Case5:08-cv-01751-JF Document27 Filed03/03/09 Page1 of 7
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`**E-Filed 3/3/2009**
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`SAN JOSE DIVISION
`
`HOMETRONICS INC.,
` Plaintiff,
` v.
`CECIL FRED REACER, ELECTRONIC ARCHI-
`TECHS, INC., ANDREA NOWAK, SHEILA
`REACER, and DOES 1 through 10, inclusive
`
`Case Number C 08-01751 JF (HRL)
`ORDER GRANTING IN PART
`1
`MOTION FOR DEFAULT
`JUDGMENT
`[Re: Docket No. 22]
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`Plaintiff HomeTronics, Inc. (“HT”) moves for a default judgment jointly and severally
`against Defendants Cecil Fred Reacer (“Cecil”), Sheila Reacer (“Sheila”) and Electronic Archi-
`Techs Inc. (“EA”). HT seeks damages in the amount of $723,000.00, plus pre- and post-
`judgment interest, attorneys’ fees and costs in the amount of $28,285.85, and injunctive relief.
`At a hearing on February 6, 2009, the Court indicated that it would grant the motion in its
`entirety. However, upon further review of the record, the Court concludes that the facts do not
`support all of the damages and injunctive relief requested. Accordingly, for reasons discussed
`
`1
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`This disposition is not designated for publication in the official reports.
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`Case No. CV 08-01751 JF (HRL)
`ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT
`(JFEX1)
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`Case5:08-cv-01751-JF Document27 Filed03/03/09 Page2 of 7
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`below, the motion will be granted in part and denied in part.
`I. BACKGROUND
`HT is a Texas corporation that specializes in installing custom home theaters,
`audio/video, lighting, control and home automation systems. It alleges that Defendants Cecil and
`Reacer each own a significant interest in EA and serve as current officer and member of EA’s
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`Board of Directors. HT alleges that EA, a Nevada corporation, also is a home theater and custom
`electronic design and installation service company.
`On July 1, 2004, HT hired Cecil as HT’s director of marketing. The employment
`agreement included a sales representation agreement with EA. Compensation originally was
`established at “9% Commission on all contracts and change orders on all sales excluding sales
`tax, meeting a 40% minimum profit margin.” The agreement also provided that “the first three
`months shall include a $6,000.00 per month guarantee paid bi-monthly . . . . The guarantee will
`be deducted from future earnings.”
`Between December 2000 and the present, HT has maintained a website to describe its
`services. The website contains professional photographs depicting installations performed by HT,
`awards and recognition received by HT as a result of those installations, HT’s authorized
`affiliations with product suppliers and other background information. The cost to produce the
`photographs was $750. Pl. Statement of Monetary Damages, Attorneys Fees, and Costs
`(“Damage Statement”) at 2. During the period of its engagement with Cecil and EA, HT
`consented to the use of its proprietary content on Defendants’ website.
`On February 2, 2008, HT terminated Cecil for cause and revoked its consent for use of its
`proprietary content by EA. On February 15, 2008, through its counsel, HT sent a letter
`demanding immediate removal of its proprietary content from Defendants’ website. On February
`29, 2008, Defendants removed all of HT’s proprietary content from their website.
`On April 1, 2008, HT filed the instant action, alleging that Defendants used HT as a
`
`The complaint also listed Andrea Nowak as a defendant. On August 28, 2008, the Court
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`issued an order dismissing Andrea Nowak.
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`Case No. CV 08-01751 JF (HRL)
`ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT
`(JFEX1)
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`Case5:08-cv-01751-JF Document27 Filed03/03/09 Page3 of 7
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`conduit to acquire installation contracts, and that Defendants thereafter completed some of those
`installations by themselves and falsely reported that such contracts were not viable for HT. HT
`also alleges that Cecil ordered business cards under the name of HT for Sheila and Nowak, who
`never were HT employees. Finally, HT claims that Defendants Cecil and Sheila charged
`personal expenses to HT’s corporate credit card.
` Cecil and Sheila were served with the summons and complaint on April 10, 2008. EA
`was served with the summons and complaint on April 3, 2008. None of the Defendants have
`appeared in this action or responded to the complaint within the time permitted by law. On
`November 6, 2008, default was entered by the clerk. See Docket No. 21. On January 3, 2009,
`HT filed the instant motion for default judgment, seeking monetary damages for copyright
`infringement, prepaid and unearned commission, misappropriated travel expenses, conversion of
`its stock and tools, the unauthorized charges to its corporate credit card, and lost profits and
`royalties, totaling $723,000.00. HT also seeks pre- and post-judgment interest, as well as
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`injunctive relief to prevent Defendants from using HT’s copyrighted materials and trademark.
