Cisco Systems, Inc. v. Dexon Computer, Inc.

Opinion

1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 CISCO SYSTEMS, INC., et al., Case No. 20-cv-04926-CRB

9 Plaintiffs,

ORDER GRANTING MOTION FOR 10 v. PRELIMINARY INJUNCTION

11 DEXON COMPUTER, INC., et al., 12 Defendants.

13 Plaintiff Cisco Systems, Inc. (“Cisco”) brings this motion for a preliminary 14 injunction against Dexon Computer, Inc. (“Dexon”), an unauthorized seller of Cisco 15 product, much of which Cisco alleges to be counterfeit. See Mot. for Prelim. Inj. (dkt. 16 202). Cisco recently received discovery from Dexon in a different case between the 17 parties—an antitrust suit in Texas—which Cisco claims shows far more (and far more 18 recent) infringing activity than Cisco knew or could have known prior. As a result, Cisco 19 now moves to enjoin Dexon from selling counterfeit Cisco product. 20 For the reasons set forth below, the Court GRANTS Cisco’s motion for a 21 preliminary injunction, subject to the parameters described herein.1 22 I. BACKGROUND 23 Cisco manufactures networking and communications hardware, software, and 24 related products and services. Am. Compl. ¶ 12. Cisco has built its brand through 25

26 1 The Court initially filed this Order under seal, in light of the parties’ many sealing motions related to documents cited herein. On September 19, 2023, the Court ordered the 27 parties to file any proposed redactions to the Order by September 28, 2023. Dkt. 289. 1 significant investment in its CISCO trademark and other related trademarks (Cisco Marks) 2 that Cisco uses in connection with its products and services. Id. ¶¶ 14–17. 3 In the operative complaint, Cisco alleges that “[f]rom at least July 2006 through the 4 present, Dexon has repeatedly and systematically engaged in schemes to traffic counterfeit 5 Cisco products.” Am. Compl. ¶ 24. Cisco alleges that Dexon has told customers that it is 6 selling genuine Cisco products, and then delivered the customers counterfeit products 7 bearing Cisco Marks. Id. And when Cisco repeatedly demanded that Dexon both (i) stop 8 selling counterfeit products, and (ii) help Cisco identify the sources of those products, 9 “[i]in almost every instance, Dexon refused to cooperate with Cisco, and refused to 10 identify the counterfeit traffickers who supply it.” Id. 11 Dexon, for its part, describes itself as a “middleman” reseller of computer 12 networking products, sourcing from thousands of different suppliers, and selling to all 13 types of consumers. Roush Decl. (dkt. 214) ¶ 3. Dexon contends that it has never 14 “intentionally or knowingly sold a counterfeit product,” but rather that Cisco itself “has a 15 counterfeit problem due in part to its decision to manufacture its products overseas,” and it 16 is passing that problem off on resellers like Dexon, who do their best to try to spot 17 counterfeits, but can only do so much. Id. ¶ 4. 18 In April 2022, after this Court dismissed Dexon’s counterclaims alleging antitrust 19 violations, Dexon brought an antitrust suit against Cisco in the Eastern District of Texas 20 (“The Texas Litigation”). See Dexon Computer, Inc. v. Cisco Sys., Inc., 22-cv-53 (E.D. 21 Tex.). Once the parties began exchanging documents in that case, Cisco contends it was 22 alerted to continued counterfeit sales by Dexon and, in particular, rampant, illegitimate 23 sales of Cisco’s SMARTnet service contracts. 24 SMARTNet are optional enhanced service contracts that Cisco sells for its products. 25 SMARTnet contracts can only be purchased one of two ways: (1) along with Cisco 26 products that are sold through “authorized distribution” channels (of which Dexon is not 27 one); or (2) along with a Cisco product obtained from a non-authorized Cisco source, if the 1 result, unauthorized resellers like Dexon are unable to sell SMARTNet contracts directly— 2 rather, they must acquire a SMARTNet contract from an authorized Cisco reseller. If a 3 customer purchases a Cisco product from an unauthorized distributor (like Dexon) and 4 purchases a SMARTNet contract through Dexon (which Dexon acquired through an 5 authorized reseller), and Cisco does not inspect the product, that SMARTnet contract may 6 be voided and terminated by Cisco. 