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M.H. SEGAN LIMITED PARTNERSHIP v. TRENDMASTERS

March 25, 2003

M.H. SEGAN LIMITED PARTNERSHIP, PLAINTIFF,
v.
TRENDMASTERS, INC., WAH SHING ELECTRONICS CO., LTD. AND WING SHING METAL & PLASTIC PRODUCTS LTD. DEFENDANTS.



The opinion of the court was delivered by: Andrew J. Peck, United States Magistrate Judge

REPORT AND RECOMMENDATION

To the Honorable Whitman Knapp, United States District Judge

By Order dated February 11, 2003, Judge Knapp granted defense counsel's motion to withdraw and defendant's motion to withdraw its answer and for entry of a default judgment. (Dkt. Nos. 24-25.)*fn1 On February 19, 2003, Judge Knapp referred the matter to me for an inquest. (Dkt. No. 26.)

For the reasons set forth below, the Court recommends that judgment be entered for plaintiff M. H. Segan Limited Partnership against defendant Trendmasters, Inc. for $15,377,802.

FACTS

"Where, as here, `the court determines that defendant is in default, the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.'" Chen v. Jenna Lane, Inc., 30 F. Supp.2d 622, 623 (S.D.N.Y. 1998) (Carter, D.J. & Peck, M.J.) (quoting 10A C. Wright, A. Miller & M. Kane, Federal Practice & Procedure: Civil 3d § 2688 at 58-59 (3d ed. 1998)).*fn2

The complaint here alleges that Trendmasters has made and sold "Rumble Robots" toys that infringe on plaintiff Segan's patent, U.S. Patent No. 4,938,483, and that such infringement is willful. (Dkt. No. 1: Compl. ¶¶ 5-8.)

ANALYSIS

The Second Circuit has approved the holding of an inquest by affidavit, without an in-person court hearing, "`as long as [the Court has] ensured that there was a basis for the damages specified in the default judgment.'" Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) (quoting Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989)).*fn3

By Order dated February 28, 2003, I directed the parties to submit papers in connection with and in opposition to the inquest by March 24, 2003. (Dkt. No. 27.) Plaintiff Segan did so; defendant Trendmasters did not submit any papers.

Damages in a patent infringement case can be set as a "reasonable royalty":

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.
When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed. . . .
28 U.S.C. § 284 (emphasis added).

Here, defendant Trendmasters indicated it had net sales of Rumble Robots of $51,259,336. (Lawrence Segan 3/21/03 Aff. ¶ 9 & Ex. E.) Marc Segan has stated that based on his twenty-five years' experience in designing and licensing toys, a reasonable royalty would be 10% of net sales. (Marc Segan 3/21/03 Aff. ¶¶ 5-6.) Thus, plaintiff is entitled to a reasonable royalty of 10% of $51,259,336 in defendant's net sales, or $5,125,934. Because a finding of willfulness allows ...


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