Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 1 of 9 PageID #: 705
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`
`
`
`ADIDAS AG; ADIDAS INTERNATONAL
`MARKETING B.V.; ADIDAS AMERICA, INC.;
`and RUNTASTIC GMBH,
`
`
`
`
`
`
`
`CASE NO. 2:22-cv-198
`
`v.
`
`NIKE, INC.,
`
`Plaintiffs,
`
`Defendant.
`
`
`
`
`
`
`
`
`
`
`
`DEFENDANT NIKE, INC.’S OPPOSED MOTION TO SET ASIDE
`CLERK’S ENTRY OF DEFAULT
`
`
`
`WEST\299336810.3
`
`
`
`

`

`Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 2 of 9 PageID #: 706
`
`
`
`Pursuant to Federal Rule of Civil Procedure 55(c), Defendant Nike, Inc. (“Nike” or
`
`“Defendant”) respectfully moves the Court to set aside the Clerk’s Entry of Default entered in
`
`this matter on July 7, 2022 (ECF No. 14), and respectfully requests that Nike be permitted to
`
`answer or otherwise respond to the Complaint filed by Plaintiffs adidas AG, adidas International
`
`Marketing B.V., adidas America, Inc., and runtastic GmbH (collectively, “adidas”) on or before
`
`August 5, 2022. adidas opposes this Motion to set aside the default.
`
`I. INTRODUCTION
`
`Nike and adidas are currently involved in three patent litigations in the United States: (1)
`
`In the Matter of Certain Knitted Footwear, No. 337-TA-3580, filed on December 8, 2021 in the
`
`International Trade Commission (ITC) (“ITC litigation”), (2) Nike, Inc. v. adidas AG et al., No.
`
`3:21-cv-01780, filed on December 8, 2021 in the United States District Court, District of
`
`Oregon, which is currently stayed pending resolution of the ITC litigation; and (3) this case,
`
`which was filed on June 10, 2022 and asserts nine adidas patents against Nike. Declaration of
`
`Jack C. Schecter (“Schecter Decl.”), ¶ 2. In addition, adidas has also initiated several patent and
`
`trademark litigations against Nike’s European subsidiaries in Germany. Id. at ¶ 3.
`
`Due to an internal communication error related to the management of the various
`
`Nike/adidas litigations, Nike did not become aware that adidas’s Complaint in this case had been
`
`served on Nike’s agent for service of process until July 14, 2022. Id., ¶ 4. Indeed, Nike did not
`
`become aware that adidas’s Complaint in this case had been served until adidas’s counsel in this
`
`case (who is also adidas’s counsel of record in the ITC litigation) contacted Nike’s counsel of
`
`record in the ITC litigation (who is not Nike’s counsel in this case) to advise that adidas had
`
`already requested—and the Court’s Clerk had granted—entry of default against Nike. ECF Nos.
`
`13 and 14; see Schecter Decl., ¶ 5. Upon receiving notification of the Clerk’s Entry of Default
`
`on July 14, 2022, Nike immediately engaged with its counsel of record in this case, who
`
`WEST\299336810.3
`
`-1-
`
`