7 Through its document discovery in the Texas litigation, Cisco learned that Dexon 8 has apparently engaged various “rogue” Cisco partners—i.e., authorized sellers of Cisco 9 products and SMARTnet—to sell SMARTnet contracts to Dexon customers without an 10 inspection, in violation of Cisco’s SMARTnet policies and the authorized resellers’ 11 contracts with Cisco. Where this goes especially awry is when a Dexon customer’s 12 product malfunctions and that customer seeks to have the product fixed or replaced by 13 taking advantage of the SMARTnet contract it purchased. When that occurs, Cisco may 14 have to inform the customer not only that the product is counterfeit, but that the 15 SMARTNet contract is invalid. This can lead to—and has led to—confused and 16 disgruntled customers. Cisco therefore moves to enjoin Dexon from continuing to sell 17 counterfeit Cisco products, which Cisco claims is necessary to stop the harm to its 18 reputation and loss of consumer goodwill. 19 The Court held a hearing on Cisco’s motion on July 14, 2023.2 At that hearing, the 20 Court ordered the parties to submit supplemental briefing regarding evidence of ongoing 21 counterfeit sales. The Court also instructed the parties to meet and confer to discuss the 22 form of the proposed injunction. Finally, the Court ordered Dexon to file a declaration 23 with the bond amount that the Court should impose, in the instance that the Court grants an 24 injunction. With that supplemental briefing on file, the Court is now prepared to evaluate 25 and rule on Cisco’s motion. 26

27 2 Cisco also filed a motion for leave to amend its complaint, which was before the Court at II. OBJECTIONS UNDER LOCAL RULE 7-3(d) 1 There is one preliminary matter to address before the Court can evaluate the merits 2 of Cisco’s motion: competing objections under Civil Local Rule 7-3(d). Local Rule 7-3(d) 3 prohibits a party from filing additional memoranda, papers, or letters once a reply is filed 4 without prior court approval. Civ. L.R. 7-3(d)(1). Cisco and Dexon each claim that the 5 other party filed improper supplemental briefing without prior Court approval. See 6 Cisco’s Mot. to Strike (dkt. 263); Dexon’s L.R. 7-3 Obj. (dkt. 268). 7 After the parties met and conferred, in accordance with the Court’s July 14 order, 8 Cisco filed a revised proposed injunction. Cisco Revised Proposal (dkt. 258-1). Dexon 9 filed a response to that revised proposal, see Resp. to Cisco Revised Proposal (dkt. 260), to 10 which Cisco filed a motion to strike, claiming that Dexon’s response was an improper 11 surreply, see Mot. to Strike. Then, Dexon filed a Rule 7-3(d) objection to that briefing, 12 claiming it included new material and therefore that Cisco submitted an improper 13 supplemental brief “fashioned as a Motion to Strike.” Dexon’s L.R. 7-3 Obj. 14 The Court will analyze Cisco’s objection first. It is undisputed that the Court did 15 not explicitly order Dexon—or Cisco, for that matter—to submit supplemental briefing 16 regarding the scope of the proposed injunction. But the Court recognizes its order that the 17 parties meet to discuss the form of an injunction may have suggested as much. The Court 18 therefore exercises its discretion to consider both Cisco’s revised proposal and—because 19 this was its first opportunity to respond to the proposal—Dexon’s response. 20 Next, Dexon’s objection to Cisco’s motion to strike. Dexon is right that Cisco’s 21 motion contains new material and arguments regarding its packaging verification tool. It 22 would therefore be well within the Court’s discretion to disregard that material. See Civ. 23 L.R. 7-3(d) (explaining that a party’s objections to new evidence “may not include further 24 argument on the motion”). However, given that the new evidence in Cisco’s motion is a 25 “reasonable response” to Dexon’s opposition, which contested Cisco’s lack of detail 26 regarding its verification tool, see Resp. to Cisco Revised Proposal, and in the interest of a 27 complete record, the Court again exercises its discretion to consider the new material. See 1 United States ex rel. Doe v. Biotronik, Inc., No. 2:09-CV-3617-KJM-EFB, 2015 WL 2 6447489, at *3 (E.D. Cal. Oct. 23, 2015). 