Summary
explaining in post-trial decision that the plaintiff "clearly identified the four elements of its trade dress at the final pretrial conference" and that the defendant failed to move to dismiss or for summary judgment based on the allegedly overbroad articulation contained in the complaint
Summary of this case from Classic Touch Décor, Inc. v. Michael Aram, Inc.Opinion
99 CIV. 11672 (DLC)
July 18, 2001
Norman H. Zivin, Robert T. Maldonado, Cooper Dunham LLP, New York, NY, Attorneys for Plaintiff Coach, Inc.
Stephen E. Feldman, Stephen E. Feldman, P.C., New York, N.Y. Attorney for Defendant We Care Trading Co., Inc.
This Opinion addresses three post-trial motions filed by the parties in this trademark infringement action. Following a trial held on March 12 though March 22, 2001, the jury rendered a verdict finding defendant We Care Trading Co., Inc. ("We Care") liable for trade dress infringement, contributory trade dress infringement, and dilution of plaintiff's registered trademarks 1,242,098 ("`098") and 2,088,707 ("`707"), but awarded no damages. On March 29, 2001, this Court signed an order of permanent injunction against the defendant. Judgment was entered on April 5, 2001.
On April 19, the defendant brought motions for judgment as a matter of law, for a partial new trial, and to vacate the injunction, pursuant to Rules 50, 59, and 65, Fed.R.Civ.P. On May 25, the defendant brought an additional motion to alter or amend the injunction (the "May 25 Motion"). Plaintiff Coach, Inc. ("Coach") brings a motion for attorneys' fees and expenses, pursuant to 15 U.S.C. § 1117(a). It also moves for sanctions, pursuant to 28 U.S.C. § 1927, in response to the filing of the May 25 Motion. For the reasons discussed in this Opinion, the defendant's motions are denied. The plaintiff's motion for sanctions is denied; its motion for attorneys' fees is granted in part and denied in part.
By letter of May 10, We Care sought to "clarify and if necessary modify the judgement entered on April 5, 2001." On May 14, the Court memo-endorsed the letter as follows: "If the defendant believes it has a timely, justiciable motion, it should file such a motion and consult with plaintiff regarding a schedule." We Care subsequently filed a motion on May 25, 2001 "to amend/modify and/or clarify the injunction." Full briefing by both sides followed.
BACKGROUND
Coach brought four claims under the Lanham Act at the jury trial:
(1) trademark infringement of registered trademarks `707 and `098 under 15 U.S.C. § 1114(1);
(2) trade dress infringement under 15 U.S.C. § 1125(a);
(3) contributory infringement of both its `707 and `098 trademarks and its trade dress; and
(4) dilution of `707 and `098 under 15 U.S.C. § 1125(c). The evidence at trial relevant to the motions brought by the parties included the following.
Coach is a manufacturer of handbags and other leather products which also sells its products to retailers and through its own chain of retail stores as well as through mail order and the Internet. It owns two federally registered trademarks, `098 and `707, each of which is a lozenge-shaped hangtag with a beaded chain that Coach affixes to its products. Coach has a protectable trade dress in its handbags, comprised of glove-tanned leather, bound edges, heavy brass or nickel-plated brass hardware, and a hangtag with a beaded chain. It engages in an extensive advertising campaign of handbags with this trade dress which has spanned decades.
Registration `098 identifies the hangtag as affixed to women's handbags, portfolios, carry on luggage, clutches, totes, travel kits, cosmetic cases, briefcases, and women's and men's belts. Registration `707 identifies the hangtag as affixed to cellular phone cases, computer cases, computer accessory cases, attache cases, briefcases, briefcase-type portfolios, handbags, satchels, tote bags, duffel bags, luggage garment bags for travel, back packs, tie cases, men's clutches, cosmetic bags, toiletry cases, water bottle carriers, waist pouches, and men's and women's belts.
Coach had provided varying formulations of this trade dress in its pre-trial papers but offered this definition at the pre-trial conference when asked by the Court for a final statement of its trade dress.
Coach proved the protectability of its trade dress through the testimony of Lew Frankfort ("Frankfort"), chairman of Coach; Miles Cahn ("Cahn"), Coach's founder; and Dr. Seymour Lieberman ("Lieberman"), a market research consultant, among others. Coach's "Classic Collection" handbags, which use Coach's identified trade dress, were designed in the 1960s. These handbags have been advertised since 1979, through a variety of media as well through sponsorship of charitable events and other community-related activities. According to Frankfort, the Coach product forms "the centerpiece" of the advertising. Frankfort pointed out specific ads which highlighted in print the "real glove tanned cowhide" and displayed in pictures the bound edges, hardware, and hangtag. Frankfort estimated that Coach had expended roughly $5 million in 1995, and $7.5 million in 1996, advertising the classic collection handbags. Coach spent less money advertising the collection in 1999-2000 than it had in 1996-1997 period "[b]ecause the classic collection is extremely well-known" and required less expenditure. Sales of classic collection handbags accounted for roughly 40 to 50 percent of Coach's net sales in the past five years, or between $1 billion and $1.2 billion. More specifically, domestic sales of classic handbags totaled $114 million in 1995, $139 million in 1996, and $152 million in 1997.
For example, Amy Stollmack, sales director for Rodo handbags with 19 years experience in the handbag industry, described Coach bags as "very recognizable" based on the leather, the brass findings, the binding, and the hangtag and testified that, based on her experience, other people recognize Coach bags by these characteristics.
Other advertisements included phrases such as "it's not the Coach without the Coach tag."
Consumer surveys conducted by Lieberman at Coach's behest in 1995 and 1996, also established the existence of secondary meaning in the trade dress. Lieberman employed Coach handbags from the classic collection and surveyed roughly 500 women aged 18 years or older who owned a handbag and indicated that they would be willing to spend $50 or more for a handbag. The 1995 survey was performed in "weaker" Coach markets, areas in which Coach did not sell its products at its own stores but rather through department stores. The 1996 survey was performed in "stronger" Coach markets, including cities where Coach tends to perform well as well as in shopping malls where Coach had stand-alone stores. Dr. Lieberman found that 30 percent of women shown a Coach bag identified it as such in 1995, compared to 65 percent in 1996. In contrast, when shown a non-Coach control handbag, 3 percent of women in 1995, and 1 percent of women in 1996, identified it as a Coach bag.
Lieberman also testified that these surveys measured post-sale confusion and point-of-sale confusion but the details of that testimony are not relevant to the pending motions. The surveys were performed in connection with lawsuits brought by Coach against two companies allegedly selling Coach look-alike handbags.
Women were asked to check off on a card what they would spend on a handbag. The categories included "under $25," "$25 to $49," "$50 to $75," "$75 to $99," "$100 to $150," and "$150 and over." If they checked anything in the $50 or over categories, they were included. Some of these same women said that they would also consider a bag for under $50.
Coach has a "full blown enforcement program" to protect the Coach brand and prevent people from selling Coach knock-off and counterfeit products. Coach "inspect[s] and check[s] on how the competitors are using trade dress [and] trademarks that may be similar or confusingly similar" to Coach marks, checks national advertising on a regular basis, employs a counterfeiting hotline, monitors for infringement over the Internet, and works with United States Customs to monitor imports of counterfeit products. Coach has seized roughly 225,000 counterfeit Coach products each year during the last four years.
