InMode Ltd. v. DHGate Seller

• Court: District Court, C.D. California
• Decided: September 3, 2024
• Docket: 8:24-cv-01803
• Status: Unknown

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 CENTRAL DISTRICT OF CALIFORNIA 9 10 InMode Ltd., and Invasix Inc. Case No. SACV 24-1803-MWF(ADSx) 11 Plaintiffs, ORDER GRANTING MOTION 12 FOR A PRELIMINARY v. INJUNCTION 13 DHGate Seller “abfl”, et al. 14 Defendants. 15

17 18 19 20 21 22 23 24 25 26 27 1 THIS CAUSE came before the Court upon Plaintiffs InMode Ltd. and 2 Invasix Inc.’s (“Plaintiffs” or “InMode”) Motion for a Preliminary Injunction 3 (“PI”) against Defendants. The Court held oral argument on Plaintiffs’ motion on 4 August 28, 2024. Having reviewed the papers and heard oral argument and 5 reviewed the evidence in support of or against the motion, the Court GRANTS 6 Plaintiffs’ motion for a preliminary injunction. 7 I. BACKGROUND1 8 Plaintiffs are the registered owner and exclusive United States distributor of 9 Morpheus®-branded microneedling products used in aesthetic skin care. InMode 10 owns numerous trademarks used in connection with the manufacture and 11 distribution of InMode’s Morpheus® brand microneedling devices and needle 12 cartridge accessories (“Morpheus® Products”). Among these trademarks are 13 United States Registration Nos. 6182558 (MORPHEUS) and 6021401 14 (INMODE), (collectively the “InMode Trademarks”). 15 Defendants are individuals and/or business entities of unknown makeup 16 who are believed to use, or assist others in using, the Internet based e-commerce 17 stores on the e-commerce platform DHGate.com (“DHGate”) and are operating 18 under the seller identification names set forth in Exhibit 1 to the Complaint (the 19 “Seller IDs”). 20 Plaintiffs recently learned of Defendants’ sale of counterfeit versions of 21 InMode’s products. InMode then retained Brand Security Corporation (“Brand 22 Security”), a licensed private investigative firm, to investigate Defendants’ 23 promotion and sale of counterfeit versions of InMode’s products on the e- 24 commerce platform DHGate. Brand Security accessed the e-commerce stores and 25 marketing and promotion sites operating under Defendants’ Seller IDs2 and placed 26

27 1 The facts herein are taken from Plaintiffs’ Complaint and Application for Ex Parte Relief. 1 orders from each Defendant for the purchase of various alleged counterfeit 2 Morpheus® Products. The products received from various Defendants were 3 shipped to Brand Security in this Judicial District. See Declaration of Mariela 4 Fernandez (“Fernandez Decl.”) at ¶ 9 and Exhibits 1-22 thereto.3 5 These orders were processed online, and following the submission of each 6 order, Brand Security finalized payment for the various purported Morpheus® 7 Products ordered from Defendants via Defendants’ respective payment accounts 8 on the DHGate platform. At the conclusion of the process, web page 9 screencaptures of the various purported Morpheus® Products offered for sale 10 and/or ordered via Defendants’ Seller IDs, together with photographs of many of 11 the products received, were sent to InMode’s representative for inspection. See 12 Declaration of Rafael Lickerman (“Lickerman Decl.”) at ¶ 25. InMode’s 13 representative, Mr. Lickerman reviewed and visually inspected web page screen 14 captures reflecting the purported Morpheus® Products identified and captured by 15 Brand Security, together with photographs of certain received goods, and 16 determined that the Defendants’ purported Morpheus® Products were not 17 authentic. See id. 18 On August 16, 2024, Plaintiffs filed, under seal, an Ex Parte Application 19 for Entry of Temporary Restraining Order (“TRO”), Restraint of Asset Transfer, 20 Motion for Expedited Discovery, and Motion for Alternative Service, which also 21 requested a PI against Defendants upon expiration of the TRO. Id. 22 On August 16, 2024, the Court granted Plaintiffs’ Application for TRO, 23 Restraint of Asset Transfer, Motion for Expedited Discovery, and Motion for 24 25 3 Certain Defendants use their Seller IDs in tandem with electronic communication to complete 26 their offer and sale of Morpheus®-branded products. Specifically, Defendants use private messaging applications and/or services such as WhatsApp to electronically communicate with 27 potential consumers to complete their offer and sale of counterfeit products. Defendants’ relevant 1 Alternative Service. The Court allowed the Defendants and any party or non- 2 party served with the TRO to object to the restraints on or before August 26, 3 2024. No filing has been made with the Court by any party or non-party on or 4 before August 26, 2024. 5 On August 23, 2024, Plaintiffs served notice of the TRO on and sought 6 expedited discovery from non-party DHGate Group a/k/a Digital Trading Sci & 7 Tech (Beijing) Co. Ltd. DHGate Group responded to the Plaintiffs’ request 8 confirming that DHGate had frozen the 22 Defendants’ seller accounts as 9 ordered. 10 On August 23, 2024, Plaintiffs posted the requisite TRO bond with the 11 Clerk of the Court. Also on August 23rd, Plaintiffs served all Defendants via 12 alternate means as the Court authorized.4 On that same day Plaintiffs filed a 13 declaration certifying that service was made on Defendants and non-party 14 DHGate Group, and describing how service was conducted. 15 On August 26, 2024, all served Defendants were given an opportunity to 16 respond to the application for the PI and no response was made. On August 28, 17 2024, the Court held oral argument on Plaintiffs’ motion to convert the TRO to a 18 preliminary injunction and the following findings are made. 19 II. LEGAL STANDARD 20 This Court has authority to grant a preliminary injunction under 15 U.S.C. § 21 1116(d), Fed. R. Civ. P. 65, The All Writs Act, 28 U.S.C. § 1651(a), and this 22 Court’s inherent authority. To obtain a preliminary injunction in the Ninth Circuit, 23 a plaintiff may proceed under either of two tests. The first test assesses the 24 traditional factors: (1) the plaintiff will suffer an irreparable injury if injunctive 25