3 While the Court uses its discretion to review the parties’ unsanctioned supplemental 4 filings this time, the Court may not do so in the future. The Court encourages the parties to 5 ask for permission to file supplemental materials, not forgiveness. 6 III. MOTION FOR PRELIMINARY INJUNCTION 7 A. LEGAL STANDARD 8 A preliminary injunction is an “extraordinary remedy that may only be awarded 9 upon a clear showing that the plaintiff is entitled to such relief.” See Winter v. Natural 10 Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). The party seeking a preliminary injunction 11 must establish: (1) a likelihood of success on the merits; (2) a likelihood of irreparable 12 harm absent preliminary relief; (3) that the balance of equities tips in the plaintiff’s favor; 13 and (4) that an injunction is in the public interest. See id. at 20. Alternatively, the moving 14 party must demonstrate that “serious questions going to the merits were raised and the 15 balance of hardships tips sharply in the plaintiff's favor,” and that the other two Winter 16 elements are met. Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1134–35 (9th Cir. 17 2011). 18 B. DISCUSSION 19 The Court addresses the Winter factors in the following order: (1) likelihood of 20 success on the merits; (2) irreparable harm; (3) balance of the equities; and (4) public 21 interest. Each factor weighs in favor of Cisco. 22 1. Likelihood of Success on the Merits 23 First, the Court must address whether the “likelihood of success” standard is 24 appropriate for the proposed injunction at issue. Dexon asserts that Cisco’s proposed 25 injunction is actually a “mandatory” injunction because it forces Dexon to “take action”— 26 i.e., to use a tool to verify that its Cisco products are legitimate before selling them—and 27 thus that Cisco has to meet a higher burden on the first Winter factor. Resp. to Cisco 1 2015)). 2 The Court disagrees. The injunctive relief that Cisco seeks is for Dexon to stop 3 selling counterfeit Cisco product. To comply with the injunction, Dexon could choose to 4 simply stop selling all Cisco products. In that event, Dexon would not have to take any 5 action—and clearly, the injunction would not qualify as “mandatory.” The Court fails to 6 see how giving Dexon a less restrictive option to comply with the injunction (taking 7 seconds to scan a product before a sale, rather than ceasing all sales) results in a 8 heightened burden for Cisco. For the first Winter factor, it is proper to analyze Cisco’s 9 proposed injunction using the “likelihood of success on the merits” standard. The Court 10 proceeds to do so. 11 Cisco currently brings Lanham Act claims for trademark infringement and 12 counterfeiting, and false designation of origin. Am. Compl. (dkt. 32) ¶¶ 65–85.3 To 13 prevail on a claim of trademark infringement or false designation of origin, Cisco must 14 show that, without Cisco’s consent, Dexon “use[d] in commerce any reproduction, 15 counterfeit, copy, or colorable imitation of [Cisco’s] mark in connection with the sale, 16 offering for sale, distribution, or advertising of any goods or services on or in connection 17 with which such use is likely to cause confusion, or to cause mistake, or to deceive.” 15 18 U.S.C. § 1114. 19 Cisco’s rights in its marks, and the likelihood of confusion resulting from the sale of 20 a counterfeit Cisco product, are not in question. Rather, Dexon maintains that Cisco has 21 failed to show that Dexon has sold any counterfeit Cisco products, pointing to the 22 declarations from Cisco’s counsel and its Director of Brand Protection, accompanying 23 Cisco’s request for a preliminary injunction. Opp’n at 15–16; First Nelson Decl. (dkt. 202- 24 1); First Williams Decl. (dkt. 202-2). In its reply, Cisco attached additional evidence of 25 Dexon’s counterfeit sales. See Reply at 9; Second Williams Decl. (dkt. 230-2). Cisco 26