This lawsuit stems from Coach's enforcement program against the sale of knock-offs. While Coach's senior vice president and general counsel, Carole Sadler, admitted that she had "no specific knowledge of a particular sale that [Coach] lost because of someone buying a We Care bag instead," she stated that "sale of products like We Care sells impact[s] the sale of Coach's classic collection."
We Care is a small family-owned business that imports, sells, and distributes knock-off handbags primarily on a wholesale basis at a store located on Sixth Avenue in New York City. Coach introduced We Care handbags into evidence, comprised of vinyl made to simulate leather, bound edges, simulated brass hardware, and a Coach look-alike blank hangtag, that is, a hangtag that looks like a Coach tag except that the word "Coach" is not embossed in its center. We Care's owners, Gil Chun and Kang Moon Chun, travel to Asia three or four times a year to purchase handbags. They rely on their son Philip, who runs a trading company in Hong Kong for which Kang Moon Chun serves as a director, to inspect the bags and ship them to We Care. Robert Chun, another son of Gil and Kang Moon Chun, helps his parents run the We Care store in New York and was identified at trial by Gil Chun as a vice president of the company.
Gil and Robert Chun testified at trial. Gil Chun has a master's degree in nursing administration and worked as a registered nurse in a supervisory position before quitting to help her husband at We Care. Robert Chun has a management degree and worked for over a year in the computer consulting division of Andersen Consulting where he did computer programming for the Department of Finance of the City of New York. Despite this experience in administration and finance, Gil and Robert Chun testified that We Care keeps no computerized accounting records aside from open accounts receivable. When asked why We Care had failed to turn over sales records for 1996, 1997, and the first ten months of 1998, Gil Chun stated that there had been a flood at the We Care business in February 2000, that had destroyed these documents and that the computer records for this period no longer existed because a new computer system was installed, also in 2000. Gil Chun claimed that she did not know the location of any disk backup copy of the computer records, and Robert Chun testified that he had made no disk copy of the pre-2000 computer records when he installed new software. Both Chuns testified that We Care uses neither catalogs nor price lists. Rather, customers come to the store in New York or to trade shows to view We Care's products. Despite this testimony, the plaintiff was able to offer at trial a We Care catalog from 1995. It featured We Care's New York address as well as one in Los Angeles and Chicago. In response, Gil Chun stated only that the Los Angeles and Chicago "We Care" locations were customers of We Care in New York whom she may have let use her catalog.
In an attempt to counter Coach's secondary meaning evidence, We Care's witnesses identified handbag companies which they claimed employed some or all of the elements Coach identified as its trade dress, but this testimony was significantly undercut by cross-examination. Joy Horvath ("Horvath"), a handbag manufacturer who also repairs and restores vintage handbags, admitted that the handbags she identified as employing the same elements as Coach used a "naked vegetable tanned leather" which she was not sure was "glove-tanned leather" and that the bags of at least one of those brands is not similar in appearance to Coach classic collection handbags. When asked whether Coach was the first to use the combination of the four elements of trade dress, Horvath testified that these four elements had previously been used together for "sporting purposes" and "military purposes" but did not indicate that they were used by any company prior to Coach as a woman's handbag. Likewise, Lee Roeder, a handbag designer for Coach with 15 years of experience in the field and a witness called by We Care, testified on cross-examination that no other company uses the four elements in combination. Henry Goldsmith, a professor of women's handbag design and production at Fashion Institute of Technology, testified generally that other companies have used one or more elements of Coach's trade dress and that two companies have manufactured handbags with the same four elements as Coach's trade dress. He also testified that there are many ways to make handbags competitive with Coach bags that would not employ the four trade dress elements of Coach bags.**
Goldsmith admitted on cross examination that he did not know whether the non-Coach bags which he had identified as having one or more elements of Coach's asserted trade dress were still being sold and that he could only "guess" when they had been made.
Goldsmith testified that Louis Vuitton and Morris Moskowitz had used "binding, glove tanned leather, brass hardware and a hangtag." Only Louis Vuitton remains in business. On cross examination, Goldsmith admitted that Vuitton "used to make" a bag with those elements and that he had seen it twenty years prior. No sample was introduced into evidence at the trial.
While both Chuns emphatically denied that We Care makes knock-off products or sells to counterfeiters, their testimony was entirely undercut by other trial evidence. Besides the We Care handbags that were produced during discovery and which appeared identical to their Coach counterparts unless closely inspected, a private investigator hired by Coach purchased at least two Coach style look-alike bags from We Care in October 2000. The investigator told the We Care salesperson that she owned a handbag store in New Jersey and purchased the bags tax-free without being asked for identification. In addition, a search conducted at two locations only blocks from We Care's store by the New York City police in February 2001 — less than a month prior to trial — resulted in the seizure of counterfeit Coach handbags bearing We Care's own hangtag. A video taken during the raid showed at least two rooms which were packed with counterfeit Coach handbags and belts as well as garbage bags filled with what was estimated to be 2000 counterfeit Coach hangtags. An investigator involved in the search testified that two pressing machines used to emboss the Coach name on hangtags and the "Coach story" on the inside of the handbags were found at one of the locations. Many of the Coach counterfeit handbags still bore We Care's easily-recognizable cardboard hangtags featuring a black background with red and blue circles and the name "We Care." The investigator testified that 90% of the roughly 1000 Coach look-alike handbags in one of the rooms contained both the Coach story embossed on the inside and a We Care tag. While Robert Chun agreed that We Care's hangtags looked like those seized in the police raid, he refused to identify even one such hangtag attached to a counterfeit Coach bag as a We Care hangtag.
We Care claims in its papers that the seizure was conducted "per the request of Plaintiff." There is absolutely no such evidence in the record. Instead, after the police found the counterfeit merchandise, they contacted Kevin Dougherty, a private investigator who is authorized by Coach and other clients to identify their merchandise when it is seized by the police.
The "Coach story" is an indicator embossed on the inside of every Coach bag providing a serial number and the location of the bag's manufacture, along with the Coach name.
At the close of the plaintiff's case, We Care moved to dismiss Coach's trade dress claim. The Court denied the motion and We Care did not renew it at the close of the evidence.
The jury found for the plaintiff on the trade dress infringement, contributory trade dress infringement, and dilution claims, but declined to award money damages. The jury found for the defendant on trademark infringement and contributory trademark infringement, each of which was addressed to Coach's asserted rights in the trademark registrations for its hangtag. Coach subsequently moved for — and the Court granted — a permanent injunction enjoining We Care from manufacturing, importing, or offering for sale, among other things, the six handbag styles specified at trial, as well as other handbags, tote bags, or backpacks in combination with the four trade dress elements identified at trial, 12 and from assisting others in carrying out these acts.
DISCUSSION
I. Defendant's Motions
A. Judgment as a Matter of Law
A party may move for judgment as a matter of law pursuant to Rule 50(b), Fed.R.Civ.P., after having made such a motion during a trial at the close of all the evidence. 13 "[W]hen a Rule 50(a) motion made during trial is not granted, the moving party must renew the motion both at the close of the evidence and within ten days after entry of judgment." Pahuta v. Massey-Ferguson, 170 F.3d 125, 129 (2d Cir. 1999).
At the end of the plaintiff's case, We Care moved to dismiss the plaintiff's trade dress claim, arguing that the evidence presented regarding trade dress was not based merely on the four elements of trade dress Coach identified at trial but also on the general style and shape of Coach's handbags and further that the trade dress definition provided by Coach was "incomprehensibly vague." The Court denied the motion, and following the presentation of its own case, We Care failed to renew its motion. Since none of the exceptions to the rule that the motion must be renewed are present here, see id., defendant's Rule 50 motion is denied.
