In a June 24, 2013 ruling, Magistrate Judge Michael H. Dolinger recommended against a contempt citation for defendant DealExtreme for supposedly violating a preliminary injunction that plaintiff Klipsch Group, Inc. obtained prohibiting counterfeiting of its high-end headphones. DealExtreme was one of some 20 defendants that Klipsch sued for counterfeiting. After receiving a copy of the ex parte TRO that Klipsch had obtained, DealExtreme conducted an internal investigation, and found that its website had facilitated the sale of counterfeit products. It cooperated with Klipsch in providing information about those sales, and the Court converted the TRO into a preliminary injunction. Klipsch subsequently accused DealExtreme of violating the injunction, and moved for "contempt seeking both coercive and compensatory sanctions, including damages, costs and attorneys' fees associated with Klipsch's motion."
In response to the motion, DealExtreme "implicitly concede[d] that the terms of the preliminary injunction order were clear and unambiguous and that its advertisement, sale, storage, and shipment of the . . . Counterfeit products after September 14, 2012 violated the preliminary injunction." DealExtreme contended, though, that Klipsch had failed to show DealExtreme's lack of diligence in trying to comply with the injunction. After a lengthy consideration of DealExtreme's compliance efforts, the Court found that "Klipsch has failed to carry its burden of showing that DealExtreme's compliance efforts have been unreasonable." In particular, Judge Dolinger noted that "each time that DealExtreme has received notice of infringing product listings on its website it has acted promptly to remove those listings and has modified its internal compliance procedures to better protect against similar future infringements." Finding that DealExtreme could have done more, as DealExtreme itself concedes, to comply with the injunction, the Court found that that is insufficient for a contempt finding. Rather, Judge Dolinger noted that "plaintiff is required to show by clear and convincing evidence that defendant's efforts at compliance have been less than reasonably diligent." Judge Dolinger held that Klipsch had not met that standard, and denied Klipsch's motion.
In an August 9, 2013 ruling, Judge Alison J. Nathan adopted the Report and Recommendation in full, and denied Klipsch's contempt motion.
In an August 9, 2013 ruling, Judge Alison J. Nathan adopted the Report and Recommendation in full, and denied Klipsch's contempt motion.