27 3 Cisco also brings claims under the UCL and for unjust enrichment. Cisco does not seek a 1 submitted further evidence of Dexon’s counterfeit sales in its supplemental briefing 2 ordered by the Court. Cisco Suppl. Br. (dkt. 248); Heidecker Decl. (dkt. 249); Second 3 Nelson Decl. (dkt. 250). 4 The evidence of counterfeit sales that Cisco has put forth suffices to demonstrate a 5 likelihood of success of the merits of its Lanham Act claim. While the first Williams 6 declaration only cites to allegations in the complaint for evidence of Dexon’s counterfeit 7 sales, see First Williams Decl. ¶ 13, the first Nelson declaration provides a slew of Dexon 8 sales between 2020 and 2022 that Cisco determined were counterfeit. First Nelson Decl. 9 ¶¶ 5–8. And Cisco attached a report to its reply that details the engineering analysis 10 performed on two of those products that Dexon sold in 2020, determining them to be 11 counterfeit. Second Williams Decl. ¶ 5; id. Ex. A. Williams declares that Cisco has 12 produced “more than a dozen similar engineering reports to Dexon, which provide the 13 same detail as to how the products Dexon sold were determined to be counterfeit. Id. ¶ 6. 14 Dexon filed an objection to Cisco’s reply, seeking to strike the second Williams 15 Declaration and accompanying evidence. See Obj. to Reply (dkt. 240). Dexon argues that 16 the second Williams declaration “still lacks foundation” because the “actual supposed 17 testing was conducted by persons other than Williams,” and, in any case, the second 18 Williams declaration and the accompanying summary report are “new” evidence presented 19 in a reply that the Court should not consider under Provenz v. Miller, 102 F.3d 1478 (9th 20 Cir. 1996). Neither of these arguments has merit. 21 First, Williams, as a Director in the Brand Protection group at Cisco and with nearly 22 20 years of experience in that group, declares that he is tasked with “managing counterfeit 23 investigations.” Second Williams Decl. ¶ 1. In this capacity, he is fully qualified to speak 24 to the outcome of an engineering analysis performed on Cisco products sold by Dexon that 25 Cisco engineers determined to be counterfeit—that is, after all, his job. Id. Williams’s 26 declaration does not “lack[] foundation” because he did not test the products himself; and 27 in any case, because “the Federal Rules of Evidence do not strictly apply in preliminary 1 admissibility,” such issues are not dispositive. Disney Enters., Inc. v. VidAngel, Inc., 224 2 F. Supp. 3d 957, 966 (C.D. Cal. 2016) (internal quotation marks and citations omitted), 3 aff’d, 869 F.3d 848 (9th Cir. 2017). 4 Second, to the extent that Dexon objects to the Williams declaration appended to 5 Cisco’s reply as “new” evidence, it was produced to respond to the arguments in Dexon’s 6 opposition that Cisco had failed to put forth sufficient evidence of counterfeit sales, and is 7 therefore not a “new” argument on reply. But even if it is, Provenz instructs that courts 8 should not consider new evidence introduced in a reply “without giving the [non-movant] 9 an opportunity to respond.” Provenz, 102 F.3d at 1483. Dexon has had the opportunity to 10 respond, in the form of its objection; as a result, the Court may consider the evidence Cisco 11 appended to its reply.4 12 Moreover, even putting the second Williams declaration to the side, Cisco’s 13 supplemental briefing contains further and significant evidence of counterfeit sales. Cisco 14 submitted a declaration from its global engineering manager, Michael Heidecker, who 15 asserts that Cisco engineers have determined that hundreds of Cisco products sold by 16 Dexon are counterfeit. Cisco Suppl. Br. at 2; Heidecker Decl. ¶ 5–6. Heidecker attached 17 engineering reports detailing the evaluation and analysis for each of these products. Ex. 1 18 (dkt. 249). Cisco also submitted another declaration from its counsel, which details 19 additional, recent counterfeit sales by Dexon. See Second Nelson Decl. In addition, Cisco 20 put forward persuasive evidence that—given Dexon’s apparent concealment of its 21 counterfeit sales and the difficulty of uncovering counterfeit sales in general—there is 22 likely many more counterfeit sales that it is unaware of.5 23 Dexon’s objections to the lack of foundation and personal knowledge in the 24 4 To the extent that Cisco contends that Dexon’s objection is procedurally improper, see 25 Resp. to Obj. (dkt. 240), the Court interprets Dexon’s objection as a sur-reply, which the Court allows pursuant to Local Civil Rule 7-3(d). 