`

`Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 3 of 9 PageID #: 707
`
`
`
`contacted adidas’s counsel within 24 hours to address this issue in an effort to resolve the default
`
`issue informally. Id.
`
`There is good cause for setting aside the Entry of Default. Nike’s failure to timely
`
`respond to the Complaint was not willful or intentional. Nor would setting aside the Entry of
`
`Default prejudice adidas in any way—to the contrary, Nike has proposed responding to adidas’s
`
`Complaint by August 5, 2022, which is approximately the same date Nike would have responded
`
`to the Complaint had the parties agreed to a 30-day extension of Nike’s time to respond, a period
`
`of time which is typical in a complex case involving nine asserted patents. Setting aside the
`
`Entry of Default would also allow Nike to present meritorious defenses (including
`
`noninfringement and invalidity) to adidas’s claims regarding the asserted patents, and is thus
`
`consistent with the longstanding policy in favor of resolving cases on the merits. Moreover,
`
`Nike promptly moved to address this issue when it became aware that adidas’s Complaint had
`
`been served and that default had been entered. Accordingly, Nike respectfully requests that the
`
`Court set aside the Clerk’s Entry of Default under Federal Rule of Civil Procedure 55(c), and
`
`permit Nike to answer or otherwise respond to the Complaint by August 5, 2022.
`
`II. LEGAL STANDARD
`
`Default judgments are generally disfavored. U.S. v. One Parcel of Real Property, 763
`
`F.2d 181, 183 (5th Cir. 1985) (“[M]odern federal procedure favors trials on the merits.”). See
`
`also Murray v. Stengel, No. 4:21-cv-00012, 2021 WL 5356496, at *1 (E.D. Tex. Sept. 15, 2021)
`
`(“[F]ederal courts should not be agnostic with respect to the entry of default judgments, which
`
`are generally disfavored in the law and thus should not be granted on the claim, without more,
`
`that the defendant had failed to meet a procedural time requirement.”). Accordingly, “where
`
`there are no intervening equities any doubt should, as a general proposition, be resolved in favor
`
`WEST\299336810.3
`
`-2-
`
`

`

`Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 4 of 9 PageID #: 708
`
`
`
`of the movant to the end of securing a trial upon the merits.” Lacy v. Sitel Corp., 227 F.3d 290,
`
`292 (5th Cir. 2000).
`
`Under Rule 55(c), a district court “may set aside an entry of default for good cause.”
`
`Fed. R. Civ. P. 55(c). The good cause standard is a liberal one. Effjohn Int’l Cruise Holdings,
`
`Inc. v. A&L Sales, Inc., 346 F.3d 552, 563 (5th Cir. 2003). To determine if good cause exists to
`
`set aside or vacate the entry of default, courts consider three non-exclusive factors: “whether the
`
`default was willful, whether setting it aside would prejudice the adversary, and whether a
`
`meritorious defense is presented.” Lacy, 227 F.3d at 292. “The decision to set aside a default is
`
`committed to the sound discretion of the trial court” and “necessarily is informed by equitable
`
`principles.” In re Dierschke, 975 F.2d 181, 183-84 (5th Cir. 1992).
`
`III. ARGUMENT
`
`A.
`
`Under Rule 55(c), Good Cause Exists To Set Aside The Clerk’s Entry of
`Default.
`
`Under each of the three non-exclusive factors considered by courts to set aside entry of
`
`default under Rule 55(c), good cause exists to set aside the Clerk’s Entry of Default in this case.
`
`1.
`
`Nike’s Failure To Timely Respond To adidas’s Complaint Was Not
`Willful.
`
`Under Rule 55(c), “[a] willful default is an ‘intentional failure’ to respond to litigation.”
`
`A.P. Moller-Maersk A/S v. Safewater Lines (I) Pvt., Ltd., 784 F. App’x 221, 228 (5th Cir. 2019).
`
`There was no intentional or willful failure to respond to the Complaint in this case. Nike takes
`
`reasonable steps to monitor and track the filing and service of complaints filed against the
`
`company. Nike’s belated discovery of the service of the Complaint in this case was the result of
`
`a miscommunication in connection with the management of the various Nike/adidas pending
`
`litigations. Schecter Decl., ¶ 4. There was no willful or intentional action taken by Nike to
`
`WEST\299336810.3
`
`-3-
`
`

