TEC. (Doc. No. 1.) TEC alleges two claims against these defendants: that they removed or altered copyright management information, in violation of 17 U.S.C. §1202(b), and that they engaged in false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a). (Id. at PageID# 4-8.) Despite having been served with process (Doc. Nos. 6, 7), neither defendant has appeared to defend against these claims. Pursuant to Federal Rule of Civil Procedure 55(a), the Clerk of Court entered default against Oisoon, LLC on July 15, 2016 (Doc. No. 10) and default against Li Jin Xu on August 29, 2016 (Doc. No. 15).

         TEC moved for default judgment under Federal Rule of Civil Procedure 55(b) on October 20, 2016. (Doc. No. 18.) After determining that TEC does not request damages in a sum certain, the magistrate judge ordered TEC to submit additional proof to support its damages claim. (Doc. No. 21.) TEC submitted the affidavit of its president, Stewart Switzer (Doc. No. 22- 1), and its counsel, Thomas J. Boylan (Doc. No. 22-20), on July 2, 2017. TEC also filed additional evidence documenting the harms it alleges, including photographs comparing images from its website to those found on defendants' site. (Doc. No. 20.) Upon consideration of these filings, the court hereby WITHDRAWS the reference to the Magistrate Judge and GRANTS TEC's motion for default judgment.

         I. Statement of Facts

         The following facts are taken from TEC's Verified Complaint (Doc. No. 1), Switzer's affidavit (Doc. No. 22-1), Boylan's affidavit (Doc. No. 22-20), and their supporting documents (Doc. No. 22-2-22-23).

         TEC is a Tennessee corporation that “operates a promotional marketing company that designs, advertises and sells logo branded products via the internet.” (Doc. No. 1, PageID# 1, 3, ¶ ¶ 1, 9.) TEC markets over 30, 000 branded logo products through its website, www.theexecutiveadvertising.com. (Doc. No. 22-1, PageID# 141, ¶ 4.) “TEC's internet site . . . uses original source coding, text and photographs that have been created and developed by TEC and are the unregistered copyrights of [TEC].” (Doc. No. 1, PageID# 3, ¶ 9.)

         Defendant Oisoon LLC is a Texas corporation that sells logo branded products through the website www.oisoon.com. (Doc. No. 1, PageID# 1, 3, ¶¶ 2, 10.) Defendant Li Jin Xu is a Texas resident and manager of Oisoon LLC. (Id. at PageID# 1, ¶ 3.) Oisoon LLC “regularly conducts and solicits business in [Tennessee] through its interactive website . . . [and] purposely avails itself of acting in Tennessee by selling goods and entering into contracts with residents of Tennessee.” (Id. at PageID# 2, ¶ 5.) Upon information and belief, Defendant Xu “personally participated in constructing” Oisoon LLC's website and in the sale of its products. (Id. at ¶ 6.) Oisoon LLC and Xu (collectively, Oisoon) conduct business in this judicial district, where many of the events underlying TEC's claims took place. (Id. at ¶ 8.)

         In November and December 2015, TEC became aware of Oisoon's website, where TEC discovered “many of the exact same images as TEC's copyrighted images.” (Doc. No. 1, PageID# 3, ¶ 11; Doc. No 22-1, PageID# 142, ¶ 7.) Oisoon “[was and is] using those images to sell products that are similar to those sold by TEC” on its website, but at lower prices than TEC. (Doc. No. 1, PageID# 3, ¶ 11.) TEC discovered Oisoon's activities when “customers began contacting [Switzer] about the disparity in price between the two sites. Many customers thought the two sites were related or simply wanted [Switzer] to match Oisoon's lower price.” (Doc. No. 22-1, PageID# 142, ¶ 7.) TEC matched the price of the products listed on Oisoon's website in order to retain its customers' business. (Doc. No. 1, PageID# 4, ¶ 12.)

         TEC identified images of 969 of its 2, 999 products that Oisoon had copied directly from TEC's website to its own, including supporting text and descriptions. (Doc. No. 22-1, PageID# 142, ¶ 9.) To claim its proprietary images, TEC had “embedded some of its website photographs with copyright management information in the form of the trade name ‘The Executive Advertising' as a watermark at the top or in the bottom right hand corner.” (Doc. No. 22-1, PageID# 142, ¶ 5.) Included among the images found on the Oisoon site were four photographs from TEC's website with the identifying watermark removed. (Doc. No. 1, PageID# 3-5; Doc. No. 22-1, PageID# 142-43; Doc. Nos. 22-3-22-8.) Otherwise, all of the data and images reproduced on Oisoon website were exact duplicates of the images on TEC's website, “and some even linked to the TEC website because [Oisoon] copied and pasted without removing TEC's URL information.” (Doc. No. 22-1, PageID# 143, ¶ 12.) The Oisoon website even contained ten images taken from TEC's website and published with the TEC watermark included. (Doc. Nos. 22-10-22-19.)