26 5 The Court finds Cisco’s evidence in this regard to be much more substantial and convincing than in Vinluan-Jularbal v. Redbubble, Inc., which Dexon cites, but where the 27 plaintiff “offer[ed] no convincing evidence” that the alleged counterfeit products were “not 1 Heidecker declaration fail for the same reason as its objections to the Williams declaration: 2 like Williams, it is Heidecker’s job to manage Cisco’s global engineering team “in support 3 of authentications of products under test to determine if they are genuine or counterfeit.” 4 Heidecker Decl. ¶ 1. His declaration is based on his 15 years of experience and his 5 “personal knowledge” of the engineering reports, which he has access to as part of his job 6 duties. Id. 7 Dexon points out one alleged discrepancy in the Heidecker declaration, asserting 8 that one of the alleged counterfeit products was examined by Cisco on two different 9 dates—one of those dates being before Dexon allegedly sold it. However, Dexon does not 10 put forward any other evidence of discrepancies within the detailed set of engineering 11 reports submitted by Cisco. So, even putting this single sale aside, the Court still finds 12 sufficient evidence of counterfeit sales. Plus, Dexon never claims that it did not sell the 13 product with the purported date discrepancy. 14 Cisco’s evidence, including the First Nelson declaration, the Second Williams 15 declaration, the Second Nelson declaration, and the Heidecker declaration, demonstrates 16 that Dexon has sold counterfeit Cisco products. Cisco has therefore carried its burden to 17 show a likelihood of success on the merits of its Lanham Act claims. 18 2. Irreparable Harm 19 As a result of a 2020 amendment to the Lanham Act, there is a rebuttable 20 presumption of irreparable harm upon a finding of a likelihood of success on the merits of 21 a Lanham Act claim. See 15 U.S.C. § 1116 (“A plaintiff seeking any such injunction shall 22 be entitled to a rebuttable presumption of irreparable harm . . . upon a finding of likelihood 23 of success on the merits for a violation identified in this subsection in the case of a motion 24 for a preliminary injunction or temporary restraining order.”); see also 5 J. Thomas 25 McCarthy, McCarthy on Trademarks and Unfair Competition § 30:47 (5th ed. 2023). 26 Dexon’s only attempt to rebut the presumption is its argument that Cisco’s 27 “extensive” delay “weighs heavily against a finding of irreparable harm” and thus should 1 operative complaint alleges infringing conduct for fifteen years, and only now moves to 2 enjoin Dexon’s conduct. Id. at 14–15. Cisco responds that Dexon has concealed not only 3 its continued sales of counterfeit products after this case was filed, but also its sales of 4 SMARTnet contracts for those products; only because of the discovery received in the 5 related Texas Litigation in December, Cisco contends, did it recognize the scope of the 6 “ongoing, worsening injuries” Dexon was causing. Reply at 8 (quoting Arc of Cal. v. 7 Douglas, 757 F.3d 975, 990–91 (9th Cir. 2013)). 8 Dexon has not established that Cisco unduly delayed in bringing this motion. While 9 Cisco may have known about Dexon’s prior sales of counterfeit products, Cisco has 10 persuasively argued that it did not know—nor could it have known—about the extent of 11 Dexon’s continued sales of counterfeit products or its sales of SMARTnet contracts for 12 those products, because Dexon was actively working to conceal where those products and 13 contracts originated. See, e.g., Nelson Decl. ¶¶ 7, 16, 21–24, 28; id. Exs. 4, 19, 21–25, 31– 14 32. 15 Even if Cisco did delay in bringing the instant motion, Dexon cites no Ninth Circuit 16 case holding that delay, standing alone, rebuts the presumption of irreparable harm under 17 the Lanham Act—particularly where the movant marshals evidence of loss of reputation 18 and consumer goodwill and the non-movant makes no attempt to rebut that evidence. See 19 Arc of Cal., 757 F.3d at 990 (“Usually, delay is but a single factor to consider in evaluating 20 irreparable injury; courts are ‘loath to withhold relief solely on that ground.’” (quoting 21 Lydo Enters., Inc. v. City of Las Vegas, 745 F.2d 1211, 1214 (9th Cir. 1984)). 