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Epic Tech, LLC v. Lara

United States District Court, S.D. Texas, Houston Division

November 29, 2017

EPIC TECH, LLC, Plaintiff,
v.
FRANK LARA, and PC SWEEPS, LLC Defendants.

          OPINION AND ORDER

          MELINDA HARMON UNITED STATES DISTRICT JUDGE

         Pending before the Court in the above-referenced cause is Plaintiff Epic Tech's (“Epic”) Motion for Default Judgment (“Motion”) against Defendants Frank Lara, individually and PC Sweeps, LLC (“Lara and Sweeps”). Doc. 42. The Court previously entered a default against Lara and Sweeps on November 2, 2017. Doc. 48. After careful consideration of the filings, record, and law, the Court is of the opinion that the motion should be granted.

         Epic alleges that Lara and Sweeps modified and distributed Epic's Legacy sweepstakes software in violation of Epic's registered copyrights and trademarks, unregistered trademarks, and that they misappropriated Epic's trade secrets. Doc. 1 at 1-2, 10. Epic seeks a default judgment on statutory damages for willful copyright and trademark infringement, seeks a permanent injunction against Lara and Sweeps's continuing use of Epic's Legacy sweepstakes software, and seeks attorney's fees, post-judgment interest, and costs. Docs. 1 at 28; 42 at 6-7.

         I. Background

         Epic owns Legacy, a proprietary sweepstakes software system, and various associated copyrights, trademarks, and trade secrets. Doc. 1 at 3-10. Some of these copyrights and trademarks are federally registered. See Id. at 7-10. According to Epic, Legacy's software system is a “promotional tool” where licensed businesses “provide[] entries into a server-based sweepstakes either through the making of a qualified purchase or after following the rules . . . of the sweepstakes.” Id. at 3-4, ¶ 12. “Patrons can then either reveal the results of their entries through using entertaining games available on the computer terminals, or by requesting that the results be immediately revealed.” Id.

         Epic's complaint also explains how Legacy operates and how Epic protects its code from manipulation. Legacy operates across a network consisting of a server, a management terminal, a point of sale terminal, computer terminals for customers' use, and a management terminal. Doc. 1 at 4, ¶ 13. It features “highly confidential mathematical formulas” and source code that neither patrons nor businesses licensing Legacy may view. Id. at 6, ¶ 16. Instead, “[a]ccess to the server is only available to high security level employees of Epic Tech, via sophisticated password protection mechanisms, ” and a “kill code” can be used to “disable the software.” Id. at 6-7. Utilizing this code, Legacy creates a “variety of entertaining games, which have proprietary names, themes, images, sounds, and even music.” Id.

         On May 7, 2015, Epic brought this lawsuit, alleging that Lara and Sweeps “gained unauthorized possession” of Epic's Legacy software, renaming it as “Falcon, ” and “have engaged in a scheme to secretly modify, copy, and distribute the software to unauthorized third parties within the state of Texas, ” North Carolina, and Florida.[1] Id. at 1-2, 10, 13. Attached to Epic's complaint are the sworn declarations of Jason Queen, Epic's Director of Information Technology, Doc. 2-1 at Ex. 1, and James Fierro, Epic's private investigator, Id. at Ex. 2; the deposition transcripts of Robert Cavazos, an owner of an infringing sweepstakes parlor in Texas, Id. at Ex. 3, Kevin Frank, an installation and maintainer of Falcon terminals, Id. at Ex. 4 and Richard Schappel, a distributor of Falcon software, Id. at Ex. 5; an assignment of copyrights to Epic, Id. at Ex. 6; a copyright, Id. at Ex 7, and two trademark registrations, Id. at Ex. 8. Additional copyright and trademark registrations are attached to Epic's Motion for Default Judgment. Doc. 42 at Ex. 4, 5.