26 4 As noted in the certificate of service, Plaintiffs were unable to serve three defendants (ytlighting, hitmantrade, and chuangke2018) because those defendants’ Seller IDs and Store IDs 27 were inactive on DHGate platform as of August 23, 2024 and Plaintiffs had no other means to 1 relief is not granted; (2) the plaintiff will probably prevail on the merits; (3) the 2 plaintiff shows the balance of equities favors granting the injunction; and (4) an 3 injunction serves the public interest. See Stanley v. Univ. of S. Cal., 13 F.3d 1313, 4 1319 (9th Cir. 1994). Under the second test, a plaintiff may alternatively 5 demonstrate “either: (1) a likelihood of success on the merits and the possibility of 6 irreparable injury; or (2) that serious questions going to the merits were raised and 7 the balance of hardships tips sharply in its favor.” Walczak v. EPL Prolong, Inc., 8 198 F.3d 725, 731 (9th Cir. 1999). These two options appear at opposite ends “of a 9 single continuum, rather than two separate tests.” Id. (quotations omitted). 10 Accordingly, if plaintiff shows a higher degree of hardship, the court will accept a 11 lower probability of success. See id.; see also Int’l Jensen, Inc. v. Metrosound 12 U.S.A., Inc., 4 F.3d 819, 822 (9th Cir. 1993). 13 Under 15 U.S.C. § 1117(a), a plaintiff may recover the illegal profits that a 14 defendant gained through the sale of counterfeit products. District courts have the 15 power to impose an asset freeze in cases where equitable relief is sought and when 16 there is “a likelihood of dissipation of the claimed assets, or other inability to 17 recover monetary damages, if relief is not granted.” Johnson v. Couturier, 572 F.3d 18 1067, 1085 (9th Cir. 2009); see also Conn. Gen. Life Ins. Co. v. New Images of 19 Beverly Hills, 321 F.3d 878, 883 n.4 (9th Cir. 2003) (A “district court has authority 20 to issue asset-freezing injunction where equitable relief is sought, even though 21 substantial money damages are also claimed”) (citing U.S. ex rel. Rahman v. 22 Oncology Assocs., 198 F.3d 489, 494-99 (4th Cir. 1999)). 23 III. ANALYSIS 24 InMode’s pleadings, sworn declarations and Memorandum of Law support the 25 following legal conclusions: 26 1. InMode Has a Substantial Likelihood of Success on the Merits. 27 InMode’s application supports that consumers are likely to be confused by 1 products bearing and/or using counterfeits, reproductions, and/or colorable 2 imitations of the InMode Trademarks, and that the products Defendants are selling 3 and promoting are unauthorized copy products that bear and/or use copies of the 4 InMode Trademarks. 5 2. InMode Will Suffer Irreparable Injury Absent Immediate 6 Injunctive Relief. 7 InMode has put forth evidence that, through the operation of twenty-two 8 seller identities comprised of e-commerce stores and marketing materials, 9 Defendants are operating Internet businesses which advertise, promote, offer for 10 sale, and sell, products bearing and/or using counterfeit and infringing trademarks 11 in violation of InMode’s rights. Accordingly, there is good cause to believe that 12 more counterfeit and infringing products bearing and/or using the InMode 13 Trademarks will appear in the marketplace; consumers may be misled, confused, 14 and disappointed by the quality of these products; InMode may suffer loss of sales 15 for its genuine products; and Defendants’ counterfeit products create an unnatural 16 erosion of the legitimate marketplace. 17 3. The Balance of Harms Favors InMode. 18 InMode has put forth evidence that the harm to InMode—including damage 19 to its reputation—outweighs the potential harm of restricting Defendants’ trade. 20 Defendants have no legitimate rights to sell counterfeit products, manufactured 21 outside of the U.S. without FDA approval. 22 4. The Public Interest Favors Issuance of the Preliminary 23 Injunction. 24 The evidence supplied by InMode supports that it is within the public 25 interest to protect InMode’s trademarks. The public has an interest in preventing 26 against the sale of counterfeit products, particularly in this case, where Defendants’ 27 counterfeit Morpheus® Products can be sold to unsuspecting third parties for use 1 5. The Requested Asset Freeze Is Warranted. 