22 The cases Dexon does cite found that delay, in combination with a host of other 23 factors, warranted denying injunctive relief. See Oakland Trib., Inc. v. Chron. Pub. Co., 24 762 F.2d 1374 (9th Cir. 1985) (finding that the movant failed to sustain its burden to 25 demonstrate irreparable harm and that finding was “supported” by other arguments, 26 including “Plaintiff’s long delay in seeking a preliminary injunction”); Miracle v. Hobbs, 27 808 F. App’x 470 (9th Cir. 2020) (affirming a denial of a preliminary injunction where the 1 movant’s favor, and “[t]he likelihood of imminent and irreparable harm is further 2 undermined” by the five year delay in filing suit); Kiva Health Brands LLC v. Kiva Brands 3 Inc., 402 F. Supp. 3d 877 (N.D. Cal. 2019) (denying preliminary injunction because the 4 movant had failed to demonstrate likelihood of success on the merits, had failed to 5 demonstrate irreparable harm, and the movant’s delay was “substantial”); Caryn 6 Mandabach Prods. Ltd. v. Sadlers Brewhouse Ltd., No. CV2010220CBMJEMX, 2021 WL 7 2497928, at *7 (C.D. Cal. May 19, 2021) (denying preliminary injunction because the 8 movant was not likely to succeed on the merits and waited over two years to file the action 9 even though the movant had actual knowledge of defendants’ infringement). 10 In this case, even assuming that Cisco did, in fact, delay in bringing this motion, it 11 is the only factor on Dexon’s side of the ledger. The Court therefore declines to find that 12 such delay, standing alone, rebuts the presumption of irreparable harm under the Lanham 13 Act. 14 3. Balance of the Equities 15 The balance of the equities clearly favors Cisco. Courts regularly acknowledge that 16 a business has no legitimate interest in selling counterfeit product. See, e.g., Kinsley Tech. 17 Co. v. Ya Ya Creations, Inc., No. 220CV04310ODWKSX, 2021 WL 2227394, at *4 (C.D. 18 Cal. May 3, 2021). And while the broad injunction originally proposed by Cisco may have 19 chilled Dexon’s legitimate sales, see Opp’n to Prelim. Injunction at 17, Cisco’s revised 20 proposal permits Dexon to continue those sales, so long as it uses a verification tool (which 21 takes just a few seconds) to ensure the products are legitimate. The balance of the equities 22 therefore favors Cisco. 23 4. Public Interest 24 The public interest, too, weighs in favor of Cisco. Of course, the public has an 25 “interest in protecting trademarks.” Brookfield, 174 F.3d at 1066. But there is also ample 26 evidence in the record of customer confusion and consternation related to Dexon’s sales of 27 counterfeit Cisco product. See, e.g., Nelson Decl. ¶¶ 9, 12, 21, 22, 25–27. This interest is 1 products, because, when those products break, Dexon’s purchasers are doubly injured: 2 First, because they did not know that the product they purchased is counterfeit; and second, 3 because Cisco will not honor the SMARTnet contracts they purchased for those products. 4 See id. ¶¶ 25–27, Exs. 27–29. This confusion and consternation would be avoided were 5 Dexon enjoined from selling counterfeit product in the first place. 6 Accordingly, because each factor undoubtedly favors Cisco, the Court concludes 7 that Cisco has met its burden of showing that it is entitled to a preliminary injunction. The 8 Court must now determine the proper scope and limitations of this injunction. 9 C. Scope of the Injunction 10 After the July 14 hearing, Cisco and Dexon met and conferred to discuss the form 11 an injunction would take, specifically with regard to the use of Cisco’s packaging 12 verification tool. See Cisco Meet and Confer Decl. (dkt. 258). Cisco then submitted a 13 revised, narrowed proposal. See Cisco Revised Proposal. Cisco’s revised injunction 14 addresses the concerns this Court had—namely, it allows Dexon to continue its legitimate 15 business activities, while protecting Cisco against counterfeit sales. See id. at 6–8 (¶¶1–6). 