Nintendo of America v. NTDEC

Citation
Nintendo of America, Inc. v. NTDEC, 51 F.3d 281 (9th Cir. 1995).

Factual Background
Plaintiff, Nintendo of America, Inc. (“Nintendo”), a video game manufacturer, alleged that Defendants, NTDEC and Nintendo Electronic Co. (“NTDEC”), were engaged in a large-scale operation counterfeiting Nintendo’s video games. NTDEC made a business reproducing Nintendo’s computer games, repackaging them, and exporting them for sale into the United States and other countries. Nintendo’s investigators, posing as potential wholesale buyers, visited NTDEC’s plant in Taiwan, purchased samples of infringing products, and were given sales brochures with price lists for infringing products.

Trial Court Proceedings
Nintendo brought civil action against NTDEC. However, Nintendo’s attempts to conduct discovery were repeatedly frustrated. Ultimately, NTDEC’s counsel moved to withdraw because NTDEC failed to cooperate with defense counsel. The trial court entered a default judgment in the amount of $24,059,062.00. The court also granted Nintendo a world-wide permanent injunction against NTDEC’s infringing activities to prevent continued violation of Nintendo’s intellectual property rights. NTDEC petitioned the trial court to set aside the default judgment and alleged that they had been erroneously advised by counsel that a default judgment would be unenforceable against them in Taiwan. The trial court denied the motion.

Appellate Court Proceedings
NTDEC appealed the entry of judgment, the amount of damages, and the trial court’s refusal to set the judgment aside. NTDEC argued that there were defects in Nintendo’s service of documents subsequent to the complaint. They also challenged the amount of the judgment, claiming that although the trial court’s calculations purported to base the award on NTDEC’s profits from their illegal activity, in fact the court unrealistically assumed that NTDEC had zero costs of production and distribution.

The appellate court stated that NTDEC was given proper notice of the hearings on the motions for default judgment and that their failure to show up at the hearings to argue on their own behalf cannot be attributed to any fault of Nintendo or the court. Thus, the court held that NTDEC must bear the consequences and that the entry of judgment by default was entirely proper. The appellate court also stated that absent any evidence of the amount of NTDEC’s costs, the trial court was not obligated to take costs into account in calculating profits. Last, the appellate court held that the trial court did not abuse its discretion in refusing to set aside the default judgment. The appellate court state that NTDEC’s conduct was culpable since they willfully absented themselves from the proceedings, cut off contact with their attorneys, and evaded actual receipt of all further papers. Thus, the appellate court affirmed the judgment of the district court.