2 Under 15 U.S.C. § 1117(a), Plaintiffs may be entitled to recover, as an 3 equitable remedy, the illegal profits gained through Defendants’ distribution and 4 sales of products bearing and/or using counterfeits and infringements of the 5 InMode Trademarks. In light of the inherently deceptive nature of their 6 counterfeiting business, and Defendants’ apparent violation of the federal 7 trademark laws, there is good reason to believe Defendants will hide or transfer 8 assets beyond the jurisdiction of this Court unless those assets are restrained. 9 IV. CONCLUSION 10 Based on Plaintiffs’ Complaint, PI Motion, and evidentiary submissions, the 11 Court concludes that Plaintiffs have satisfied the four-part test for injunctive relief. 12 Accordingly, it is hereby ORDERED AND ADJUDGED that Plaintiffs’ PI Motion 13 is GRANTED. It is further ORDERED AND ADJUDGED as follows that: 14 1. Each Defendant, their officers, directors, employees, agents, 15 subsidiaries, distributors, and all persons in active concert or participation with 16 them having notice of this Order are hereby preliminarily restrained from: 17 a. Manufacturing, making, buying, purchasing, importing, shipping, 18 delivering, advertising, marketing, promoting, offering to sell, selling, or otherwise 19 distributing or disposing of, in any manner, any counterfeit or infringing products, 20 including but not limited to Morpheus® Products and any other products bearing 21 the MORPHEUS® and INMODE® Trademarks. 22 b. Manufacturing, making, buying, purchasing, importing, shipping, 23 delivering, advertising, marketing, promoting, offering to sell, selling, or otherwise 24 distributing or disposing of, in any manner, any purported InMode or Morpheus® 25 Products that are not actually produced, imported, or distributed under Plaintiffs’ 26 control or supervision, or approved for sale in the United States by Plaintiffs in 27 connection with the MORPHEUS® and INMODE® Trademarks; 1 counterfeit or infringing Morpheus® Products originate with Plaintiffs when they 2 do not; 3 d. In any way infringing or damaging the MORPHEUS® and 4 INMODE® Trademarks or the value or goodwill associated therewith; 5 e. Attempting, causing, or assisting in any of the above-described acts, 6 including but not limited to enabling others in the above-described acts, or passing 7 on information to others to allow them to do so; and 8 f. Forming or causing to be formed any corporation or other entity that 9 engages in the above-described acts; 10 g. Secreting, concealing, destroying, selling off, transferring, or 11 otherwise disposing of: (i) any products, not manufactured or distributed by 12 Plaintiffs bearing and/or using the InMode Trademarks, or any confusingly similar 13 trademarks; or (ii) any evidence relating to the manufacture, importation, sale, 14 offer for sale, distribution, or transfer of any products bearing and/or using the 15 InMode Trademarks, or any confusingly similar trademarks. 16 2. Each Defendant, its officers, directors, employees, agents, 17 subsidiaries, distributors, and all persons in active concert or participation with any 18 Defendant having notice of this Order shall immediately discontinue the use of the 19 InMode Trademarks, or any confusingly similar trademarks within metatags or 20 other markers within website source code, from use on any webpage (including as 21 the title of any web page), from any advertising links to other websites, from search 22 engines’ databases or cache memory, and any other form of use of such terms 23 which is visible to a computer user or serves to direct computer searches to Internet 24 based e-commerce stores, registered by, owned, or operated by each Defendant, 25 including the Internet based e-commerce stores operating under the Seller IDs. 26 3. Defendants shall not transfer ownership of the Seller IDs during the 27 pendency of this Action, or until further Order of the Court. 1 the use of any of the Seller IDs and shall take all steps necessary to retrieve 2 computer files relating to the use of the Seller IDs that may have been deleted 3 before the entry of this Order. 4 5. Plaintiffs shall serve a copy of this Order upon Defendants and non- 5 parties by alternative means, for good cause shown. Plaintiffs intend to serve 6 Defendants and non-parties via available email and messaging system application 7 (such as WhatsApp), as well as the DHGate messaging portal associated with each 8 individual Defendant as listed in Exhibit 1 attached to the Complaint. 