`HT requests attorney’s fees and costs in the amount of $28,285.85.
`II. DEFAULT JUDGMENT
`Upon default, the well-pleaded allegations in a complaint are considered to be true and
`sufficient to establish a defendant’s liability. DirecTV, Inc. v. Huynh, 503 F.3d 847, 851 (9th Cir.
`2007); Kingvision Pay-Per-View, Ltd. v. Backman, 102 F. Supp. 2d 1196, 1197 (N.D. Cal. 2000).
`However, this rule does not apply to allegations in the complaint regarding damages. Backman,
`102 F. Supp. 2d at 1197.
`A. Copyright
`“In a case where the copyright owner sustains the burden of proving, and the court finds,
`that infringement was committed willfully, the court in its discretion may increase the award of
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`The motion for default judgment also claims damages for trademark infringement in the
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`amount of $13,200, trebled to $39,000. See Pl. Mot. at 18:13-16. However, including the
`trademark infringement would result in a damage award greater than the $723,000 requested in
`the motion. The trademark infringement damages are not listed in HT’s Damage Statement.
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`Case No. CV 08-01751 JF (HRL)
`ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT
`(JFEX1)
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`Case5:08-cv-01751-JF Document27 Filed03/03/09 Page4 of 7
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`statutory damages to a sum of not more than $150,000.” 17 U.S.C. § 504(c)(2). However, “[17
`U.S.C. § 412(2)] mandates that, in order to recover statutory damages, the copyrighted work
` must have been registered prior to commencement of the infringement, unless the registration
`is made within three months after first publication of the work.” Derek Andrew, Inc. v. Poof
`Apparel Corp., 528 F.3d 696, 699 (9th Cir. 2008) (emphasis added).
`HT has opted to pursue statutory damages in the amount of $150,000. Pl. Mot. at 15:1-3.
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`However, although it alleges that it held copyrights on various professional photographs, Pl.
`Mot. at 4:21-23, HT has not pled or demonstrated that the photographs in fact were registered
`prior to the alleged infringement or within three months after first publication of the photographs.
`Under these circumstances, HT’s request for statutory damages must be denied.
`“The copyright owner is entitled to recover the actual damages suffered by him or her as a
`result of the infringement, and any profits of the infringer that are attributable to the infringement
`and are not taken into account in computing the actual damages.” 17 U.S.C. § 504(b). HT has
`not pled any actual damages suffered by it as the result of the infringement or the extent to which
`any of the Defendants profited from the infringements. Accordingly, the Court will not award
`actual damages for the copyright infringement. Because HT has alleged that the photographs
`cost $750.00 to produce, the Court will award general damages in the amount of $750.00.
`B. Prepaid & Unearned Commissions
`HT also seeks $258,000.00 in prepaid and unearned commissions. HT arrived at that
`amount by multiplying forty-three (43), the number of months Cecil was employed by HT, by
`$6,000, the amount of commission paid to Cecil per month. This analysis is reasonable, and the
`Court will award prepaid and unearned commissions in the amount of $258,000.00.
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`HT’s moving papers suggest multiple copyright infringements and an entitlement to
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`multiple statutory damage awards, but only a single award is requested. The motion states,
`“[a]ccordingly, HT seeks damages for Defendants’ violation of 17 U.S.C. § 504 of $150,000.00
`(the maximum amount of damages permitted by statute) per copyright infringed. There were
`several copyrighted photographs that were reproduced by Defendants on their website and
`elsewhere.” Pl. Mot. at 15: 1-4. (emphasis added)
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`Case No. CV 08-01751 JF (HRL)
`ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT
`(JFEX1)
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`Case5:08-cv-01751-JF Document27 Filed03/03/09 Page5 of 7
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`C. Lost Profits and Royalties
`HT seeks $258,000.00 in lost profits and royalties. HT arrived at this amount by
`inferring that Defendants performed 0.5 installation per month for 43 months at an average sale
`price of $30,000, and a gross margin of $12,000. The analysis and the final amount are
`reasonable. The Court will award lost profits and royalties in the amount of $258,000.00.
