Case 3:17-cv-01321-PK Document 1 Filed 02/02/17 Page 1 of 20

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

____________________________________
)
DIGITAL FUNDING, LLC, )
)
Plaintiff, )
)
v. ) Civil Action No. ______________
)
UMPQUA BANK, )
)
Defendant. )
____________________________________)

COMPLAINT

Plaintiff, Digital Funding, LLC, by and through its undersigned counsel, brings this

action against Defendant, Umpqua Bank, and respectfully alleges as follows:

NATURE OF THE ACTION

1. This is an action under the Copyright Act, the Lanham Act and state-law arising

from defendant’s campaign to willfully exploit plaintiff’s rights in a catalog of copyrighted

works and registered trademarks, and defendant’s purposeful interference with plaintiff’s

contractual relations with defendant’s Borrowers. After causing the Borrowers to breach their

License Agreement for the use of plaintiff’s intellectual property, plaintiff terminated the License

Agreement with the Borrowers. Defendant then orchestrated the sale of hundreds of thousands

of copies of the Works and Trademarks, the majority of which were sold in a “fire sale” auction.

Defendant financed the costs of the illegal sales and pocketed the proceeds. In addition, prior to

the termination of the License Agreement, defendant tortiously interfered with the Borrowers’

performance of the contract by refusing to permit the Borrowers to pay certain third-party license

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fees that were required under the agreement. Defendant’s brazen conduct even included the

outright conversion of third-party license fees that belonged to plaintiff. As a result, plaintiff has

filed this action.

THE PARTIES
2. Plaintiff, Digital Funding, LLC, is a limited liability company organized and

existing under the laws of Delaware.

3. Defendant Umpqua Bank is a bank chartered under the laws of the State of

Oregon with a principal place of business in Oregon.

JURISDICTION AND VENUE

4. This Court has subject matter jurisdiction over the copyright and trademark

claims included in this action pursuant to 28 U.S.C. §§1331 and 1338. This Court has

supplemental subject matter jurisdiction over the state – law claims under 28 U.S.C. §1367.

5. Venue in this Court is proper under 28 U.S.C. §1391 (b) – (c), and/or 28 U.S.C.

§1400 (a).

6. This Court has personal jurisdiction over defendant because the acts described in

the complaint occurred partly in Delaware and caused harm to plaintiff in Delaware. In addition,

defendant was a direct and intended beneficiary of the transactions between plaintiff and the

Licensees identified in the complaint.

7. The exercise of personal jurisdiction over defendant is consistent with Delaware’s

Long-Arm Statute, 10 Del. C. § 3104, and Constitutional due process concerns.

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BACKGROUND

8. Plaintiff owns or has the exclusive copyrights in numerous musical and video

works. The works that are the subject of this action are identified on Exhibit A attached hereto

(the “Works”). Plaintiff owned or had the exclusive rights to the Works at all times during the

acts of infringement identified in this complaint.

9. Plaintiff owns or has exclusive rights to the registered trademarks identified on

Exhibit B attached hereto, which, at all times relevant hereto, have been used in interstate or

foreign commerce (the “Trademarks”). Plaintiff owned or had the exclusive rights to the

Trademarks at all times during the acts of infringement identified in this complaint.

10. Allegro Corporation (“Allegro”), Somerset Group, Ltd. (“Somerset”), and

Softland Corporation (collectively, the “Borrowers”) were companies engaged in the

manufacture and distribution of small independent music and video labels and small consumer

electronics. Among the assets owned by the Borrowers was a catalog consisting of thousands of

master video and audio recordings, contract rights relating to such recordings, artwork associated

with the master recordings, publishing rights associated with the master recordings, trademarks

arising out of or used in connection with the master recordings, and books and records

(collectively, the “IP Catalog”). The IP Catalog included the Works and Trademarks.

11. The IP Catalog is the lifeblood of the Borrowers’ businesses as the rights

associated with the catalog enabled the Borrowers to manufacture and sell the content in physical

format, as well as through digital sales.

12. Prior to December 2015, the Borrowers were indebted to defendant and certain

predecessor entities for various loan obligations in the approximate amount of $10 million.