9 6. Upon receipt of notice of this Order, Defendants and all financial 10 institutions, payment processors, banks, escrow services, money transmitters, or 11 marketplace platforms, including but not limited to payment processors associated 12 with DHGate or any of its affiliates, and their related companies and affiliates, 13 shall (i) immediately identify and restrain all funds in all financial accounts and/or 14 sub-accounts associated with the Internet based e-commerce stores, operating 15 under the Seller IDs, the store URLs, store numbers, and/or the e-mail addresses 16 identified in Exhibit 1 to the Complaint, as well as any other accounts of the same 17 customer(s); (ii) identify all other accounts which transfer funds into the same 18 financial institution account(s) or any of the other financial accounts subject to this 19 Order; (iii) restrain the transfer of all funds, as opposed to ongoing account activity, 20 held or received for their benefit or to be transferred into their respective financial 21 accounts, and any other financial accounts tied thereto; and (iv) immediately 22 divert those restrained funds to a holding account for the trust of the Court. 23 7. The PI shall remain in effect until the Court orders otherwise. 24 8. This PI shall apply to the Seller IDs and any other seller identification 25 names, e-commerce stores, private messaging accounts, domain names and 26 websites, or financial accounts which are being used by Defendants for the purpose 27 of manufacturing, distributing, offering for sale and/or selling counterfeit 1 issue in this action and/or unfairly competing with Plaintiffs. 2 9. Any Defendant or financial institution account holder subject to this 3 PI may petition the Court to modify the asset restraint set out herein. 4 10. The PI shall no longer apply to any Defendant or associated Seller ID 5 dismissed from this action or as to which Plaintiffs have withdrawn its request for 6 a PI. 7 11. Pursuant to 15 U.S.C. § 1116(d)(5)(D) and Fed. R. Civ. P. 65(c), 8 Plaintiffs posted bond in the amount of Ten Thousand Dollars and Zero Cents 9 ($10,000.00), as payment of damages to which Defendants may be entitled for a 10 wrongful injunction or restraint, during the pendency of this action, or until further 11 Order of the Court; 12 12. The Court converts the bond Plaintiffs previously posted for the TRO 13 into a PI bond that provides security for this Order. In the Court’s discretion, the 14 bond may be subject to increase should an application be made in the interest of 15 justice. 16 13. Plaintiffs shall serve copies of this Order, on each Defendant by 17 e-mail via their corresponding e-mail address, or on each Defendant via the 18 e-mail/online contact form or other means of electronic contact provided on the 19 Internet based e-commerce stores operating under the respective Seller IDs, or by 20 providing a copy of this Order by e-mail to the marketplace platform, social media 21 website, or image hosting website for each of the Seller IDs so that the marketplace 22 platform, social media website, or image hosting website in turn, notifies each 23 Defendant of the Order, or by other means reasonably calculated to give notice 24 which is permitted by the Court. 25 14. The Court further dissolves the Order sealing this action and instructs 26 the Clerk of the Court to make all prior filings available to the public. The Court 27 further instructs the parties to proceed with future filings publicly, unless specific 1 15. To the extent that any named Defendant should attempt to avoid the 2 ||obligations of this Order by changing its Seller ID while continuing to operate 3 || under the same Store ID or using the same corporate account, this Order shall apply 4 || with full force and effect to any new Seller ID used by any of the named 5 ||Defendants to distribute and offer for sale counterfeit Morpheus® Products 6 unlawfully using infringing versions of the InMode Trademarks. 8 9 || DONE AND ORDERED, this 3 day of September 2024. 10 11

Hon. Mictiael W. hd :

14 UNITED STATES DISTRICT JUDGE 15 16 7 ce: All counsel of record 18 19 20 21 22 23 24 25 26 27 28