         On May 17, 2016, TEC sent a takedown notice to Oisoon's internet service provider as contemplated in the Digital Millennium Copyright Act (DMCA), 17 U.S.C. § 512(c), and a cease-and-desist letter to Oisoon. (Doc. No. 1, PageID# 4, ¶13; Doc. No. 1-3; Doc. No. 22-1, PageID# 143, ¶ 13; Doc. No. 1-4.) In response, Oisoon “removed most, but not all” of TEC's images from their website “by August-September 2016.” (Doc. No. 22-1, PageID# 143, ¶ 13.)

         II. Discussion

         A. Legal Standard

         After a party's default has been entered under Rule 55(a), the court may enter default judgment. In so doing, the court treats all well-pleaded allegations of the complaint as true, except allegations regarding the amount of damages, and must determine whether those facts state a claim. Thomas v. Miller, 489 F.3d 293, 299 (6th Cir. 2007); Zinganything, LLC v. Import Store, 158 F.Supp.3d 668, 672 (N.D. Ohio 2016). Otherwise, the entry of default judgment is a matter of the court's discretion, guided by factors including: (1) prejudice to the plaintiff; (2) the merits of the plaintiff's claim; (3) the complaint's sufficiency; (4) the amount of money at stake; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy favoring decisions on the merits. Mucerino v. Newman, No. 3:14-cv-00028, 2017 WL 387202, at *2 (M.D. Tenn. Jan. 26, 2017) (citing Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986); Marshall v. Bowles, 92 F. App'x 283, 285 (6th Cir. 2004)).

         The court may conduct a hearing or make a referral to conduct an accounting, determine the amount of damages, establish the truth of any allegation by evidence, or investigate any other matter. Fed.R.Civ.P. 55(b)(2)(A)-(D). The court referred this matter to the magistrate judge (Doc. No. 19), who ordered TEC to submit additional evidence in support of its motion (Doc. No. 21). In light of the evidence TEC submitted in response (Doc. No. 22), the court finds that no evidentiary hearing is required.

         B. Jurisdiction

         The court must determine that it has jurisdiction over an action and its parties to render a valid judgment, even when a defendant is in default. Antoine v. Atlas Turner, Inc., 66 F.3d 105, 108 (6th Cir. 1995). “Once default is entered against a defendant, that party is deemed to have admitted all of the well pleaded allegations in the Complaint, including jurisdictional averments.” Ford Motor Corp. v. Cross, 441 F.Supp.2d 837, 846 (E.D. Mich. 2006). The verified complaint alleges this court's jurisdiction over TEC's claims because they arise under federal copyright law and the Lanham Act. 28 U.S.C. §§ 1331, 1338(a); 15 U.S.C. § 1121. Federal question jurisdiction over the action is therefore established.

         Regarding the court's jurisdiction over Oisoon LLC and Xu, “[w]here a federal court's subject matter jurisdiction over a case stems from the existence of a federal question, personal jurisdiction over a defendant exists if the defendant is amenable to service of process under the [forum] state's long-arm statute and if the exercise of personal jurisdiction would not deny the defendant[s] due process.” Bird v. Parsons, 289 F.3d 865, 871 (6th Cir. 2002). Because Tennessee's long-arm statute has been interpreted to reach the highest limit of federal due process, “the court need only determine whether exercising personal jurisdiction violates constitutional due process.” Bridgeport Music, Inc. v. Still N The Water Publ'g, 327 F.3d 472, 477 (6th Cir. 2003). Personal jurisdiction therefore exists if: (1) the defendant purposefully avails himself of the privilege of acting in the forum state or causing a consequence in the forum state, (2) the cause of action arises from the defendant's activities there, and (3) the acts of the defendant or consequences caused by the defendant have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable. S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968).

         Here, TEC asserts specific personal jurisdiction over Oisoon LLC based upon its allegation that Oisoon LLC “regularly conducts and solicits business in this jurisdiction through its interactive website” and “purposely avails itself of acting in Tennessee by selling goods and entering into contracts with residents of Tennessee.” (Doc. No. 1, PageID# 2, ¶ 5.) “The operation of an Internet website can constitute the purposeful availment of the privilege of acting in a forum state . . . ‘if the website is interactive to a degree that reveals specifically intended interaction with residents of the state.'” Bird, 289 F.3d at 874 (quoting Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 890 (6th Cir.2002)). The court “distinguishes between interactive websites, where the defendant establishes repeated online contacts with residents of the forum state, and websites that are passive, where the defendant merely posts information on the site.” Cadle Co. v. Schlichtmann, 123 F. App'x 675, 678 (6th Cir. 2005). A website through which a company sells its goods, provides information about its products, and communicates with its customers is sufficiently interactive to establish its operators' purposeful availment of a forum state. Sports Authority Michigan, Inc. v. Justballs, Inc., 97 F.Supp.2d 806, 814 (E.D. Mich. 2000). TEC's ...


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