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Concrete Log Systems, Inc. v. Better Than Logs, Inc.

United States District Court, D. Montana, Missoula Division

July 10, 2019

CONCRETE LOG SYSTEMS, INC., d/b/a/ EVERLOG SYSTEMS, Plaintiff,
v.
BETTER THAN LOGS, INC., Defendant.

          ORDER

          DONALD W. MOLLOY, DISTRICT JUDGE.

         This suit arises out of Defendant Better Than Logs, Inc.'s infringement of a patent for simulated log siding held by Plaintiff Concrete Log Systems, Inc. d/b/a Everlog Systems ("Everlog"). Pending before the Court is Everlog's application for default judgment. (Doc. 29.) Everlog seeks money damages and an injunction prohibiting Better Than Logs from making, using, advertising, or selling infringing products. Everlog is entitled to judgment against Better Than Logs for $978, 909.00, and a permanent injunction.

         Background

         Everlog is a Montana corporation that manufactures cement-based building materials that have the appearance of logs but are more resilient than wood. (Doc. 31 at ¶ 3.) It holds five U.S. patents for simulated log products. (Id. at ¶ 5.) On February 15, 2018, Everlog filed this suit against Better Than Logs, bringing federal claims for patent infringement, false designation of origin and unfair competition, and false advertising, and a state law claim for unfair competition. (Doc. 1.) Specifically, Everlog alleged Better Than Logs's sale of simulated log siding infringes U.S. Patent No. 9, 695, 598 ("'598 patent"), (id. at ¶¶ 7-23), and that Better Than Logs falsely advertised its products as made in the United States when the products were substantially manufactured in China, (id. at ¶¶ 25-59).

         Better Than Logs waived service, (Doc. 4), and filed an answer and counterclaim on May 15, 2018, (Doc. 7). On July 17, 2018, the parties attended a preliminary pretrial conference in Missoula, Montana. (Doc. 19 at 1.) On July 19, 2018, the Court denied Better Than Logs's motion for a stay pending the Patent and Trademark Office's reexamination of the patent at issue. (Doc. 20.) The Patent and Trademark Office has since confirmed the validity of the '598 patent. (Doc. 31-7.)

         The March 1, 2019 discovery deadline and May 1, 2019 motions deadline passed without any further filings. On May 16, 2019, the Court ordered the parties to file a status report. (Doc. 21.) Everlog advised of its intent to proceed to trial as scheduled. (Doc. 24.) However, counsel for Better Than Logs moved to withdraw. (Doc. 22.) The Court granted the motion but ordered Better Than Logs to retain new counsel by June 7, 2019, or be subject to default. (Doc. 25.) Better Than Logs did not comply. The Clerk of Court entered its default on June 11, 2019. (Doc. 28.)

         Everlog now applies for a default judgment. (Doc. 29.) It has submitted affidavits and other documentary evidence in support of its application. (Docs. 30-1, 31, 31-1 to 31-17, 33.) A hearing was held on July 9, 2019. Everlog served written notice of the application and hearing on Better Than Logs. (Doc. 36.) However, Better Than Logs did not file a response to Everlog's application or appear at the hearing. At the hearing, the Court struck Better Than Logs's answer and directed the Clerk of Court to enter Better Than Logs's default on its counterclaims. Then, testimony was heard from Stewart Hansen, Everlog s president, and Dale Williams, Everlog's retained accounting expert. The Court found Hansen and Williams to be credible. In addition, Williams's experience qualifies him to offer expert opinions on business accounting, and his opinions in this case were based on sufficient facts and data and were the product of reliable principles and methods.

         Legal Standard

         Rule 55(b) allows a court to enter default judgment following a defendant's default. Fed.R.Civ.P. 55(b)(2). "The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true." TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (quoting Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977)). Accordingly, while default establishes a defendant's liability on all well-pled claims, see Cripps v. Life Ins. Co. o/N. Am., 980 F.2d 1261, 1268 (9th Cir. 1992), courts must determine the damages to be awarded, if any, in the default judgment, see Fed. R. Civ. P. 55(b)(2).

         Notwithstanding a default, whether to enter default judgment against a defendant is a matter of discretion. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). Before entering a default judgment, a court must have subject matter jurisdiction over the action and personal jurisdiction over the defendant. In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). Otherwise, "Rule 55 gives the court considerable leeway as to what it may require as a prerequisite to the entry of a default judgment." Tele Video Sys., 826 F.2d at 917. Factors to consider include

(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.

Eitel, 782 F.2d at 1471-72.

         Analysis

         Everlog is entitled to default judgment against Better Than Logs. Everlog's claims for patent infringement under 35 U.S.C. § 271 (Count 1), false designation of origin and unfair competition under 15 U.S.C. § 1125(a)(1)(A) (Count 2), false advertising under 15 U.S.C. § 1125(a)(1)(B) (Count 3), and unfair competition under Montana law (Count 4) are well-pled, establishing Better Than Logs's liability on each count of the Complaint. See TeleVideo Sys., Inc., 826 F.2d at 917-18. Subject matter jurisdiction exists under 15 U.S.C. § 1121(a) and 28 U.S.C. §§ 1331, 1367, and 1338(a). Personal jurisdiction over Better Than Logs exists because Better Than Logs is incorporated in and has its principal place of business in Montana. Daimler AG v. Bauman,571 U.S. 117, 137 (2014). Further, the Eitel factors weigh in favor of entering default judgment. (See Doc. 30 at 17-42.) ...


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