Beginning in the third quarter of 2015, the Borrowers began exploring opportunities to reduce

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the amount of debt owed to defendant through the sales of assets. Defendant was fully aware of

the Borrowers’ attempt to sell off certain assets to generate cash to reduce their debt to

defendant.

13. In connection with these efforts, on November 30, 2015, Allegro and Somerset,

on the one hand, and plaintiff, on the other hand, entered into a series of agreements led by a

Master Recording Purchase Agreement (the “Purchase Agreement”), pursuant to which plaintiff

purchased from Allegro and Somerset the IP Catalog for a purchase price of $2 million. At

closing on the Purchase Agreement, the purchase price was conveyed to defendant, which

released any liens or security interests it possessed in the IP Catalog.

14. The material terms of the Purchase Agreement, including the purchase price, were

communicated to and approved by defendant prior to the execution of the Purchase Agreement.

In addition, defendant required that the full $2 million purchase price be paid to it at closing on

the Purchase Agreement as consideration to defendant for the release of its liens in the IP

Catalog. At closing, defendant received the purchase price and released its liens in the IP

Catalog.

15. Certain works included in the IP Catalog were subject to license agreements

between original owners and copyright holders and Allegro and Somerset (the “Third-Party

Licenses”). Under the Third-Party Licenses, in exchange for licensing fees, Allegro and

Somerset maintained exclusive rights to use and exploit the licensed works. Under the Purchase

Agreement, the Third-Party Licenses were assumed and assigned to plaintiff.

16. The Third-Party Licenses required the payment of license fees based upon the

sales of licensed content by Allegro and Somerset. Recognizing that Allegro and Somerset

would continue to exploit the licensed content, the Purchase Agreement required Allegro and

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Somerset to continue to pay fees that were owed under the Third-Party Licenses to these

licensors. (See Purchase Agreement at §1.2).

17. To facilitate Allegro’s and Somerset’s continued use of the IP Catalog after

closing of the Purchase Agreement, Allegro, Somerset and plaintiff executed a License

Agreement (the “License Agreement”) under which plaintiff conveyed to Allegro and Somerset

(collectively, the “Licensees”) a nonexclusive, non-royalty bearing, nontransferable and

nonsublicensable license to use the IP Catalog in the manufacture and sale of products that

included IP Catalog content in physical format only. A true and correct copy of the License

Agreement is attached hereto as Exhibit C.

18. On February 3, 2016, plaintiff and the Licensees executed an amendment to the

License Agreement that clarified the license arrangements with respect to compilations of video

and audio master recordings included in the IP Catalog.

19. Consistent with section 1.2 of the Purchase Agreement, the License Agreement

required the Licensees to pay all royalties, license fees and other charges owed to licensors under

the Third-Party Licenses resulting from the commercial use of the IP Catalog in connection with

their business activities. Under the Purchase Agreement, plaintiff assumed obligations

associated with the Third-Party Licenses arising after transfer of the IP Catalog. The payment of

obligations arising under the Third-Party Licenses by the Licensees was critical to enable

plaintiff to maintain its rights in the IP Catalog. The failure to pay these obligations would

expose plaintiff, not the Licensees, to penalties and damages under the Third-Party Licenses and

could result in the cancellation of the Third-Party Licenses.

20. In addition, prior to closing on the Purchase Agreement, Allegro and Somerset

were licensors of IP Catalog content to third-parties under downstream licensing arrangements

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under which third-party licensees would pay license fees to Allegro and Somerset for the use of

the licensed content (the “Downstream License Fees”).

21. After closing on the Purchase Agreement, plaintiff notified the licensees to pay all

Downstream License Fees to plaintiff directly. However, some of the licensees continued to pay

Allegro and Somerset. When this occurred, Allegro and Somerset would pay over the

Downstream License Fees to plaintiff.

22. The license granted under the License Agreement could be terminated by plaintiff

for various events, including, but not limited to, the insolvency of either of the Licensees, either

of the Licensees suffered or consented to the appointment of a receiver, trustee, custodian or

liquidator, or either of the Licensees became generally unable to pay or failed to pay its debts as

they became due.