`

`Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 5 of 9 PageID #: 709
`
`
`
`evade service, avoid responding to the Complaint, or to delay this lawsuit. As a result, this factor
`
`weighs strongly in favor of setting aside the Clerk’s Entry of Default.
`
`2.
`
`Setting Aside the Clerk’s Entry of Default Will Not Prejudice adidas.
`
`Setting aside the Clerk’s Entry of Default will not prejudice adidas in any way. Nike’s
`
`answer was due July 4, 2022, adidas requested Entry of Default on July 7, 2022, and the Clerk
`
`entered default against Nike that same day. Nike only become aware that the Complaint had
`
`been served and that default had been entered on July 14, 2022, when adidas’s counsel first
`
`contacted Nike’s counsel to advise that adidas had already requested—and the Court’s Clerk had
`
`granted—entry of default against Nike. When Nike became aware of this issue, it immediately
`
`engaged with outside counsel, who contacted adidas’s counsel of record the next day to address
`
`the entry of default. After consulting with their client in Germany, counsel for adidas advised
`
`Nike’s counsel on July 19, 2022 that adidas opposes Nike’s Motion, and Nike promptly filed this
`
`Motion on the same day.
`
`In addition, Nike has proposed responding to adidas’s Complaint by August 5, 2022,
`
`which is approximately the same date Nike would have responded to the Complaint had the
`
`parties agreed to a 30-day extension of Nike’s time to respond, a period of time which is typical
`
`in a complex case involving nine asserted patents. Thus, there is no delay here that would be
`
`prejudicial to adidas. Indeed, the Fifth Circuit has consistently held that “[t]here is no prejudice
`
`to the plaintiff where the setting aside of the default has done no harm to plaintiff except to
`
`require it to prove its case.” Hardaway v. Sprint Corp., No. 4:21-cv-00109-SDJ-CAN, 2021 WL
`
`2349311, at *3 (E.D. Tex. May 12, 2021) (quoting Lacy, 227 F.3d at 293).
`
`Moreover, this case is in its infancy. No Case Management Order has been entered in the
`
`case, and no discovery has been conducted, all of which would still be the case even if the parties
`
`had not agreed to any extension of Nike’s time to respond to the Complaint. As a result, this
`
`WEST\299336810.3
`
`-4-
`
`

`

`Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 6 of 9 PageID #: 710
`
`
`
`factor also weighs strongly in favor of finding good cause to set aside the Clerk’s Entry of
`
`Default.
`
`3.
`
`Nike Has Meritorious Defenses To adidas’s Claims.
`
`“[A] defendant’s allegations are meritorious if they contain ‘even a hint of a suggestion’
`
`which, proven at trial, would constitute a complete defense.” Dowd v. TubeMaster, Inc., No.
`
`4:21-cv-00125-SDJ-CAN, 2021 WL 4024452, at *6 (E.D. Tex. June 15, 2021); Obinyan v.
`
`Walgreens Specialty Pharmacy Holdings, L.L.C., No. 21-10294, 2022 WL 987183, at *3 (5th
`
`Cir. Mar. 31, 2022) (“Presenting a meritorious defense is a low bar: ‘the underlying concern is
`
`whether there is some possibility that the outcome of the suit after a full trial will be contrary to
`
`the result achieved by the default.”) (emphasis in original).
`
`Here, although Nike has not yet responded to the Complaint, Nike has identified several
`
`meritorious defenses in this case. Indeed, the accused Nike mobile applications and products
`
`identified by adidas have all been sold or otherwise made available to customers for years, and
`
`adidas had never previously alleged or even suggested that it believed Nike infringes any of
`
`those patents, for good reason—Nike does not infringe the asserted patents. Moreover, there are
`
`substantial invalidity questions regarding the adidas asserted patents. As just one example,
`
`several of the patents include claims directed to abstract concepts such as fitness performance
`
`tracking and providing feedback to a user regarding their fitness or movement progress and are
`
`not eligible for patent protection under 35 U.S.C. § 101. adidas’s entire case is a transparent
`
`attempt to create settlement leverage with respect to Nike’s ITC litigation against adidas, and
`
`Nike intends to defend itself in this litigation. This factor therefore also weighs in favor of
`
`finding good cause to set aside the Clerk’s Entry of Default.
`
`WEST\299336810.3
`
`-5-
`
`