16 Dexon has raised concerns about the workability of this injunction with regard to drop 17 shippers, see Resp. to Cisco Revised Proposal, but the Court believes the solutions Cisco 18 discussed with Dexon, like Dexon obtaining packaging information from its drop shippers 19 to input into the tool, sufficiently address those concerns. 20 The Court therefore adopts the scope of the proposed injunction described in the 21 Cisco Revised Proposal at Docket No. 258-1. Subject to the particular language in the 22 proposal, see Cisco Revised Proposal at 6–8 (¶¶1–6), Dexon is enjoined from selling 23 counterfeit Cisco products. Cisco will provide Dexon with a packaging verification tool 24 that will allow Dexon to screen products and determine, within a few seconds, if they are 25 legitimate. So long as Dexon uses that tool before selling a Cisco product, and the tool 26 says the product is legitimate, Dexon will not violate this Order. In addition, the injunction 27 will only apply to Cisco products (1) that can be verified using Cisco’s tool, and (2) that D. Appropriate Bond 1 Because there are costs to Dexon associated with this injunction, the Court finds it 2 appropriate to order Cisco to furnish a bond. See Fed. R. Civ. P. 65(c). The amount of 3 this bond shall be what the Court considers “proper” to pay Dexon’s costs and damages 4 sustained during the injunction if Dexon ultimately prevails at trial. See id.; see also Civ. 5 L.R. 65.1-1(a). 6 Unsurprisingly, the parties have (very) different proposals for how much the bond 7 should be. Dexon asks for $8 million, see Resp. to Cisco Revised Proposal, while Cisco 8 argues the bond amount should be no more than $10,000, see Mot. to Strike. Neither party 9 provides a clear explanation for why its proposed number reflects the amount of harm 10 Dexon will sustain during the injunction. For example, Dexon bases its proposal on 11 Dexon’s annual gross revenue for Cisco products—without factoring in its costs or 12 expenses. On top of that, it asks for more than double that amount of revenue without 13 explaining why the additional harms it points to will cost an extra $4 million. Cisco, for its 14 part, points out the flaws with Dexon’s proposal but does not substantiate its own proposed 15 amount with any explanation. See Mot. to Strike. 16 The Court recognizes that Dexon sells a significant number of Cisco products each 17 year, with substantial price tags. The Court also notes that the injunction may result in 18 strained relationships with its customers if Dexon is unable to fulfill orders due to available 19 product being identified as counterfeit. With these facts in mind, the Court orders Cisco to 20 furnish a $500,000 bond. The Court considers this amount appropriate to pay Dexon’s 21 costs and damages associated with the injunction, should it be found to have been 22 wrongfully enjoined at trial—which, though yet to be scheduled, appears could happen as 23 early as 2024. See Order Granting Extension of Disc. (dkt. 281). 24 IV. CONCLUSION 25 For the foregoing reasons, the Court concludes that Cisco has met its burden and is 26 entitled to a preliminary injunction during the pendency of this proceeding. The Court 27 thus orders as follows: 1 (1) Cisco’s motion for a preliminary injunction is GRANTED. 2 (2) Pursuant to the specific terms in Cisco’s revised proposed injunction, see Cisco 3 Revised Proposal at 6—8 (41-6), Dexon is hereby enjoined from selling 4 counterfeit Cisco products. 5 (3) The preliminary injunction shall only apply to Cisco products which are 6 advertised by Dexon as “new,” and for which Cisco has provided Dexon a 7 method to verify the genuine nature of the product packaging. 8 (4) Dexon will not violate this Order if it sells a Cisco product that turns out to be 9 counterfeit, so long as Dexon used the tool provided by Cisco prior to the sale of 10 such product and the tool reported that the packaging was genuine. ll (5) Cisco shall furnish a bond in the amount of $500,000 within 10 days of this = 12 Order. € 13 IT IS SO ORDERED. 14 Dated: October 3, 2023 € E - United States District Judge a 16

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