B. New Trial
We Care also moves for a new trial. "`A motion for a new trial ordinarily should not be granted unless the trial court is convinced that the jury has reached a seriously erroneous result or that the verdict is a miscarriage of justice.'" Atkins v. New York City, 143 F.3d 100, 102 (2d Cir. 1998) (quoting Lightfoot v. Union Carbide Corp., 110 F.3d 898, 911 (2d Cir. 1997)). See also Piesco v. Koch, 12 F.3d 332, 344 (2d Cir. 1993) ("seriously erroneous" standard reaffirmed as the standard of Second Circuit). Under this standard, the Court "is free to weigh the evidence [itself] and need not view it in the light most favorable to the verdict winner." Song v. Ives Laboratories,
Inc., 957 F.2d 1041, 1047 (2d Cir. 1992) (internal quotation omitted). Even if there is substantial evidence to support the jury verdict, a new trial may be warranted. Id. Nevertheless, the Court must bear in mind that
where the resolution of the issues depended on assessment of the credibility of the witnesses, it is proper for the court to refrain from setting aside the verdict and granting a new trial.
Piesco, F.3d at 345 (internal quotation omitted).
A detailed description of the terms of the permanent injunction appears in Section I.C., below.
1. Trade Dress Definition
We Care's primary argument for a new trial is that it was prejudiced by Coach's shifting definition of trade dress which left the jury "flailing around in the dark." It is well established that a plaintiff must provide
an articulation of the specific elements which comprise its distinct [trade] dress. Without such a precise expression of the character and scope of the claimed trade dress, litigation will be difficult, as courts will be unable to evaluate how unique and unexpected the design elements are in the relevant market. . . . Moreover, a plaintiff's inability to explain to a court exactly which aspects of its product design(s) merit protection may indicate that its claim is pitched at an improper level of generality, i.e., the claimant seeks protection for an unprotectable style, theme or idea.
Landscape Forms, Inc. v. Columbia Cascade Co., 113 F.3d 373, 381 (2d Cir. 1997).
As discussed above, Coach clearly identified the four elements of its trade dress at the final pretrial conference: glove-tanned leather, bound edges, brass or nickel-plated brass hardware, and a lozenge-shaped hangtag with a beaded chain. The Court instructed the jury that Coach's claimed trade dress was limited to those elements. While We Care claims that Coach shifted its definition during and after trial, it provides no citation in the trial transcript to support its argument.
Rule 50(b) states that
[i]f, for any reason, the court does not grant a motion for judgment as a matter of law made at the close of all the evidence, the court is considered to have submitted the action to the jury. . . .The movant may renew its request for judgment as a matter of law by filing a motion no later than ten days after entry of judgment. . . .
Fed.R.Civ.P. 50(b).
Specifically, the Court's instruction to the jury included the following: "Coach claims that the trade dress for its handbags is comprised of the following elements: `glove, tanned leather,' `bound edges,' `brass or nickel-plated brass hardware,' and a `lozenge-shaped hangtag with a beaded chain.'" Each juror received a copy of the jury instructions to which to refer during deliberations.
In support of its argument, We Care cites two cases, both of which are readily distinguishable. In Whimsicality, Inc. v. Battat, 27 F. Supp.2d 456, 464 (S.D.N.Y. 1998), the plaintiff had "nowhere identified" its trade dress. In Regal Jewelry Co. v. Kingsbridge International, Inc., 999 F. Supp. 477, 487-88 (S.D.N.Y. 1998), the court found that the plaintiff had only "intermittently used" its trade dress and that it had failed to provide evidence of secondary meaning.
We Care belatedly argues that, because the Complaint defined trade dress as "among other elements, heavy, soft leather; bound edges; distinctive hardware; and distinctive appearance and readily identifiable shapes and sizes" (emphasis supplied), but failed to specify of what the "other elements" consisted, We Care "properly took this as an admission that Plaintiff could not sufficiently detail its trade dress and that it had no viable claim." It further argues that it received varying definitions of trade dress during its discovery depositions. Notably, however, We Care filed no motion to dismiss the Complaint or for summary judgment on this or any other ground, nor did it raise this issue in any of the several telephone conferences held in this case to resolve discovery disputes.
We Care argues that it had planned to attack at trial the Complaint's vague reference to "other elements" of Coach's trade dress by arguing that "[e]liminating even one element of Plaintiff's trade dress as generic or functional would have defeated the entire trade dress claim." We Care provides no legal authority in support of this assertion, and as discussed further below, "trade dress may protect the `overall look' of a product" such that "`although each element of a trade dress individually might not be inherently distinctive, . . . the combination of elements' may be indicative of source." Landscape Forms, 113 F.3d at 381; see also LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 76 (2d Cir. 1985). 16
2. Failure of Secondary Meaning
We Care next argues for a new trial by asserting that Coach failed to prove that its trade dress had acquired secondary meaning. Where a trade dress has not been registered, a "product's design is distinctive, and therefore protectable, only upon a showing of secondary meaning." Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U.S. 205, 216 (2000); see also TCPIP Holding Co. v. Haar Communications Inc., 244 F.3d 88, 94, 100-01 (2d Cir. 2001). Secondary meaning exists where "`in the minds of the public, the primary significance of a [mark] is to identify the source of the product rather than the product itself.'" Wal-Mart, 529 U.S. at 211 (quoting Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 851 n. 11 (1982)). Secondary meaning exists where "the public is moved in any degree to buy an article because of its source." Genesee Brewing Co. v. Stroh Brewing Co., 124 F.3d 137, 143 n. 4 (2d Cir. 1997). In determining whether secondary meaning exists, courts examine many factors, including "`(1) advertising expenditures, (2) consumer studies linking the mark to a source, (3) unsolicited media coverage of the product, (4) sales success, (5) attempts to plagiarize the mark, and, (6) length and exclusivity of the mark's use.'" Id. (citation omitted).
As described more fully above, Coach presented ample evidence of secondary meaning of Coach's trade dress. The trade dress handbags were developed in the 1960s and advertised widely since the 1970s. These bags have enjoyed tremendous sales success and are recognizable as Coach bags, according to both the opinions of those in the handbag industry and consumer surveys commissioned by Coach. Attempts to plagiarize Coach products are evident from the fact that over 200,000 counterfeit Coach products have been seized each year over the last four years, including from the defendant's own business.
We Care also argues that, just following the close of discovery in December 2000, Coach "attempted to expand this case to include trade dress protection in its entire line of Classic handbags, but was limited by this Court to the six that were shown to Defendant in July, 2000." As the Court detailed in a bench opinion delivered on February 2, 2001, in the related case, Coach, Inc. v. Moon et al., 00 Civ. 9458 (DLC), and again in the final pretrial conference in this action on March 8, 2001, the ruling regarding six styles of handbags was limited to the scope of discovery. Until the end of the discovery period, the plaintiff took discovery on only six We Care handbags which it contended infringed its trademark. Two days prior to the close of discovery, the plaintiff sought to expand the number of styles for which it sought discovery. Relying on the impact that this last-minute expansion would have on the litigation schedule, the Court refused to permit discovery beyond the six styles. The Court's ruling, however, did not limit the claims, defenses, or proof for trial.