`

`Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 7 of 9 PageID #: 711
`
`
`
`4.
`
`Nike Acted Promptly To Correct The Default.
`
`An additional factor often considered by courts is whether the party acted expeditiously
`
`to correct the default. See Dierschke, 975 F.2d at 184; Blackhawk Paving, Inc. v. CPCM, LLC,
`
`No. 4:20-cv-00048-SDJ-CAN, 2021 WL 770614, at *2 (E.D. Tex. Feb. 10, 2021). Here, there
`
`can be no doubt that Nike acted promptly as soon as it discovered the Complaint had been served
`
`and that default had been entered. Nike first learned that service of adidas’s complaint had been
`
`completed on July 14, 2022. Schecter Decl., ¶ 4. The next day, Nike contacted adidas’s counsel
`
`to meet and confer regarding this issue, and Nike filed this Motion on the same day that adidas
`
`provided its position regarding this Motion. Id., ¶ 5; see also Dowd, 2021 WL 4024452, at *5
`
`(finding this factor weighs in favor of good cause, where the defendant moved to set aside the
`
`default judgment 28 days after learning of the triggering event for its responsive pleading).
`
`Nike’s prompt action also supports a finding of good cause to set aside the entry of default.
`
`IV. CONCLUSION
`
`All of the factors considered by courts under Rule 55(c) weigh in favor of finding good
`
`cause to set aside the Clerk’s Entry of Default. Accordingly, Nike respectfully requests that the
`
`Court grant its Motion to set aside the Clerk’s Entry of Default, and that Nike be permitted to
`
`answer or otherwise respond to the Complaint on or before August 5, 2022. A proposed order is
`
`tendered with this Motion.
`
`
`
`
`
`WEST\299336810.3
`
`-6-
`
`

`

`Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 8 of 9 PageID #: 712
`
`Dated: July 19, 2022
`
`Respectfully submitted,
`
`By: /s/ J. Mark Mann
`J. Mark Mann
`mark@themannfirm.com
`Texas Bar No. 12926150
`G. Blake Thompson
`blake@themannfirm.com
`Texas Bar No. 24042033
`Mann ǀ Tindel ǀ Thompson
`201 East Howard St.
`Henderson, Texas 75654
`Phone: 903.657.8540
`
`Richard Mulloy (to be admitted pro hac vice)
`richard.mulloy@us.dlapiper.com
`Edward H. Sikorski (to be admitted pro hac vice)
`ed.sikorski@us.dlapiper.com
`Tiffany Miller (to be admitted pro hac vice)
`tiffany.miller@us.dlapiper.com
`Peter P. Maggiore (to be admitted pro hac vice)
`peter.maggiore@us.dlapiper.com
`Catherine Huang (to be admitted pro hac vice)
`catherine.huang@us.dlapiper.com
`DLA Piper LLP (US)
`401 B Street, Suite 1700
`San Diego, California 92101
`Phone: 619.699.2700
`
`John M. Guaragna
`john.guaragna@us.dlapiper.com
`Texas Bar No. 24043308
`DLA Piper LLP (US)
`303 Colorado St., Suite 3000
`Austin, Texas 78701
`Phone: 512.457.7000
`
`ATTORNEYS FOR DEFENDANT NIKE, INC.
`
`
`
`
`
`
`
`
`
`
`
`WEST\299336810.3
`
`-7-
`
`

`

`Case 2:22-cv-00198-JRG Document 17 Filed 07/19/22 Page 9 of 9 PageID #: 713
`
`
`
`CERTIFICATE OF SERVICE
`
`I certify that the foregoing document was filed electronically on July 19, 2022, pursuant
`
`to Local Rule CV-5(c) and has been served on all counsel whom have consented to electronic
`
`service via electronic mail. Any other counsel of record will be served by first class U.S. mail on
`
`this same date.
`
`/s/ J. Mark Mann
`J. Mark Mann
`
`
`
`
`
`CERTIFICATE OF CONFERENCE
`
`Pursuant to Local Rule CV-7(i), counsel for Nike and counsel for adidas have complied
`
`with the meet and confer requirement in Local Rule CV-7(h) in a good-faith effort to resolve the
`
`matter presented herein. Counsel for adidas opposes the instant Motion.
`
`
`
`
`
`
`
`
`/s/ J. Mark Mann
`J. Mark Mann
`
`
`
`WEST\299336810.3
`
`-8-
`
`