         According to Queen, Epic's IT. Director, Lara and Sweeps distributed “Falcon software, ” which is “directly copied from [Epic's] software.” Doc. 2-1 at 3-6. Queen's allegation is based upon photographs taken by Fierro at a business location at 16097 N. Loop Dr., Ste E, Socorro, Texas 79927 (“North Loop”), and personal observations of Falcon's “management terminal software, ” as follows: Lucky Duck Game:

(Image Omitted)

Id. at 3-10, 14-16. Queen also claims that he personally observed Falcon software in multiple locations in North Carolina and Florida. Id. at 6. In addition to North Carolina and Florida, Queen “believes that the Falcon software is being distributed in other states including Arizona, California, and Colorado.” Id. at 11.

         Epic alleges that the depositions provide additional evidence of a scheme where Lara and Sweeps would distribute and install Falcon software, and then retrieve a portion of the revenue. Doc. 1 at 11, 13. According to the deposition of Cavazos, Lara installed the software at North Loop, and picked up a weekly cash payment of 50% of revenues derived from Falcon. Doc. 2-1 at 54:5, 59:7-10, 88:5-12, Ex. 3. According to the depositions of Frank and Schappel, Lara distributed the software to them for installation, Lara activated the software, and Lara received 5% of profits. Id. at Ex. 4, 5.

         Queen alleges that Epic owns the copyrights for the above software and icons. Relevant to the default judgment, Queen alleges that Epic owns these five copyrights for the Lucky Duck game and one for the Ritzy Kitty game: Copyright Registration Nos. PA0001828303 (lucky duck screen displays), VA0001745520 (lucky duck game icons and screens), VA0001779200 (cherries), VA0001779211 (bell), VA0001779212 (watermelon), and VA0001943259 (Ritzy Kitty). Id. at 3; Doc. 42 at 13-14. According to the exhibits attached to the motion for default judgment and a supplement to that motion, Epic owns each of these copyrights through assignment, conveyance, or direct copyright claim. Docs. 42-4, Ex. 4 (copies of copyright filings); 2-1 at 368-372, Ex. 6 (assignment of copyrights to Epic); 50. While, the supplemental filing walks through the transfer of the copyright claims from filing to Epic, we do not include this roadmap in the opinion because the Court granted Epic's motion to seal the supplemental filing. Doc. 50.

         Queen also alleges that Epic owns two federal trademarks for the Lucky Duck, U.S. Trademark Registration No. 3, 853, 565, and Reel Cats games, U.S. Trademark Registration No. 3, 782, 626. Doc. 2-1 at 3. The below example screen shots were taken from Falcon software used in North Carolina:

(Image Omitted)

         According to the exhibits attached to the motion for default judgment, Gateway Gaming, LLC registered federal trademarks for Lucky Duck and Reel Cats, and later assigned those trademarks to Epic. Doc. 42-5, Ex. 5. Epic also alleges common law trademarks for Storefront and Community Prize, but Queen only references other “registered trademarks.” Docs. 1 at 9, ¶ 28; 2-1 at 4, ¶ 11, as follows:

(Image Omitted)

Doc. 1 at 14.[2]

         Finally, Queen alleges that the similarities of the management terminal software of both Falcon and Legacy proves that Falcon used a copy of Legacy's computer code, which is Epic's trade secret. Id. at 8-11.

         Thus, Epic sued Lara and Sweeps alleging that they willfully infringed on six of Epic's copyrights under 17 U.S.C. § 501, two trademarks under 15 U.S.C. § 1114, two common law trademarks under state law, and its trade secret computer code. Id. at 15-29; Doc. 42 at 6-7.

         Epic effected service on Lara and Sweeps. On May 13, 2015, Epic served Lara under Rule of Civil Procedure 4(e)(2)(B) by leaving copies of the Complaint and Summons with someone of suitable age and discretion who resides at Lara's residence. Doc. 17. On the same date, Epic served Sweeps under Rule of Civil Procedure 4(h)(1)(B) by effecting service on Lara, the president of Sweeps, and by delivering a copy of the summons and of the complaint to Ms. Holseth, Accounts Manager of Sweeps. Doc 18.

         On April 7, 2017, Epic moved for default judgment against Laura and Sweeps, seeking statutory damages for willful conduct, a permanent injunction, and attorney's fees. Doc. 42. Under the Local Rules of the Southern District of Texas, Epic served the motion for default judgment upon the Defendants via certified mail, with return receipt requested. Id. ...


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