We Care makes essentially two arguments to undermine some of Coach's specific evidence of secondary meaning. First, We Care argues that the survey evidence should have been excluded since it was addressed to the incorrect universe (it excluded those women who would not spend $50 or more on a handbag), employed a style of handbag not representative of the bags at issue in the current litigation (while the three styles used were from Coach's classic collection, the survey did not include every style at issue at the trial), 18 and used only bags made of leather (We Care's bags are vinyl).
The survey respondents were also limited to women who were 18 years of age or older and owned a handbag.
This is substantially the same argument made by We Care in a pre-trial motion in limine. As the Court ruled on March 8, 2001, the survey, which was offered to establish secondary meaning is admissible, pursuant to Rule 803(3), Fed.R.Evid., as reflecting the declarant's state of mind at the time of utterance, with alleged errors in methodology going to the weight of the evidence, subject of course to the additional gatekeeping function of Rule 403, Fed.R.Evid. Schering Corp. v. Pfizer, Inc., 189 F.3d 218, 228 (2d Cir. 1999).
Further, the Court's jury instructions on survey evidence — to which We Care now offers no objection — included the following limitations on the use of the survey evidence:
Remember that the surveys done in 1995 and 1996 were done in connection with other litigation and that no bags from We Care were used in those surveys. You have also been told that the surveys excluded from their pool of respondents any women who reported that they would not spend $50 or more to buy a handbag. Moreover, the handbags shown to the survey respondents have not been received into evidence so that you will not be able to examine them. You only have pictures of the handbags. You have heard evidence, however, that each of the handbags used in the surveys were made of leather. For these reasons, you may only use the surveys for the limited purposes I have and will explain. . . . You may not use the surveys to decide whether there has been actual confusion between the plaintiff's and the defendant's products. You may use them, however, to understand the processes called point-of-sale confusion and post-sale confusion that I will be explaining to you. And, you may use them to decide whether there is secondary meaning in what the plaintiff has claimed as its trade dress.
(Emphasis supplied).
We Care next argues that Coach's advertising evidence was irrelevant since it was not "look for" advertising and did not prominently display the trade dress claimed. We Care is simply wrong. The evidence at trial showed Coach to be engaged in widespread advertising of handbags featuring the trade dress at issue here. The examples of advertising presented at trial included prominent word or image displays of the four elements of its trade dress, including classic "look for" advertising. Far from being "incidental" to its advertising campaigns, the trade dress was frequently the most prominent component of the campaigns.
The handbags used in the survey were wider than they were tall and had a flap. Only some of the infringing We Care bags had this design.
3. Functionality
Relying on the Supreme Court's decision in TrafFix Devices, Inc. v. Marketing Displays, Inc., 121 S.Ct. 1255 (2001), which was handed down on the day the Court instructed the jury, We Care contends that the Court erred in its charge to the jury on the issue of functionality. At a conference held as the jury deliberated, We Care argued, among other things, that the TrafFix Court had ruled that once one feature of a trade dress is found to be functional, the entire trade dress is unprotectable. It asked that the Court alter that portion of its jury charge that read:
The Court in TrafFix held that a feature is functional "when it is essential to the use or purpose of the device or when it affects the cost or quality of the device," including situations in which the "`exclusive use of [a feature] would put competitors at a significant non-reputation-related disadvantage.'" Id. at 1261 (citation omitted). The Court noted that courts need not inquire into a feature's competitive necessity except in cases of aesthetic functionality. Id. at 1262.
Even if you find that one or more of the individual elements of what Coach has identified as its trade dress is functional, you may still find the trade dress to be non-functional if you find that the combination or arrangement of the features it has identified as its trade dress, when viewed in its entirety, is non-functional.
While the Court made other changes in a supplemental charge delivered to the jury, the Court declined to change this statement.
At the conference, the defendant requested — and the Court agreed to — changes in the jury charge to reflect the discussion of aesthetic functionality highlighted by the TrafFix decision. The Court's original charge instructed the jury that a collection of functional parts is protectable if the collection itself is not essential to the use or purpose of the handbag, and if its exclusive use by Coach does not put competitors at a significant non-reputation related disadvantage. The supplemental charge, which is not challenged by the defendant, reads
a collection of functional parts is protectable
(1) if the collection itself is not essential to the use or purpose of the handbag,
(2) if it does not affect the cost or quality of the product, and
(3) if, in the event you find the collection to be ornamental or aesthetic, its exclusive use by Coach does not put competitors at a significant non-reputation related disadvantage.
We Care's reading of TrafFix is incorrect. The TrafFix decision does not overrule Second Circuit law that a collection of functional features may nonetheless be protectable trade dress. See LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 76 (2d Cir. 1985); see also Landscape Forms, 113 F.3d at 381.
Following the close of briefing on this issue, We Care called the Court's attention to Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 121 S.Ct. 1678 (2001), which it claimed cited TrafFix approvingly. While it does cite TrafFix with approval, Cooper involves a product which was found not to merit trade dress protection because both the individual features of its trade dress as well as the product's overall appearance were functional. Cooper, 121 S.Ct. at 1681.
4. Miscellaneous
We Care briefly alludes to several additional arguments, principally alleged errors in evidentiary rulings. Rule 61 counsels that
[n]o error in either the admission or the exclusion of evidence and no error or defect in any ruling or order or in anything done or omitted by the court . . . is ground for granting a new trial . . . unless refusal to take such action appears to the court inconsistent with substantial justice.
Rule 61, Fed.R.Civ.P. (emphasis supplied). Consequently, a new trial should only be granted where there has been an erroneous evidentiary ruling if "it is likely that in some material respect the factfinder's judgment was `swayed by the error.'" Perry v. Ethan Allen, Inc., 115 F.3d 143, 150 (2d Cir. 1997) (citation omitted); see also Libutti v. United States, 178 F.3d 114, 118 (2d Cir. 1999).
First, We Care argues that the Court allowed the jury to hear hearsay testimony when it allowed the CEO of Coach to testify about consumer recognition of the Coach brand name by referring to an exhibit entitled "1995 National Consumer Accessories Survey." Defense counsel only objected at trial to the identification of the survey, however, and in any event the CEO did not testify about the survey's content beyond mentioning that Coach appears in the survey. The strength of the Coach brand name was not in dispute at trial and the brief questioning resulted in no "substantial injustice."
Defense counsel raised an objection, which the Court overruled, only to the following statement: "I am going to hand you Exhibit 93 called 1995 National Consumer Accessories Survey."
We Care complains that it was not allowed to move into evidence certain trademark applications that were "abandoned" by Coach. The portion of the trial transcript that it cites, however, reflects not a motion to admit the applications into evidence but rather a question posed in cross-examination to Sadler as to whether Coach had ever sought to register as a trademark the design or shape of any of its handbags. The Court sustained that objection. We Care further asserts that the applications were "rejected" by the Patent and Trademark Office ("PTO") "because they were functional, not inherently distinctive, and did not function as a trademark." It did not provide at trial or in support of this motion, however, any evidence that the abandoned trademark applications were "rejected" for these — or any other — reasons. Nor has We Care shown that these abandoned applications concern the trade dress at issue at trial. Without a showing of relevance to the issues at trial, the limitation on cross-examination was not error.
The Court ruled that it would permit defense counsel to ask whether there was an attempt to register the trade dress asserted at trial. It ruled that Defendant's Exhibit 260, which was described by the defendant as evidence of an attempt to register the trade dress, did not in fact reflect such an attempt. It showed the design of a particular handbag with bound edges, but did not describe the leather, emphasize brass fittings or include a hangtag.
