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Crescent Services, Inc. v. Michigan Vacuum Trucks

May 12, 2010

CRESCENT SERVICES, INC., PLAINTIFF,
v.
MICHIGAN VACUUM TRUCKS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: David G. Larimer United States District Judge

DECISION AND ORDER

INTRODUCTION

Plaintiff Crescent Services, Inc. ("Crescent") commenced this action against defendants Michigan Vacuum Trucks, Inc. ("Michigan Vacuum") and Shea's Outhouse Service, Inc. ("Shea's") pursuant to the Patent Laws of the United States 35 U.S.C. §100 et seq., seeking a money judgment against Michigan Vacuum for patent infringement. (Dkt. #1). Michigan Vacuum was duly served with process but has failed to appear or to answer the complaint. An initial Entry of Default was entered by the Clerk on April 29, 2009. (Dkt. #10). After correspondence to Michigan Vacuum from plaintiff's counsel was returned as undeliverable and an investigation revealed that personal service had been made upon Terrance Wickenheiser, Sr. instead of Michigan Vacuum officer Terrance Wickenheiser, Jr., plaintiff requested an extension of time to re-serve Michigan Vacuum with the complaint. That request was granted (Dkt. #13), and Michigan Vacuum was served by court-ordered substituted service on July 31, 2009. (Dkt. #18, 19). On October 1, 2009, the Clerk of the Court entered a Second Entry of Default against Michigan Vacuum. (Dkt. #22).

Plaintiff now moves for a default judgment pursuant to Fed. R. Civ. P. 5(b)(2), seeking an order of compensatory and punitive damages, including prejudgement interest and attorneys fees, as well as injunctive relief, against Michigan Vacuum. (Dkt. #23). For the reasons set forth below, that motion is granted.

FACTUAL ALLEGATIONS IN THE COMPLAINT

According to the complaint, Robert P. Denome ("Denome"), the sole owner and President of Crescent, is the inventor of a "Low Profile Transportable Sewage Holding Tank" (the "Tank") and the patent-holder of the corresponding patent, U.S. Patent No. 6,598,242 (the "'242 patent"). In October 2008, Denome assigned the '242 patent to Crescent, which proceeded to manufacture and sell the Tank, along with related tank-mounting services, at an appreciable profit.

In June 2007, Denome personally observed that one of Crescent's competitors in the Rochester, New York area, Shea's, was using trucks with tanks very similar to the Tank protected by the '242 patent. Upon investigation, Crescent's counsel learned that Shea's had purchased the similar tank from Michigan Vacuum, and upon a physical inspection of the tank, determined that the tank manufactured by Michigan Vacuum was, in all relevant respects, a copy of Denome's patented Tank design which infringed on the '242 patent. Crescent contacted Michigan Vacuum and requested that Michigan Vacuum provide evidence that its tank did not infringe on the '242 patent. Despite multiple invitations by Crescent, Michigan Vacuum declined to respond.

The complaint alleges causes of action for patent infringement pursuant to 35 U.S.C. §284 et seq. The complaint requests compensatory and punitive damages, costs and attorneys fees, and an injunction prohibiting Michigan Vacuum from further infringement of the '242 patent.

MOTION FOR DEFAULT JUDGMENT

In order to obtain a default judgment, a party must first secure the clerk's entry of default by demonstrating, by affidavit or otherwise, that the opposing party is in default. See Fed. R. Civ. Proc. 55(a); J&J Sports Prods. v. Bimber, 2008 U.S. Dist. LEXIS 39174 at *2 (W.D.N.Y. 2008). Once default has been entered, the allegations of the complaint that establish the defendant's liability are accepted as true, except for those relating to the amount of damages. Id., 2008 U.S. Dist. LEXIS 39174 at *3-*4 (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)).

The Clerk has entered Michigan Vacuum's default and Crescent has shown that it is entitled to judgment against Michigan Vacuum, based on its failure to respond to the allegations asserted in the complaint. However, the Court cannot merely accept at face value that Crescent is entitled to the relief it seeks. Rather, "judgment against a defaulting party should be granted only after careful examination of the moving party's claim by the district court. . . . Indeed, a defendant's default does not in itself warrant [entry of] a default judgment because there must be a sufficient basis in the pleadings for the judgment entered." Bianco v. Seaway Indus. Services, Inc., 2004 WL 912916, *1 (W.D.N.Y. Apr. 01, 2004) (internal citations and quotations omitted); see also Enron Oil Corp. v. Masonori Diakuhara, 10 F.3d 90, 95-96 (2d Cir.1993). The Court, therefore, must evaluate the merits of the underlying claim and the relief sought. See Wagstaff-el v. Carlton Press Co., 913 F.2d 56, 57 (2d Cir.1990). Furthermore, the Second Circuit cautions that "defaults are generally disfavored and are reserved for rare occasions," and when there is doubt as to the propriety of default relief, "the doubt should be resolved in favor of the defaulting party." Enron Oil Corp., 10 F.3d at 96.

I have reviewed the allegations in the complaint in detail. Accepting as true Crescent's allegations that Michigan Vacuum's allegedly offending tank is a copy of Crescent's Tank in all respects relevant to the claims of the '242 patent and therefore does infringe upon it, and upon review of the evidence submitted by Crescent in support of its claims, I am convinced that Crescent has established its claims of patent infringement, and is entitled to default judgment on that claim.

In assessing Crescent's damages claim, the Court notes that Crescent is entitled to an award of 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." 35 U.S.C. §284. The patent owner -- here, Crescent -- bears the burden to prove the amount of damages. See Oiness v. Walgreen Co., 88 F.3d 1025, 1029 (Fed. Cir. 1996). "While the damages may not be determined by mere speculation or guess, it will be enough if the evidence show[s] the extent of the damages as a matter of just and reasonable inference, although the result be only approximate." Rates Tech. Inc. v. Redfish Telemetrix, Inc., 2001 U.S. Dist. LEXIS 23246 at *10 (E.D.N.Y. 2001), quoting Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1065 (Fed. Cir. 1983).

In order to demonstrate lost profits, the preferred method for assessing damages for patent infringement under 35 U.S.C. §284, Crescent must "establish the sales and profits lost as a result of the infringement." Rates Tech. Inc., 2001 U.S. Dist. LEXIS 23246 at *10-*11. The Federal Circuit has established a four-part test for proving lost profits, by which the patent holder must show: (1) that a demand for the patented product existed; (2) that there was an absence of acceptable non-infringing substitutes; (3) that the patentee possessed the marketing and manufacturing capabilities to meet the demand; and (4) the amount of lost profits due to the infringing activity, or the amount of profit the patentee would have made had the infringement not occurred. See Fonar Corp. v. General Electric Co., 107 F.3d 1543, 1553 (Fed. Cir. 1997). Once ...


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