23. On or about December 2, 2015, defendant and the Borrowers executed that certain

Business Loan Agreement (Asset Based) (“Loan Agreement”) in the principal amount of $10

million pursuant to which defendant agreed to make certain advances to the Borrowers pursuant

to the terms and conditions of the agreement. The Loan Agreement did not represent a new

funding arrangement between the parties but instead constituted a rollover of existing debt that

had been extended by defendant to the Borrowers. A true and correct copy of the Loan

Agreement is attached hereto as Exhibit D.

24. The Borrowers’ obligations under the Loan Agreement were allegedly secured by

a first lien and security interest on substantially all of the Borrowers’ assets, including inventory,

accounts receivable, equipment and fixtures and general intangibles. Since the Borrowers did

not own the IP Catalog on the closing date of the Loan Agreement (and defendant previously

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released any liens on the IP Catalog in exchange for $2 million), defendant obtained no liens or

security interests on IP Catalog content.

25. The Loan Agreement created a revolving line of credit under which cash

generated from sales and other business activities was deposited into a cash collateral account

(the “Cash Account”) maintained at defendant. (Loan Agreement at p. 8). The Cash Account

was controlled by defendant and defendant, at its election, could withdraw the entire balance

from the account and apply the proceeds to the Borrowers’ obligations. (Loan Agreement at p.

8). As the Borrowers required cash to operate their businesses, defendant would then advance

funds under the Loan Agreement as additional borrowings under the line of credit. (Loan

Agreement at p. 1).

26. Under the terms of the Loan Agreement, the Borrowers were required to identify

a business consultant by February 1, 2016 and to employ the business consultant no later than

July 1, 2016. (Loan Agreement at p. 8). At the time the Loan Agreement was executed, it was

contemplated that the business consultant would consult with the Borrowers in restructuring or

selling their businesses.

27. In order to comply with the terms of the Loan Agreement, on or about February 1,

2016, the Borrowers selected Edward Hostmann, Inc. (“EHI”), as their business consultant. EHI

and its principal, Edward Hostmann (“Hostmann”), were recommended by defendant and, upon

information and belief, were well-known to defendant from other transactions.

28. On June 1, 2016, Allegro appointed Hostmann as its “chief restructuring officer”

with certain powers to act on behalf of the corporation. Despite being appointed by Allegro’s

Board of Directors, from and after his appointment, Hostmann never took direction from the

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Board and instead communicated directly with defendant to develop and implement the

liquidation of the Borrowers’ assets.

29. Hostmann relied upon defendant to fund the costs associated with the wind-down

and liquidation of the Borrowers. Hostmann and EHI prepared cash budgets for defendant that

included the costs associated with operating the businesses and selling the Borrowers’ assets.

Since the Borrowers had no cash, Hostmann was completely reliant upon defendant for the funds

he needed. Defendant reviewed the cash budgets, decided what costs would be paid and then

advanced funds to cover only the costs it approved. EHI’s fees were also included in the funds

advanced by Defendant. All cash generated by Hostmann was deposited into the Cash Account

and swept by defendant on a regular basis. EHI was not authorized by defendant to spend any

cash other than what was included in the budget approved by defendant.

30. Through this process, Hostmann and EHI acted solely for the benefit of

defendant. In fact, in connection with an involuntary bankruptcy proceeding filed against

Allegro, Hostmann and EHI have contended (and defendant has agreed) that they acted as a

“custodian” of the Borrowers’ assets for the benefit of defendant. As a custodian, Hostmann and

EHI acted as an agent for the administration of the Borrowers’ property for defendant’s benefit.

No one other than defendant benefitted from their activities.

31. In contrast, at no point after June 3, 2016 were the Borrowers’ directors or owners

responsible for any decision-making with respect to the Borrowers’ business activities. They did

not approve the cash budgets submitted to defendant, did not request any advances from

defendant under the Loan Agreement, did not sign checks, and did not approve cash expenditures

associated the operation of the Borrowers’ businesses.