We Care also notes that the "abandoned" applications should be admitted under TrafFix. That case, however, involved the functionality of a "dual-spring design" for road signs which was the subject of an expired utility patent. While the Supreme Court held that a utility patent is "strong evidence that the features therein claimed are functional," it did not address the issue of abandoned trademark applications nor has We Care, as noted above, provided any evidence for its assertion that the PTO considered Coach's features to be functional. TrafFix, 121 S.Ct. at 1260.
Third, We Care devotes two sentences to the argument that the Court erroneously allowed Coach to "introduce a new cause of action for contributory trade dress" which was not listed in the Complaint and for which defendant claims it had no discovery. Pursuant to Rule 15(b), Fed.R.Civ.P., a court may allow the pleadings to be amended to conform to the evidence and "shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice the party in maintaining the party's action or defenses upon the merits." A party opposing a Rule 15(b) amendment "`cannot normally show that it suffered prejudice simply because of a change in its opponent's legal theory'" but rather "`a party's failure to plead an issue it later presented must have disadvantaged its opponent in presenting its case.'" Cruz v. Coach Stores, 202 F.3d 560, 569 (2d Cir. 2000) (citation omitted).
While Coach pled a claim for contributory trademark counterfeiting, pursuant to 15 U.S.C. § 1116, it did not plead a contributory trade dress infringement claim. In its reply pre-trial memorandum of law, Coach argued that because We Care sold handbags to those who apply the Coach trademark and then sell the handbags as counterfeits, We Care could be liable for contributory infringement of Coach's trademark and trade dress. At the final pretrial conference held on March 8, the Court delineated the issues which, based on the parties' pre-trial papers, would be tried. We Care objected that the contributory infringement claim had been "withdrawn" by the plaintiff. The Court noted the objection, but the lengthy conference ended without further argument on the issue.
We Care has failed to show that it was prejudiced by the inclusion of the contributory trade dress infringement claim. Contributory infringement on a related issue was pled in the Complaint. Further, the evidence with respect to contributory trade dress infringement was relevant to other claims at issue in the trial. The defendant therefore had both the motive and opportunity throughout discovery and trial to defend against this evidence and theory.
The Complaint alleged that the defendant "affixed blank leather hang tags to handbags that are confusingly similar to COACH handbags and . . . have supplied their products to others whom they knew or had reason to know were engaging in trademark counterfeiting by affixing a spurious designation identical in appearance to COACH's registered trademark leather hangtag."
Also with respect to contributory infringement, We Care argues, without citing any supporting case law, that it is "impossible" for a jury to find both direct and contributory trade infringement "on the same set of facts." "[W]hen faced with seemingly inconsistent verdict . . . `a reviewing court must adopt a view of the case, if there is one, that resolves any seeming inconsistency.'" Harris v. Niagara Mohawk Power Corp., 2001 WL 589403, at *6 (2d Cir. May 31, 2001) (citation omitted). If it fails, then the court must order a new trial in accordance with the Seventh Amendment. Id. We Care's argument in this instance is meritless. From the evidence presented at trial, the jury could easily have found that We Care both sold infringing products and that it enabled others to infringe by selling them Coach look-alike products which were then embossed with the Coach name and sold as counterfeits.
Finally, We Care makes several complaints regarding the Court's rulings with regard to the jury charge and the verdict form. First, citing an unspecified passage of TrafFix, We Care argues that the Court should have charged that copying is permissible unless the trade dress is protected. We Care raised this argument after jury deliberations had begun, when the Court met with counsel to address the emergence of the TrafFix case. As the Court stated on the record: "This charge does not suggest that the plaintiff has any rights other than those described in this charge and, therefore, only if it meets all the tests described in this charge can it keep someone from copying any part of what it does and nothing in this charge suggests otherwise." Second, We Care complains that the verdict sheet did not include separate questions about particular elements of a trade dress claim, specifically, questions regarding the existence of a protectable trade dress, and the non-functionality of the trade dress. The argument is not persuasive. The jury was explicitly instructed in the charge regarding these issues; the issues were not so complex that a special verdict was necessary, and there is no requirement that there be any special finding on separate elements of a claim in the verdict sheet simply because counsel requests it.
The Court in TrafFix noted that "unless an intellectual property right such as a patent or copyright protects an item, it will be subject to copying." TrafFix, 121 S.Ct. at 1260.
With respect to infringement, the jury verdict form asks: "Has the plaintiff proven by a preponderance of the evidence its infringement claim based on the trade dress it has asserted at this trial?" With respect to contributory infringement, the jury verdict form asks: "Has the plaintiff proven by a preponderance of the evidence that the defendant engaged in contributory infringement of its trade dress?"
5. Dilution
We Care makes several unmeritorious arguments concerning Coach's dilution claim. The dilution claim sought to enforce rights Coach asserted in trademark registrations `098 and `707 for its hangtags.
First, We Care argues that Coach did not own its trademark registration at the commencement of the suit and therefore lacks standing to bring its dilution claim. For the reasons stated by the Court on the record on March 13, 2001, Coach has standing. We Care also argues, citing Hormel Foods Corp. v. Jim Henson Productions, Inc., 73 F.3d 497 (2d Cir. 1996), that dilution requires that it use "the plaintiff's trademark as a trademark" and no evidence existed at trial that We Care uses the hangtag as a "source identifier." To the contrary, the jury was entitled to find that We Care's blank hangtag serves no other purpose than copying the trademarked Coach hangtag to complete the "Coach look" for We Care's knock-off handbags.
The Hormel Court held that dilution did not exist where the defendant's product, a puppet named "Spa'am," neither weakened the association of the plaintiff's "SPAM" mark with luncheon meat nor caused the plaintiff's mark to suffer negative associations through its use, particularly because the puppet possessed "transparent parodic intent" rather than "`subtle or insidious effort at humor at plaintiff's expense'" and no direct competition existed between the puppet and the luncheon meat. Hormel, 73 F.3d at 506-07 (citation omitted). In contrast, We Care sells cheap knock-off versions of Coach handbags. It sells these bags to, among others, counterfeiters who stamp "Coach" on the already-attached hangtag and sell the We Care bags as Coach bags.
Finally, We Care argues, citing Mead Data Central, Inc. v. Toyota Motor Sales, Inc., 875 F.2d 1026 (2d Cir. 1989), that dilution requires the diluter to make an "identical or almost identical use" of the trademark, while the Court instructed the jury that We Care could be liable if it used an "altered" form of the trademark. Mead held that the marks at issue "must be `very' or `substantially' similar." Id. at 1029.
The Court instructed the jury that dilution by blurring occurs
when customers or prospective customers see the plaintiff's trademark or a modification of the plaintiff's trademark used by others to identify other sources of different goods. This may cause the plaintiff's trademark to lose its ability to serve as a unique identifier of the plaintiff's products.
(emphasis added). It further instructed the jury that it should consider at least eight separate factors in analyzing dilution by blurring, including
(2) the degree of similarity between Coach's trademark and We Care's use of the trademark, such that in the mind of the consumer, We Care's use will invoke an association with Coach's trademark;
(3) the similarity of the products;
The Court also instructed the jury that it could find dilution by tarnishment
if the plaintiff proves that because of defendant's use of its trademark or an altered version of its trademark, the value of the trademark is reduced or consumers will come to attribute unfavorable characteristics to the trademark and ultimately associate the trademark with inferior goods.
(emphasis added).