`D. Misappropriated Travel Expenses, Conversion of Plaintiff’s materials, Personal
`Expenses on Corporate Card
`HT seeks $35,000 for misappropriated travel expenses, $15,000 for conversion of its
`tools and materials, and $7,000 for personal expenses charged to its corporate credit card. The
`Court will award the amounts requested by HT.
`E. Attorneys’ Fees
`HT also seeks $26,205.00 in attorneys’ fees and $2,080.85 in other litigation costs.
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`These amounts are supported by declaration of HT’s counsel, Marc E. Hankin. The Court will
`award attorneys’ fees and costs in the amount of $28,285.85.
`III. Injunctive Relief
`HT requests injunctive relief, including “an injunction against Defendants from operating
`a website using a domain name intended to, or having the effect of, diverting traffic from HT’s
`website, including but not limited to the site www.theelectronicarchitects.com or any other
`domain name confusingly similar to Plaintiff’s Mark owned . . . .” Pl. Mot. at 17:21-24. “The
`core element of trademark infringement is whether the similarity of the marks is likely to confuse
`customers about the source of the products . . . .” Nissan Motor Co. v. Nissan Computer Corp.,
`378 F.3d 1002, 1018 (9th Cir. 2004) (citing Interstellar Starship Services, Ltd. V. Epix, Inc., 304
`F.3d 936, 941 (9th Cir. 2002)). “To evaluate the likelihood of confusion [] in the context of the
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`HT’s moving papers state that HT has “incurred reasonable attorneys’ fees and costs in
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`prosecuting this action against Defendants of $26,885.85 plus, by virtue of this Motion, it will
`incur approximately an additional $1,400.00.” Pl. Mot. at 21:1-3. However, the later filed
`Damage Statement lists the attorney fees (pre-motion) at $24,805.00 and an additional $1,400 for
`the motion hearing. The amount of $26,205 is calculated using the amount listed in the Damage
`Statement ($24,805 + $1,400 = $26,205).
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`Case No. CV 08-01751 JF (HRL)
`ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT
`(JFEX1)
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`Case5:08-cv-01751-JF Document27 Filed03/03/09 Page6 of 7
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`internet, the three most important factors are the similarity of the marks, the relatedness of the
`goods or services, and the parties’ simultaneous use of the internet in marketing.” Id. at 1018-
`1019 (internal citations omitted).
`The website www.theelectronicarchitects.com is not similar to HT’s website
`www.hometronics.com. HT has not provided any facts or data indicating potential customers
`“accidentally” entering the site www.theeletronicarchitects.com when looking for HT’s
`www.hometronics.com site. Accordingly, while the Court will enjoin Defendants from operating
`a website using a domain name intended to, or having the effect of, diverting traffic from HT’s
`website, it will not enjoin Defendants from operating the website
`www.theelectronicarchitects.com.
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`III. ORDER
`For the reasons discussed above, the motion is GRANTED IN PART. HT shall recover
`(1) damages in the amount of $573,750.00; (2) pre- and post-judgment interest; and (3) attorneys’
`fees and costs in the amount of $28,285.85. The Court also will enjoin Defendants from using
`any and all proprietary materials created or used by HT, and from imitating, copying, using,
`reproducing the “HomeTronics” Mark or any Mark that imitates or is confusingly similar to the
`“HomeTronics” Mark. Finally, the Court will order Defendants to destroy or otherwise dispose
`of all materials found to have been made or used in violation of HT’s exclusive copyright and
`trademark rights; and will enjoin Defendants from operating a website using a domain name
`intended to, or having the effect of, diverting traffic from HT’s website.
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`IT IS SO ORDERED.
`
`DATED: 3/3/2009
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`__________________________________
`JEREMY FOGEL
`United States District Judge
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`Case No. CV 08-01751 JF (HRL)
`ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT
`(JFEX1)
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`Case5:08-cv-01751-JF Document27 Filed03/03/09 Page7 of 7
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`This Order was served on the following persons:
`
`Imran Vakil imran@hankinpatentlaw.com
`Lawrence Griffith Townsend ltownsend@owe.com
`Marc E. Hankin Marc@HankinPatentLaw.com
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`Case No. CV 08-01751 JF (HRL)
`ORDER GRANTING IN PART MOTION FOR DEFAULT JUDGMENT
`(JFEX1)
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