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32. Defendant also played fast and loose with respect to declaring the Borrowers in

default of the Loan Agreement to perpetuate the illusion that defendant was not in complete

control of the Borrowers. Under the Loan Agreement, the “Effect of an Event of Default”

includes the following language:

If any Event of Default shall occur, except where otherwise provided in
this Agreement or the Related Documents, all commitments and
obligations of Lender under this Agreement or the Related Documents or
any other agreement immediately will terminate (including any obligation
to make further Loan Advances or disbursements), and, at Lender’s
option, all Indebtedness immediately will become due and payable, all
without notice of any kind to Borrower, except that in the case of an
Event of Default of the type described in the “Insolvency” subsection
above, such acceleration shall be automatic and not optional. (Loan
Agreement at p. 7) (emphasis added).
33. The term “Insolvency” as used in the Loan Agreement is defined as follows:

The dissolution or termination of Borrower’s existence as a going
business, the insolvency of Borrower, the appointment of a receiver for
any part of Borrower’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against
Borrower. (Loan Agreement at p. 6)
34. The Borrowers were “Insolvent” as of June 1, 2016, when Hostmann was

appointed as chief restructuring officer. By that date, the Borrowers were not paying their debts

as they became due, and were therefore insolvent. In addition, EHI’s and Hostmann’s

appointment, and defendant’s assumption of control over the Borrowers’ cash expenditures,

plainly constituted a “creditor workout” that amounted to insolvency under the Loan Agreement.

35. The “Insolvency” of the Borrowers resulted in an immediate termination of the

Loan Agreement and the automatic and non-optional acceleration of the debt. Despite these

events, defendant continued to create the false impression that the Loan Agreement was still in

effect and that funding provided to Hostmann constituted arms-length advances under the loan.

Three months after the real acceleration of the debt, on August 31, 2016, defendant purported to
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accelerate the loan balance. By the time of the acceleration, defendant, through its own actions

and its control of Hostmann, its custodian, had already been exercising complete dominion and

control over the Borrowers and their assets for months.

36. After assuming control over the Borrowers through Hostmann and EHI, defendant

caused the Licensees not to pay obligations due under the Third-Party Licenses as required under

the License Agreement. Defendant was aware of these obligations yet refused to provide

funding to pay them, even though funds were made available to Hostmann to satisfy other

business expenses of the Borrowers.

37. Defendant’s intentional decision to refuse to fund the Borrowers’ obligations

under the Third-Party Licenses caused the Borrowers to default on the License Agreement, and

resulted in actual and significant potential injury to plaintiff. Defendant’s actions are particularly

egregious because the obligations it refused to pay are calculated based on the Borrowers’ sales

of content covered by the Third-Party Licenses. Thus, defendant received the full benefit of the

sales of this content, but refused to pay the expenses due under the Third-Party Licenses that

arose from the same sales.

38. In addition, EHI and Hostmann, at the direction defendant, refused to turn over

misdirected Downstream License Fees that belonged to plaintiff. Instead, these misdirected

payments were deposited into the Cash Account and taken by defendant, even though they were

not property of the Borrowers.

39. In one instance in July 2016, plaintiff became aware that approximately $20,000

in Downstream License Fees had been mistakenly paid to Allegro. Plaintiff demanded turnover

of these misdirected payments from EHI and Hostmann. Plaintiff was informed that EHI did not

object to turning over of plaintiff’s property, but that defendant had refused to permit EHI to

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return the funds to plaintiff. Upon information and belief, these funds were swept from the Cash

Account and taken by defendant.

40. By September 2016, multiple grounds existed for termination of the License

Agreement, including the Licensees’ insolvency, the appointment of EHI and Hostmann and the

failure of the Licensees to pay their debts as they became due.

41. As a result of these events, on September 12, 2016, plaintiff terminated the

License Agreement and transmitted notice of termination to the Licensees. The Licensees,

through Hostmann and EHI, in turn, notified defendant of the termination.

42. As a result of the proper termination of the License Agreement, the Licensees’

license to manufacture and sell products incorporating the IP Catalog was terminated, and all of

the licensed rights were transferred to plaintiff. As a result of the termination, only plaintiff had

the right to sell content included in the IP Catalog.

43. Notwithstanding this reality, EHI and Hostmann, acting on behalf of defendant as

its custodian, and under the direction of defendant, continued to sell hundreds of thousands of

units of physical inventory, which included content from the IP Catalog. The unauthorized sale

of plaintiff’s proprietary material included an auction conducted on or about October 12, 2016, in

which hundreds of thousands of inventory items including the Works and the Trademarks were

sold at “fire-sale” prices in direct violation of plaintiff’s rights. The liquidator retained by

Hostmann to conduct the auction, Great American Group, conducted extensive advertising and

promotion of the sale of the Borrowers’ inventory that included IP Catalog content. These

promotional efforts included the use of website promotions and other electronic communications

that occurred in Delaware.

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44. The unauthorized sale of products incorporating content from the IP Catalog,

especially the auction sale, flooded the market with copies of the Works and the Trademarks and

substantially impaired the value of plaintiff’s interests in these assets.

45. All of the activities conducted by EHI and Hostmann occurred under the direction

of and with the direct knowledge and involvement of defendant, its legal counsel and its agents.

Defendant not only authorized and encouraged the sale of products including the Works and the

Trademarks, it approved and funded all of the costs associated with the sales and pocketed the

sale proceeds.

46. As a result of defendant’s actions, plaintiff has suffered significant injuries and

brings this action.

COUNT I
Tortious Interference with Contractual Relations

47. Plaintiff incorporates by this reference the preceding paragraphs of this complaint

as if fully set forth at length herein.

48. The Licensees breached the License Agreement by virtue of various events,

including their failure to satisfy the obligations in the Third-Party Licenses.

49. Defendant was aware of the obligations owed on the Third-Party Licenses that are

included in the License Agreement. Defendant benefited from the Third-Party Licenses and the

License Agreement because the proceeds of sales of products that exploited the IP Catalog were

taken by defendant from the Cash Account.

50. Despite defendant’s awareness of the License Agreement and its receipt of direct

benefits from the business activities of the Licensees, defendant intentionally refused to permit

the Licensees to satisfy their obligations under the License Agreement by refusing to advance

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funds to the Licensees or permit the use of its cash collateral to satisfy the Licensees’ obligations

under the Third-Party Licenses, as expressly required by the License Agreement.

51. Defendant’s actions as described herein are intentional acts that caused direct

injury to plaintiff by exposing plaintiff to injuries caused by the Licensees’ failure to satisfy their

required obligations under the Third Party Licenses.

52. Defendant’s actions in taking the proceeds of sales of products that included

content in the IP Catalog while, at the same time, interfering with the Licensees’ ability to satisfy

their obligations under the License Agreement, constitutes extreme and outrageous conduct that

justifies the imposition of punitive damages.

WHEREFORE, plaintiff respectfully requests that this Court enter the relief against

defendant as requested in plaintiff’s prayer for relief.

COUNT II
Conversion

53. Plaintiff incorporates by this reference the preceding paragraphs of this complaint

as if fully set forth at length herein.

54. Defendant exercised dominion and control over the Downstream License Fees

that were erroneously received by the Borrowers and deposited into the Cash Account.

55. Defendant was aware of the fact that the Downstream License Fees were not

property of the Borrowers and instead belonged to plaintiff.

56. Defendant wrongfully refused Plaintiff’s demand for return of the Downstream

License Fees even though Defendant knew that these funds were not the Borrowers’ property

and, therefore, defendant had no right whatsoever to retain possession of these funds.

57. As a result of the foregoing, defendant converted the Downstream License Fees

and is liable to plaintiff for return of its property.

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58. Defendant’s conversion of the Downstream License Fees constitutes extreme and

outrageous conduct that justifies the imposition of punitive damages.

WHEREFORE, plaintiff respectfully requests that this Court enter the relief against

defendant as requested in plaintiff’s prayer for relief.

COUNT III
Direct Copyright Infringement

59. Plaintiff incorporates by this reference the preceding paragraphs of this complaint

as if fully set forth at length herein.

60. From and after June 3, 2016, Hostmann and EHI acted as defendant’s agent with

respect the operation of the Borrowers’ businesses, including the unauthorized sale of Works

after the License Agreement was terminated. Defendant accepted the benefits of the agency

relationship.

61. Defendant’s activities in selling the copies of the Works after termination of the

License Agreement through its agents, Hostmann and EHI, infringed plaintiff’s copyrights in the

Works and violated the exclusive rights conferred upon plaintiff under 17 U.S. C. §106.

62. As a direct and proximate result of defendant’s direct infringement of the Works,

plaintiff is entitled to damages.

WHEREFORE, plaintiff respectfully requests that this Court enter the relief against

defendant as requested in plaintiff’s prayer for relief.

COUNT IV

Vicarious Copyright Infringement

63. Plaintiff incorporates by this reference the preceding paragraphs of this complaint

as if fully set forth at length herein.

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64. Alternatively, at all times relevant hereto, defendant had the right and ability to

supervise and/or control the infringing conduct of the Borrowers, EHI and Hostmann with

respect to the unauthorized sale of Works after the License Agreement was terminated by,

without limitation, refusing to permit the sale of inventory that included the Works, refusing to

fund the costs and expenses associated with the inventory sales that included the Works, or

directing Hostmann and EHI to segregate inventory that included the Works to insure that the

unauthorized sales did not occur.

65. Prior to the infringing activity, defendant was fully aware of the existence of the

License Agreement and plaintiff’s termination of the License Agreement.

66. The unauthorized sales of copies of the Works infringed plaintiff’s copyrights in

the Works and violated the exclusive rights conferred upon plaintiff under 17 U.S. C. §106.

67. As a direct and proximate result of defendant’s failure to supervise and/or control

the activities relating to the unauthorized sales of the Works as described herein, defendant

permitted and, in fact, openly supported and encouraged, infringing activities associated with the

unauthorized sales of the Works.

68. Defendant derived significant and direct financial benefit from the infringing

activities of the Borrowers as all proceeds from the unauthorized sales of the Works were taken

by defendant.

69. Defendant’s acts of vicarious infringement have been willful, intentional and

purposeful in disregard of and indifferent to plaintiff’s rights.

70. As a direct and proximate result of defendant’s vicarious infringement of the

Works, plaintiff is entitled to damages.

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WHEREFORE, plaintiff respectfully requests that this Court enter the relief against

defendant as requested in plaintiff’s prayer for relief.

COUNT V
Contributory Copyright Infringement

71. Plaintiff incorporates by this reference the preceding paragraphs of this complaint

as if fully set forth at length herein.

72. Alternatively, the Borrowers’, EHI’s and Hostmann’s activities in selling the

copies of the Works infringed plaintiff’s copyrights in the Works and violated the exclusive

rights conferred upon plaintiff under 17 U.S.C. §106.

73. Defendant was fully aware of the existence of the License Agreement and

plaintiff’s termination of the License Agreement, which occurred prior to the infringing activity.

As a result, defendant had direct knowledge of, or had reason to know of, the infringement of the

Works.

74. Through its actions as described herein, defendant materially contributed to the

infringing activity.

75. Defendant derived significant and direct financial benefit from the infringing

activity as all proceeds from the unauthorized sales of the Works were taken by defendant.

76. Defendant’s acts of contributory infringement have been willful, intentional and

purposeful in disregard of and indifferent to plaintiff’s rights.

77. As a direct and proximate result of defendant’s contributory infringement of the

Works, plaintiff is entitled to damages.

WHEREFORE, plaintiff respectfully requests that this Court enter the relief against

defendant as requested in plaintiff’s prayer for relief.

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COUNT VI
Vicarious Trademark Infringement

78. Plaintiff incorporates by this reference the preceding paragraphs of this complaint

as if fully set forth at length herein.

79. By engaging in sales of goods with the Trademarks affixed to them after

termination of the License Agreement by plaintiff, the Borrowers, EHI and Hostmann have

violated the exclusive rights granted to plaintiff under the Lanham Act.