This Court relied on Federal Express Corp. v. Federal Espresso, Inc., 201 F.3d 168, 175 (2d Cir. 2000) (dilution by blurring may occur where defendant "uses or modifies" the plaintiff's mark), and Deere Co. v. MTD Products, Inc., 41 F.3d 39, 43, 45 (2d Cir. 1994) (dilution by blurring may occur where defendant "uses or modifies" plaintiff's trademark; alteration of plaintiff's mark may dilute the mark), in crafting its charge. When read as a whole, the charge correctly and adequately advised the jury on the role that the similarity between the plaintiff's and defendant's marks should have in their deliberations.
Moreover, there can be no serious argument that the plaintiff's and defendant's marks were not substantially similar. We Care's hangtag was simply a slightly altered or modified form of plaintiff's registered mark. Seen from a distance, they were indistinguishable. We Care's hangtag shares the same lozenge shape and coarsely beaded chain as Coach's hangtag, although it lacks the word "Coach" embossed on the front or back of the tag and is made of vinyl rather than leather. Based on evidence presented at trial, the jury was entitled to find that We Care's hangtag was a modification or alteration of Coach's hangtag which reduced its value or harmed the ability of Coach's hangtag to serve as the unique identifier of Coach's products.
Relying on its interpretation of dilution as requiring "identical" use, We Care also asserts that the jury acted inconsistently when it found We Care liable for dilution of trademarks `707 and `098 but not for trademark infringement of `707 and `098 because the law of trademark infringement requires "merely" that the defendant use the trademark in a manner likely to cause confusion between the plaintiff's product and the defendant's product while dilution requires that the defendant make an almost identical use of the plaintiff's mark. As discussed above, however, the defendant's interpretation of the 28 requirements of dilution are incorrect. In any event, the elements of these claims are different, and there is no inconsistency in failing to find a likelihood of confusion on one hand, but finding tarnishment or blurring on the other hand.
C. Motion to Modify the Injunction
We Care moves to modify two aspects of the injunction. It complains of one of the five specific combinations of features that are enjoined, to wit, a combination of bound edges and glove-tanned leather (or materials that appear to be glove-tanned leather). We Care also challenges the application of the injunction to backpacks.
In addition to its motion for a new trial, We Care filed a second motion to amend the injunction on May 25, 2001. The May 25 Motion is untimely whether brought under Rule 59, Fed.R.Civ.P., or Rule 60, Fed.R.Civ.P. The motion is in the nature of a Rule 59 motion since it seeks to alter or amend the judgment. See Osterneck v. Ernst Whinney, 489 U.S. 169, 174 (1989) ("[A] post-judgment motion will be considered a Rule 59(e) motion where it involves `reconsideration of matters properly encompassed in a decision on the merits.'") (quoting White v. New Hampshire Dep't of Employment Sec., 455 U.S. 445, 451 (1982)); McCowan v. Sears, Roebuck Co., 908 F.2d 1099, 1103 (2d Cir. 1990) (noting that "most substantive motions brought within ten days of the entry of judgment are functionally motions under Rule 59(e), regardless of their label or whether relief might also have been obtained under another provision"). The time for filing a Rule 59 motion expired on April 19, 2001. We Care asserts in its reply brief that the motion is brought under Rule 65 "with the additional basis of the newly discovered evidence under Rule 60." It claims that the new evidence consists of six handbags made by well-known manufacturers, such as Liz Claiborne and Dooney Burke, which it vaguely asserts it has "the opportunity" to sell but which it fears violate the injunction. Rule 60(b)(2) provides that a party may move for relief from judgment based on "newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b)." See also United States v. International Brotherhood of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001). Such a motion is "generally not favored and is properly granted only upon a showing of exceptional circumstances." Id. The party moving for relief must meet an "onerous standard." Id. at 392. Specifically, the movant must demonstrate that
(1) the newly discovered evidence was of facts that existed that the time of trial or other dispositive proceeding,
(2) the movant must have been justifiably ignorant of them despite due diligence,
(3) the evidence must be admissible and of such importance that it probably would have changed the outcome, and
(4) the evidence must not be merely cumulative or impeaching.
Id. (citation omitted). We Care fails to address or satisfy any prong of this test.
On March 26, 2001, the Court held an extended conference with the parties to discuss a proposed order of permanent injunction submitted by Coach and a mark-up of that proposed order provided by We Care. The parties agreed that the record for the decision as to the scope and nature of any permanent injunction would be the trial record. At the conclusion of the conference, the Court gave the parties until March 28 to submit any legal or factual argument addressed to the Court's preliminary rulings at the conference about the scope of the proposed injunction. The defendant made no submission.
The injunction prohibits We Care from, inter alia, manufacturing, importing, distributing, advertising, promoting, or selling, as well as offering for sale the six handbag styles featured at trial and from assisting others to do so. The injunction further enjoins these activities in connection with any handbag, tote bag or backpack in combination with (a) the four trade dress elements, or (b) a lozenge-shaped hangtag and beaded chain, whether or not the hangtag includes the word "Coach." In connection with handbags alone, it also enjoins these activities for handbags comprised of:
(1) glove-tanned leather (or simulated glove-tanned leather) and bound edges; or
(2) glove-tanned leather (or simulated glove-tanned leather), bound edges, and brass (or nickel-plated brass) hardware (or simulated brass hardware); or
(3) lozenge-shaped hangtag attached by a beaded chain to a glove-tanned leather (or simulated glove-tanned leather) handbag in combination with either
(i) bound edges; or
(ii) brass (or nickel-plated brass) hardware (or simulated brass hardware).
Pursuant to Rule 65(d), Fed.R.Civ.P., every order granting an injunction "shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail, and not only by reference to the complaint or other document, the act or acts sought to be restrained." An injunction must be "more specific than a simple command that the defendant obey the law." S.C. Johnson Son, Inc. v. Clorox Co., 241 F.3d 232, 240 (2d Cir. 2001) (citation omitted). Rather, an injunction must "be specific and definite enough to apprise those within its scope of the conduct that is being proscribed." Id. at 240-41 (citation omitted); see also Lau v. Meddaugh, 229 F.3d 121, 123 (2d Cir. 2000). The rule against "`broad, vague 31 injunctions'" aims to "`prevent uncertainty and confusion on the part of those to whom the injunction is directed.'" Id. at 241 (citation omitted). Injunctions forbidding the sale of items "confusingly similar" to those described with specificity in the injunction have been approved. See Wella Corp. v. Wella Graphics, Inc., 37 F.3d 46, 48 (2d. Cir. 1994). As significantly for our purposes, a party who "has once infringed a trademark may be required to suffer a position less advantageous than that of an innocent party." Id.
