Amazon.com, Inc. v. Does

• Court: District Court, W.D. Washington
• Decided: September 16, 2019
• Docket: 2:18-cv-01399
• Status: Unknown

Opinion

7 UNITED STATES DISTRICT COURT 8 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 9

10 AMAZON.COM, INC., a Delaware corporation, No. C18-1399RSM 11 Plaintiff, ORDER GRANTING IN PART 12 v. PLAINTIFF AMAZON’S MOTION FOR DEFAULT JUDGMENT 13 HUANG TENGWEI, an individual; XIE WEIYONG, an individual; and ADSWING 14 TECHNOLOGY, CO., LTD., a Hong Kong company, 15

Defendants. 16

18 I. INTRODUCTION 19 This matter comes before the Court on Plaintiff Amazon.com, Inc. (“Amazon”)’s 20 Motion for Default Judgment against Defendants Huang Tengwei, Xie Weiyong, and Adswing 21 Technology Co., Ltd. (collectively, “Defendants”). Dkt. #27. On June 5, 2019, the Court 22 granted Amazon’s Motion for Default against Defendants. Dkt. #23. Amazon now requests $4 23 million in statutory damages against Defendants jointly and severally and a permanent 24 injunction prohibiting Defendants from engaging in future trademark infringement. Having 25 26 27 reviewed Amazon’s Motion, the supporting documents, and the remainder of the record, the 1 2 Court finds good cause to grant the requested relief in part. 3 II. BACKGROUND 4 The Court accepts the following well-pleaded allegations of Amazon’s Amended 5 Complaint as established fact. See LHF Prods., Inc. v. Holmes, 2018 WL 3742189, at *2 6 7 (W.D. Wash. Aug. 7, 2018) (citing TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 8 (9th Cir. 1987)). 9 Millions of consumers around the world shop on Amazon.com for hundreds of millions 10 of items. Amazon is one of the most recognized brands in the world. 11 “Malvertising” describes malicious advertisements that harm consumers and damage 12 the entire online advertising industry. Malvertising threatens consumers through a range of 13 harmful actions, including disrupted user experiences and malware attacks. It threatens the 14 15 advertising publishers because users associate the malvertisements with them. It also directly 16 damages brands, like Amazon, that malvertisers unlawfully use in an effort to deceive 17 consumers. 18 From their office in China, Defendants Huang Tengwei (“Huang”) and Xie Weiyong 19 (“Xie”) operated a sophisticated and widespread “malvertising” campaign that harmed 20 Amazon’s customers and damaged Amazon’s brand. Huang and Xie operate under a multitude 21 of company names (some real, some fictitious), including for example, AdsBays, Tap My 22 23 Traffic, Adbooming, and Adscompanion. 24 Defendants Huang and Xie hijacked the legitimate online advertising process by 25 injecting malicious code into advertisements published on popular websites. Defendants’ 26 malvertisements forcibly redirected victims from their desired websites to a website controlled 27 by Defendants replete with Amazon’s trademarks and other indications of Amazon’s brand. 1 2 Defendants intentionally designed this website to deceive victims into believing it was 3 affiliated with Amazon to entice victims to click through. Defendants then sold the generated 4 traffic to online marketing companies. 5 Amazon operates its own advertising service. The abuse of Amazon’s brand was 6 central to Defendants’ malvertising scheme, and Defendants’ actions directly harmed 7 consumers. Amazon’s products and services are readily identifiable to consumers around the 8 world because of the company’s substantial investment of time, money, and other resources in 9 10 Amazon’s brand, including exclusive ownership of numerous federally registered and 11 registration-pending trademarks including the following marks at issue in this case: AMAZON, 12 AMAZON.COM, the Amazon logo, and the abbreviated “a” Amazon logo as pictured in the 13 Amended Complaint. See Dkt. #11 at 5–6. 14 Defendant Huang Tengwei and Defendant Xie Weiyong are individuals who likely 15 reside in China. Dkt. #29 (“Williams Decl.”), ¶ 4. Defendant Adswing Technology Co., Ltd. 16 17 (“Adswing”) is a company registered in Hong Kong, China, and owned by Xie. Id. 18 As stated above, Amazon alleges that Defendants engaged in an online advertising 19 scheme that deceived online consumers using Amazon’s name and marks. See Dkt. #27 at 5–7 20 (citing Amended Complaint). Further evidence to support these allegations come in the form 21 of a declaration from an Amazon employee, Jason A. Roe, who states that he has reviewed 22 “numerous” complaints Amazon has received about this malvertizing scheme. Dkt. #30 at ¶ 3. 23 These complaints are not attached as exhibits. Mr. Roe references and quotes from eight 24 25 customer complaints. Id. at ¶ 4 – 11. 26 27 Amazon also includes a declaration of a strategic brand analyst and investigator named 1 2 Nate Hall who details how the malvertizing scheme worked on a technical level. Dkt. #31. 3 Through the use of Amazon’s name and marks, Defendants directed duped online users to a 4 New York-based marketing company called Fluent, Inc. that purchased this traffic. Id. at ¶ 11. 5 Mr. Hall states that “[b]ased upon my review of records provided by Fluent and my 6 investigation, Defendants referred over 800,000 unique victims to Fluent through Defendants’ 7 AdsBays account alone” and that “[b]ased on my experience as an investigator, the number of 8 victims who received Defendants’ malvertisements… is far greater than 800,000 because not 9 10 every victim who viewed Defendants’ Landing Page completed the survey.” Id. at 14–15. 11 The Court previously granted leave under Federal Rule of Civil Procedure 4(f)(3) and 12 (h)(2) to serve Defendants by registered electronic mail to the following email addresses used 13 by Defendants: 14  1165592@qq.com 15  263947523@qq.com 16 17  372318566@qq.com 18  lily@adbays.com 19 III. ANALYSIS 20 A. Legal Standard and Jurisdiction 21 The Court has the authority to enter a default judgment based on the clerk’s entry of 22 23 default and pursuant to Federal Rule of Civil Procedure 55 and Local Civil Rule 55. 24 The Court has subject matter jurisdiction over Amazon’s claims under the Lanham Act 25 pursuant to 15 U.S.C. § 1121 and 28 U.S.C. §§ 1331 and 1338(a). The Court has personal 26 jurisdiction over Defendants because Defendants have sufficient minimum contacts with 27 Washington and Amazon’s claims arise from those contacts. Specifically, Defendants 1 2 purposefully directed their malvertisements towards Washington, and but for Defendants’ 3 malvertisements, Amazon would not have been injured. See CollegeSource, Inc. v. 4 AcademyOne, Inc., 653 F.3d 1066, 1076 (9th Cir. 2011). 5 To determine a plaintiff’s entitlement to default judgment, the Court considers the seven 6 factors set forth in Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986): “(1) the possibility of 7 prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of 8 the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute 9 10 concerning material facts, (6) whether the default was due to excusable neglect, and (7) the 11 strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the 12 merits.” 782 F.2d at 1471-72. 13 B. Liability 14 As an initial matter, the Court finds that the Defendants’ liability has been established in 15 this case. To establish trademark infringement, a claimant must show: (1) it has a protected 16 17 ownership interest in the mark; and (2) the alleged infringer’s use of the mark “is likely to 18 cause confusion, or to cause mistake, or to deceive.” Reno Air Racing Ass’n v. McCord, 452 19 F.3d 1126, 1134 (9th Cir. 2006); 15 U.S.C. § 1114(1). 20 Amazon’s uncontested proof of registration of the four trademarks that Defendants used 21 in their malvertising scheme (“Amazon Trademarks”) establishes Amazon’s protected 22 ownership interest in those marks. See Am. Compl. ¶¶ 16, 31; Wendell Decl., Exs. A-D; Pom 23 Wonderful LLC v. Hubbard, 775 F.3d 1118, 1124 (9th Cir. 2014) (“Registration of a mark is 24 25 prima facie evidence of the validity of the mark, the registrant’s ownership of the mark, and the 26 registrant’s exclusive right to use the mark in connection with the goods specified in the 27 registration. When proof of registration is uncontested, the ownership interest element of a 1 2 trademark infringement claim is met.” (internal citation omitted)). 3 Defendants’ uncontested use of the Amazon Trademarks confused victims as to the 4 origin of Defendants’ website. See Au-Tomotive Gold, Inc. v. Volkswagen of Am., Inc., 457 5 F.3d 1062, 1076-78 (9th Cir. 2006). The Amazon Trademarks are strong and have achieved 6 trust and recognition among the general public. See Am. Compl. ¶¶ 14-18. Defendants 7 intentionally used exact copies of the Amazon Trademarks in their malvertisements to deceive 8 consumers. See id. at ¶¶ 40, 42. Defendants specifically targeted Amazon customers, id. at ¶¶ 9 10 33, 40, and deliberately designed their malvertisements to impersonate Amazon. See id. at ¶¶ 11 34, 40, 42. In doing so, Defendants successfully enticed over 800,000 victims to at least click 12 through to Defendants’ website. See id. at ¶¶ 59-60. Amazon has also shown at least some 13 actual confusion. See, e.g., Roe Decl. at ¶¶4-6. Accordingly, Amazon has demonstrated that 14 Defendants infringed the Amazon Trademarks. 15 C. Eitel Factors 16 17 1. Prejudice to the Plaintiff 18 Amazon argues this factor weighs in their favor because “[a]bsent a default judgment, 19 Amazon has no legal remedy for Defendants’ harm, and no way to prevent Defendants from 20 causing further damage to Amazon and its customers. Dkt. #27 at 15 (citing POW Nev., LLC v. 21 Connery, 2018 WL 3956129, *2 (W.D. Wash. Aug. 17, 2018)). Given Defendants’ lack of 22 participation in this litigation, the Court agrees. 23 2. Merits of Substantive Claim 24 25 As explained above, the Court finds that Amazon has established Defendants’ liability. 26 The only remaining issue is the proper amount of damages. 27 3. Sufficiency of the Complaint 1 2 As explained above, Amazon has established Defendants’ liability. The Amended 3 Complaint sets forth sufficient specific facts that establish a prima facie case of trademark 4 infringement under 15 U.S.C. § 1114. 5 4. Sum of Money at Stake 6 Amazon argues that the sum of money Amazon seeks in damages is reasonable in light 7 of Defendant’s “flagrant exploitation of victims’ trust in Amazon.” Dkt. #27 at 15. Although 8 the seriousness of Defendant’s conduct is considered by this Court, other factors are also 9 10 considered in determining whether the sum of money requested is reasonable. In cases of 11 willful infringement, courts consider the need: (1) to compensate the plaintiff for the damage 12 the defendant’s actions caused; (2) to deter defendants from violating the trademarks; and (3) to 13 punish defendants for willfully violating the trademarks. See Philip Morris USA Inc. v. Liu, 14 489 F. Supp. 2d 1119, 1124 (C.D. Cal. 2007). 15 The Lanham Act authorizes statutory damages of up to $2 million per mark for willful 16 17 trademark infringement. See 15 U.S.C. § 1117(c). Amazon argues that “given the facts and 18 circumstances in this case, an award of fifty percent of the available statutory damages is 19 reasonable based on the seriousness of Defendants’ unlawful conduct and necessary in order to 20 deter continuing abuse of Amazon’s brand.” Dkt. #27 at 18. Amazon contends that 21 Defendants willfully used four counterfeit Amazon trademarks. Id. 22 “Statutory damages further ‘compensatory and punitive purposes,’ and help ‘sanction 23 and vindicate the statutory policy of discouraging infringement.’” Dream Games of Ariz., Inc. 24 25 v. PC Onsite, 561 F.3d 983, 992 (9th Cir. 2009). A court has wide discretion to determine the 26 amount of statutory damages between the statutory maxima and minima. Harris v. Emus 27 Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984). In calculating statutory damage, some 1 2 courts have looked to estimates of actual damages. See Sara Lee Corp. v. Bags of New York, 3 Inc., 36 F. Supp. 2d 161, 170 (S.D.N.Y. 1999). Here, Amazon gives no estimates of actual 4 damages to itself nor how much defendant profited from his actions. Amazon argues that 5 800,000 or more “victims” saw these ads but fails to connect this number to actual damages 6 suffered by Amazon. The evidence of customers actually being confused is fairly limited—a 7 handful of anecdotes in an employee declaration. Instead, to support its multi-million dollar 8 request, Amazon cites to several other default judgment orders where millions were awarded. 9 10 See Dkt. #27 at 16. 11 Considering all of the above, the Court agrees that an award of fifty percent of the 12 available statutory damages is reasonable based on the seriousness of Defendants’ unlawful 13 conduct. The number of potential Amazon customers affected alone is sufficient to warrant 14 such an award, and the Court is cognizant of the difficulty in demonstrating actual damages. 15 However, the Court finds that, under the circumstances of this case, multiplying this $1 million 16 17 by four for the four marks at issue results in an unreasonably punitive award untethered to 18 evidence of actual damages. Amazon was damaged by the use of its brand. At least some 19 customers were misled into believing that the malvertising campaign was directed by Amazon. 20 This happened with the use of the mark “AMAZON” and the Amazon logo. Subsequent 21 additional references to “AMAZON.COM” and the “a” logo were essentially superfluous and 22 did not significantly increase Amazon’s actual damages, customer confusion, or the seriousness 23 of Defendant’s conduct. Amazon has failed to convince the Court to the contrary. 24 25 Accordingly, the Court concludes that an appropriate award is as follows: $1 million for 26 27 AMAZON, $1 million for the Amazon logo, and a nominal award of $1,000 each for 1 2 “AMAZON.COM” and “a” logo marks, for a total award of $2,002,000. 3 5. Possibility of a Dispute Concerning Material Facts 4 The Court finds that, based on the record above, there is a low possibility of a dispute 5 concerning material facts. The Court’s only concern is with the limited evidence linking the 6 obviously illegal malvertising scheme above to the Defendants Huang Tengwei, Xie Weiyong, 7 and Adswing Technology Co., Ltd. Amazon does not discuss evidence of this link, other than 8 to cite to a declaration of an investigator in China and a strategic brand analyst who determined 9 10 that Huang Tengwei, Xie Weiyong, and Adswing Technology Co., Ltd. “own, operate, and 11 financially benefit from the schemes.” Dkt. #31 at 2. 12 6. Whether the Default was due to Excusable Neglect 13 The Court is satisfied that Defendants were served as best as possible with notice of this 14 case. There is no evidence of excusable neglect to balance against the other factors in favor of 15 default judgment. 16 17 7. Strong Policy Favoring Decisions on the Merits 18 The Court agrees with Amazon that where, as here, Defendants’ failure to appear makes 19 a decision on the merits “impractical, if not impossible,” any preference for deciding cases on 20 the merits “does not preclude a court from granting default judgment.” Dkt. #27 (quoting 21 PepsiCo, Inc. v. Cal. Security Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). 22 D. Injunctive Relief 23 In addition to statutory damages, Amazon seeks to permanently enjoin Defendants from 24 25 further infringing the Amazon Trademarks. The Lanham Act authorizes courts to grant 26 injunctive relief “to prevent the violation of any right of the registrant of a mark.” 15 U.S.C. § 27 1116(a). “As a general rule, a permanent injunction will be granted when liability has been 1 2 established and there is a threat of continuing violations.” MAI Sys. Corp. v. Peak Computer, 3 Inc., 991 F.2d 511, 520 (9th Cir. 1993). A plaintiff seeking permanent injunctive relief must 4 demonstrate: “(1) that it has suffered an irreparable injury; (2) that remedies available at law, 5 such as monetary damages, are inadequate to compensate for that injury; (3) that, considering 6 the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; 7 and (4) that the public interest would not be disserved by a permanent injunction.” eBay, Inc. v. 8 MercExchange, L.L.C., 547 U.S. 388, 391 (2006). 9 10 It is clear from the record that Defendants knew that what they were doing was illegal. 11 This is not a case where clarity from the Court could help Defendants avoid further violations. 12 The Court is not inclined to simply order Defendants to stop obviously breaking the law. If 13 Defendants are caught conducting the same malvertising campaign again, the requested 14 injunction would offer Amazon no further protection than monetary damages. Accordingly, 15 this relief will be denied. 16 17 IV. CONCLUSION 18 The Court, having reviewed the relevant briefing and the remainder of the record, finds 19 adequate bases for default judgment. Accordingly, the Court hereby finds and ORDERS: 20 1) Plaintiff Amazon’s Motion for Default Judgment, Dkt. #27, is GRANTED IN PART. 21 2) Defendants are jointly and severally liable for statutory damages in the amount of 22 23 $2,002,000. 24 3) This award amount shall accrue interest pursuant to 28 U.S.C. § 1961. 25

26 27 1 DATED this 16 day of September, 2019. 2 A 3 RICARDO S. MARTINEZ 4 CHIEF UNITED STATES DISTRICT JUDGE 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27