80. Through its actions as described herein, since Hostmann and EHI were

defendant’s admitted custodian of the Licensees’ inventory that included goods affixed with the

Trademarks, defendant acted in partnership with the Borrowers, Hostmann and EHI with respect

to the infringement of the Trademarks.

81. In addition, through its actions as described herein, defendant exercised joint

ownership of control over the infringing goods.

82. As a result of defendant’s actions as alleged herein, defendant is liable to plaintiff

for vicarious trademark infringement.

83. As the owner of the Trademarks, plaintiff has suffered an injury caused by

defendant’s vicarious infringement of the Trademarks, and is entitled to relief under the Lanham

Act.

WHEREFORE, plaintiff respectfully requests that this Court enter the relief against

defendant as requested in plaintiff’s prayer for relief.

COUNT VII
Contributory Trademark Infringement

84. Plaintiff incorporates by this reference the preceding paragraphs of this complaint

as if fully set forth at length herein.
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85. By engaging in sales of goods with the Trademarks affixed to them after

termination of the License Agreement by plaintiff, the Borrowers, EHI and Hostmann have

violated the exclusive rights granted to plaintiff under the Lanham Act.

86. Through its actions as described herein, defendant directly induced and

encouraged the infringement of the Trademarks.

87. In addition, by controlling the funds necessary to enable the Borrowers, EHI and

Hostmann to conduct unauthorized sales of goods with the affixed Trademarks, defendant

directly controlled and monitored the instrumentalities used to engage in the infringing activities.

88. Defendant was aware that the License Agreement covered the use of the

Trademarks included in the IP Catalog, that the License Agreement was terminated and,

thereafter, that the sales of goods affixed with the Trademarks would violate plaintiff’s exclusive

rights in the Trademarks. Notwithstanding this knowledge, defendant continued to support and

encourage the infringing activities by providing financial and other support to facilitate the sales

of infringing goods.

89. As a result of defendant’s actions as alleged herein, defendant is liable to plaintiff

for contributory trademark infringement.

90. As the owner of the Trademarks, plaintiff has suffered an injury caused by

defendant’s contributory infringement of the Trademarks, and is entitled to relief under the

Lanham Act.

WHEREFORE, plaintiff respectfully requests that this Court enter the relief against

defendant as requested in plaintiff’s prayer for relief.

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PRAYER FOR RELIEF

Plaintiff respectfully requests that the following relief be entered against defendant and in

favor of plaintiff, together with costs of suit and such other and further relief as is just and

proper:

As to Count I

1. Compensatory damages caused by defendant’s wrongful acts;

2. Punitive damages in an amount required to punish defendant and deter similar

conduct in the future; and

3. Costs of suit, including attorneys’ fees.

As to Count II

1. Compensatory damages caused by defendant’s wrongful acts;

2. Punitive damages in an amount required to punish defendant and deter similar

conduct in the future; and

3. Costs of suit, including attorneys’ fees.

As to Counts III, IV and V

1. Plaintiff’s actual damages calculated as the maximum permissible amount

available under the Copyright Act;

2. Prejudgment interest; and

3. Attorneys’ fees and costs of suit.

As to Counts VI and VII

1. Plaintiff’s actual damages calculated as the maximum permissible amount

available under the Lanham Act;

2. The profits derived from the infringing activity;

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3. A reasonable royalty payable to plaintiff for the infringing activity;

4. Treble damages;

5. Prejudgment interest; and

6. Attorneys’ fees and costs of suit.

DEMAND FOR JUST TRIAL

Plaintiff demands a trial by jury with respect to all claims for which a jury trial is

permitted under applicable law.

Dated: February 2, 2017 KLEHR HARRISON HARVEY
BRANZBURG LLP

/s/Richard M. Beck
Richard M. Beck (DE Bar No. 3370)
Sally E. Veghte (DE Bar No. 4762)
919 Market Street, Suite 1000
Wilmington, Delaware 19801-3062
Telephone: (302) 426-1189
Facsimile: (302) 426-9193
Email: rbeck@klehr.com
sveghte@klehr.com

Attorneys for Plaintiff

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