We Care argues that the injunction provides Coach with an undeserved monopoly in that the Court enjoined We Care from selling handbags that employ a combination of binding and glove-tanned leather (or simulated leather) even though that particular combination has been selling longer than Coach has been in business. We Care also argues that the injunction improperly covers backpacks. The defendant's arguments are without merit. The combination of simulated leather and bound edges are present on every Coach knock-off. In contrast, some Coach styles use little hardware, so that feature may not be important to a particular knock-off. Of course, the hang tag is easily removed. Backpacks were included within the scope of the injunction because the We Care sales brochure includes knock-offs of Coach backpacks. As the Court noted at the conclusion of a nearly two-hour conference on March 26, it planned to
include in the injunction's terms, reference to tote bags and backpacks based upon other evidence at trial . . . including Plaintiff's Exhibit 135, a We Care brochure reflecting a 32 page of Coach knock-offs that included not only handbags . . . but also a tote bag and backpacks. . . . I should say that in my view, because the hangtag is so easily removed from the knock-off handbags, and other products at issue here, any injunction that would be limited to a product that had the hangtag attached could be so easily evaded as to make the injunction worthless and toothless. Consequently, I am not requiring the hangtag to be present to bar the importation or selling of a Coach knock-off. I do find it, though, to be a critical element that the product at issue have the glove-tanned leather and the bound edges. Or if the hangtag is attached, that it is the Coach look alike hangtag. Then the gloved-tanned leather in combination with the hangtag and either the bound edges or the brass is sufficient.. . . [T]he principal items that create the Coach trade dress, and a confusingly similar knock-off, are the bound edges and the gloved-tanned leather. Some Coach items have much less hardware than others. And, therefore, the absence of the hardware on a particular item may not be . . . compelling indices of whether or not it is a successful knock-off.
The transcript's punctuation has been altered here to assist the reader.
We Care has offered no legal authority or factual argument to undermine this analysis. 34 Given We Care's deliberate, repeated, and bad faith infringement Coach products, it is appropriate to prohibit We Care from selling items that contain less than all four elements of the Coach trade dress, including items with the two elements that are present in each Coach Classic Collection handbag and were integral to each of the We Care knock-offs of those handbags — the simulated leather and bound edges. After all, "[a]ny doubts in respect of the reach of appropriate injunctive relief should be resolved in favor of an innocent plaintiff and against a willful infringer." Imagineering, Inc. v. Van Klassens, Inc., 851 F. Supp. 532, 541 (S.D.N.Y. 1994). We Care's behavior, including the blatantly false trial testimony of its principals, its efforts to evade scrutiny by failing to keep the most basic business records, and its willingness to continue to infringe Coach's trademark rights even after being sued, justify the imposition of an injunction which ensures that We Care cannot duck the intent of the injunction by selling Coach knock-off products in a modified form. Accordingly, the defendant's motion to vacate the injunction is denied.
II. Plaintiff's Motion for Sanctions and Attorneys' Fees
A. Sanctions
In response to the filing of the May 25 Motion, plaintiff moves for sanctions against defendant's counsel pursuant to 28 U.S.C. § 1927. Section 1927 states that an attorney "who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." See also Eisemann v. Greene, M.D., 204 F.3d 393, 396 (2d Cir. 2000). While the district court has discretion in awarding sanctions, it must find "clear evidence that (1) the offending party's claims were entirely without color, and (2) the claims were brought in bad faith — that is, `motivated by improper purposes such as harassment or delay.'" Id. at 396 (citation omitted). This bad faith standard has been interpreted "restrictively" by the Second Circuit, and judges must make their decisions to impose sanctions "`with restraint and discretion.'" Id. (citation omitted). While the defendant's May 25 motion is unmeritorious and was brought despite the Court's specific admonition that it be timely, there is insufficient evidence that the claims were brought in bad faith. Accordingly, the Court declines to impose sanctions.
Further, to the extent that We Care's complaint that the injunction bestows upon Coach a monopoly is an argument that We Care will be unable to compete, it too is unpersuasive. The ban on combining leather (or simulated leather) and bound edges will not prevent the defendant from selling handbags. Henry Goldsmith, We Care's own expert, testified at trial that there are numerous ways to make handbags competitive with Coach bags that would not employ the four trade dress elements of Coach bags, singly or in combination.
B. Attorneys' Fees
Coach seeks an award of $405,578.94 in total fees and costs. We Care does not object to Coach's request for attorneys' fees on the more traditional grounds that they are duplicative or unreasonable, except to the extent that it argues fees should be awarded only for those claims on which Coach won at trial. Rather, We Care argues primarily that no fees should be awarded because this case is not an "exceptional case" under the Lanham Act.
1. "Exceptional Case" Analysis
Pursuant to Section 1117(a), 15 U.S.C. a court may award 35 "reasonable attorney fees" to the prevailing party in "exceptional cases." In addition to being confined to exceptional cases, the Second Circuit has held that attorney fees should be awarded "only `on evidence of fraud or bad faith.'" Gordon and Breach Science Publishers S.A. v. American Institute of Physics, 166 F.3d 438, 439 (2d Cir. 1999) (citation omitted). While a finding of bad faith does not require the court to award attorneys' fees, a district court abuses its discretion if it does not consider whether an award of attorneys' fees is appropriate where willful infringement is involved. See International Star Class Yacht Racing Ass'n v. Tommy Hilfiger, U.S.A., Inc., 80 F.3d 749, 753 (2d Cir. 1996).
We Care's primary argument is that it did not act in bad faith and that the jury verdict, finding no bad faith, is binding. With the parties' consent, the Court took an advisory verdict from the jury on the issue of the defendant's bad faith.
It is undisputed by the parties that the decision to award attorneys' fees is left to the Court and that bad faith is an element of the attorneys' fee analysis. While We Care argues that the Court is bound by the jury's decision on bad faith, and argues that the Court must apply a Rule 50 standard in order to "overturn" the jury's decision on bad faith, a judge sitting with an advisory jury "is not bound by the findings of the advisory jury, which [the judge] is free to adopt in whole or in part or to totally disregard." Ragin v. Harry Macklowe Real Estate Co., 6 F.3d 898, 907 (2d Cir. 1993) (citation omitted).
Evidence of bad faith on the part of Robert and Gil Chun in this case was overwhelming. While the Chuns denied intentionally copying Coach's bags, the evidence presented by Coach showed that We Care specifically ordered look-alike bags from China, that the owners traveled to the Far East three or four times per year where they had direct contact with Far East manufacturers, and that one of their sons in Hong Kong supervised production and delivery. Using a blank hangtag made it possible to import the bags without them being seized as counterfeit by customs officials, but also facilitated the final step in the counterfeiting process. All that was left to be done — as the videotape from the police raid demonstrated — was embossing the "Coach story" on the inside of the bag and the Coach name on the blank hangtag. We Care sold hundreds of the Coach knock-offs to counterfeiters just blocks away from its New York address. Testimony from Gil Chun that she never sought any opinion from counsel about her right to sell the knock-offs reinforces the conclusion of bad faith.
Two members of the Chun family gave false testimony at trial. Gil Chun testified that she was unaware that her bags looked like Coach bags, that We Care kept no price lists, and that the one identified price list did not belong to We Care. She further testified, against overwhelming evidence, that her company maintained no relationship with We Care organizations in Los Angeles and Chicago. Her son, Robert, refused to identify his own handbags or We Care's hangtags and denied knowledge of We Care's tax return preparation, despite his extensive and sophisticated business background and heavy involvement in the family business.
Despite the sophisticated administration and business backgrounds of both Chuns, they testified that the only records kept on computer were outstanding accounts receivable. There was inadequate explanation as to what happened to those computer files once the accounts were paid. The deliberate choice not to keep records customarily kept by businesses may have been primarily motivated by a desire to evade taxes, but it also made it easier to conceal their distribution of imported knock-off handbags. In addition, Gil Chun explained her failure to produce any appreciable quantity of records during discovery with a flood at We Care's store in February 2000. Nonetheless, We Care still failed to produce a complete set of documents related to their purchases made after February 2000. As a result, effectively the only records of purchases came from one of the Chuns' banks and even then the most current record from that bank is dated 1999. Finally, both Chuns testified that they kept no copies of pre-2000 computer records when they changed their computer system in 2000, despite the fact that this lawsuit was filed in 1999, and We Care knew or should have known that its pre-2000 activity would be at issue.
We Care makes several additional arguments against the award of attorneys' fees by singling out specific factors and attempting to make them determinative. Even taken together, however, these factors do not persuade the Court, given the extensive evidence of bad faith, that an attorneys' fee award is unwarranted.
First, citing Simon Schuster, Inc. v. Dove Audio, Inc., 970 F. Supp. 279, 302 (S.D.N.Y. 1997), and Gidatex v. Campaniello Imports, Ltd., 82 F. Supp.2d 136, 148-49 (S.D.N.Y. 2000), We Care argues that fees are not merited because the outcome was not a "foregone conclusion" and the issues "close and contested" as evidenced by the fact that the jury deliberated for almost two days and the plaintiff did not win on all of its claims. The cases cited by We Care, place consideration of this factor within the context of the larger case. The Simon Schuster court found deliberate infringement but declined to award attorneys' fees at least in part because the case "presented a number of close and contested issues," but it made no finding of bad faith approaching the behavior that has occurred in this action. Simon Schuster, 970 F. Supp. at 302. Likewise, the decision not to award fees in Gidatex was based in large part on the fact that the action formed but one part of a protracted litigation during which the Court found the defendant to have acted justifiably. Gidatex, 82 F. Supp.2d at 148-49.
We Care next argues that the Court must consider the defendant's conduct after it became aware of the plaintiff's allegations which, in this case, occurred with the filing of the Complaint. If anything, this factor reinforces an award of fees. As noted above, Gil and Robert Chun either destroyed or failed to 39 produce pre-2000 documents when installing a new computer system in 2000, and failed to cooperate during discovery. In addition, as seen by the police raid videotape at trial, We Care continued to sell infringing products to counterfeiters nearly two years after the case was filed. Their excuse for these continued sales is that they did not know precisely what Coach claimed as its trade dress. This is a frivolous argument. From the beginning of this case Coach identified six of its classic collection handbags which it asserted had been "knocked off" by We Care and its Complaint identified in almost identical language to that relied upon at trial the four components of its trade dress.
The Complaint says: "Coach's distinctive, original and arbitrary Trade Dress of source identifying characteristics includes, among other elements: heavy, soft leather; bound edges; distinctive hardware; and distinctive appearance and readily identifiable shapes and sizes."
We Care next argues that Coach is not entitled to attorneys' fees because the jury awarded no monetary damages to Coach. The failure to win an award of damages should be considered by the Court in deciding whether this case is an "exceptional" one warranting an award of attorney fees, Lurzer GMBH v. American Showcase, Inc., 75 F. Supp.2d 98, 102 (S.D.N Y 1988), but a "failure to prove actual damages does not preclude an award of attorneys' fees." See, e.g., Fruit of the Loom, 1999 WL 527989, at *2; see also Springs Mills, Inc. v. Ultracashmere House Ltd., 724 F.2d 352, 357 (2d Cir. 1983) (noting that the district court should have considered availability of award of attorneys' fees even though plaintiff had not shown lost sales and parties were not competitors).
In this case, the failure to award damages is of little weight. Coach chose not to seek the infringers' profits since We Care made any comprehensive proof of its sales and net profits virtually impossible when it failed to produce business records. Coach chose instead to seek its own lost profits based on records of We Care imports produced by We Care's bank for the period between November 1998 and May 1999, and a projection of those numbers over a multi-year period. The jury's decision not to award damages on this theory was entirely predictable. A person interested in having a Coach bag will see as soon as she picks up a We Care bag that it is made with inferior materials and workmanship. Awarding damages for Coach's lost profits would have required speculation, which the jury was specifically instructed to avoid.
Finally, We Care argues that a party seeking attorneys' fees based on bad faith must provide the court with highly specific factual findings of a party's misconduct and may only receive fees for the claims upon which it prevailed at trial. In support of these arguments, however, We Care relies on case law outside the context of the Lanham Act. In any event, as already described, the trial record was filled with specific factual examples of We Care's intentional misconduct. To the extent that the defendant has pointed to litigation expenses that are properly attributable solely to claims on which the plaintiff did 41 not prevail, they shall be excluded from the fee award.
In light of the strength of the material evidence presented at trial against We Care, the extensive findings of bad faith, and the absence of mitigating factors, this action is an "exceptional case" for which an award of attorneys' fees should be awarded.
2. Analysis of Amount of Fees
Coach was initially represented in this action by the law firms of Cooley Godward LLP and Sachnoff Weaver in Chicago, where this action was initially filed and by Gibney, Anthony and Flaherty LLP. In the fall of 2000, Cooper Dunham LLP ("Cooper Dunham") replaced all three law firms and represented Coach through the trial and post-trial motions in this action. The requests for fees and costs come primarily from Cooper Dunham, which asks for $295,969.00 in fees and $50,888.23 in costs. Each of the other law firms requests approximately $14,000.00 in fees and between $400.00 and $1650.00 in costs.
Cooper Dunham represented Coach in pre-trial matters by opposing a motion made by the defendant to amend its answer and add counterclaims, by completing discovery, and by filing all pre-trial papers. It served as trial counsel during a ten-day trial and subsequently prepared a draft permanent injunction. It has opposed two sets of post-trial motions made by We Care and addressed in this Opinion.
Cooper Dunham requests reimbursement for a total of 1043.50 hours of work performed primarily by four attorneys, with 42 billing rates ranging from $180.00 to $390.00 per hour. They have sought costs for a variety of tasks, including meals, telephone charges, transportation, computer research, courier service, and photocopying. Defendant has challenged neither the rates charged by Cooper Dunham nor the number of hours worked or the itemized cost requests. With one exception, this Court finds both Cooper Dunham's rates and time billed as well as its costs to be reasonable and awards them the fees and costs they have requested. There is no need to reduce the award to Cooper Dunham because of any deviations in the definition of the trade dress or the failure to win damages at trial. With respect to the latter issue, virtually all of the discovery and trial evidence was relevant to the issuance of the injunction and proof of the defendant's bad faith. It is appropriate, however, to reduce the award of fees for the time spent in opposing the motion to amend. Cooper Dunham shall have five days from this Opinion to submit a revised request with those fees and costs removed.
The remaining three law firms, while submitting detailed time sheets of work performed on behalf of Coach, have provided no information regarding billing rates nor even the names of the attorneys working on this action. A declaration made by Carole Sadler on behalf of Coach in support of the attorneys' fees application mentions two partners, but the time sheets themselves provide the initials and/or names of other individuals who are either not identified at all or identified with billing rates but 43 without employment titles or total amounts billed. While defendant has offered no challenge to the rates, hours, or costs charged by these law firms, the Court lacks a complete presentation from which to evaluate the reasonableness of all of the fees charged and costs incurred. Moreover, some of the legal work undertaken by one or more of these law firms was unsuccessful, including the motion for summary judgment. In consideration of all of these deficiencies, the three law firms will be jointly awarded a total of $10,000.00 in fees, and $1,200.00 in costs, to be allocated among them by Ms. Sadler.
CONCLUSION
For the reasons discussed above, We Care's multiple motions made pursuant to Rules 50, 59, 60, and 65, Fed.R.Civ.P., are denied. Coach's motion for sanctions is denied. Coach's motion for attorneys' fees is granted in part and denied in part.
SO ORDERED: