Opinion
Civil Action 21 Civ. 6029 (LGS) (SLC)
07-18-2022
KELLY TOY HOLDINGS, LLC, Plaintiff, v. BAODING MI XIAOMEI TRADING CO., LTD., et al., Defendants.
REPORT AND RECOMMENDATION
SARAH L. CAVE, UNITED STATES MAGISTRATE JUDGE.
TO THE HONORABLE LORNA G. SCHOFIELD, United States District Judge
I. INTRODUCTION
On July 14, 2021, Plaintiff Kelly Toys Holdings, LLC (“Kelly Toys”) commenced this action asserting claims for trademark and copyright infringement, willful counterfeiting, false designation of origin, and unfair competition under state and federal law against 65 Defendants. (ECF No. 5 at 21-33 ¶¶ 47-106 (the “Complaint”); see also ECF No. 57 at 5-6 (the “Proposed Findings”)). Following entry of a temporary restraining order and preliminary injunction (see ECF Nos. 14, 19), and default by 52 Defendants (the “Defaulting Defendants”), (see generally ECF No. 52), the Honorable Lorna G. Schofield referred this case to me for an inquest on damages. (ECF No. 54).
A glossary of defined terms appears at the end of this Report and Recommendation.
For the reasons set forth below, I respectfully recommend that Kelly Toys be awarded damages under the Lanham Act, 15 U.S.C. § 1117 (“Section 1117”), in the amount of $2,550,000.00 ($50,000.00 against each of the 51 Infringing Defendants, defined below), plus post-judgment interest.
II. BACKGROUND
A. Factual Background
The Court summarizes the factual background of Kelly Toys' claims based on the allegations in the Complaint (ECF No. 5), which are accepted as true for purposes of determining liability. See Norcia v. Dieber's Castle Tavern, Ltd., 980 F.Supp.2d 492, 496 (S.D.N.Y. 2013); see also Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) (observing that a district court, “at the inquest,” should “accept[] as true all of the factual allegations of the complaint, except those relating to damages.”). Where noted, additional facts are drawn from documents Kelly Toys submitted in support of the Proposed Findings (ECF No. 57), including the Futterman Aff. (ECF No. 58), and the Memorandum of Law (ECF No. 32).
1. Kelly Toys
Kelly Toys is “is one of the world's most influential, leading manufacturers[,] and distributors of high-quality plush toys and gifts,” including “best-selling brands,” such as “Pillow Chums, Kellybaby[,] and Kellypet.” (ECF No. 5 at 10 ¶ 7). Squishmallows, one of Kelly Toys' most popular brands, is “a line of loveable buddies made with a super soft, marshmallow-like texture that come in a variety of sizes from 3.5-inch clip-ons to extra-large 24[-]inch plush toys.” (Id. at 10 ¶ 9). Kelly Toys developed the Squishmallows Products from its inception in 2017, and has introduced new styles, namely “Hug Mees, Stackables, Mystery Squad[,] and Flip-A-Mallows.” (Id. at 10 ¶¶ 9-10).
Squishmallows Products are sold by major U.S. retailers, e-commerce sites, and department stores, such as Amazon, Target, Walmart, and Justice. (ECF No. 5 at 10 ¶¶ 8, 12). Over seventy-three (73) million Squishmallows Products have been sold internationally since 2017, “and sales of Squishmallows have tripled in the past six months.” (Id. at 10 ¶ 10). In 2020, Squishmallows Products received the “Best Toy of the Year” award from Learning Express. (Id. at 10 ¶ 11). Kelly Toys credits it success, in part, to using the “highest quality materials and processes[,]” effective “marketing and promotional efforts[,]” including “advertising and promotion through social media, the Squishmallows' website[,]” and “word-of-mouth buzz that its consumers have generated.” (Id. at 12 ¶¶ 19-21). Squishmallows Products typically retail between $7.99 to $35.00. (Id. at 10 ¶ 13).
Kelly Toys has protected the intellectual property it owns by obtaining “significant common law trademark and other rights in its Squishmallows Products,” including ownership of U.S. Trademark Registrations for “FLIP A MALLOWS”, “SQUISHMALLOW”, “MYSTERY SQUAD”, and “KELLYTOY” for goods in Class 28 (collectively, the “Squishmallows Registrations”). (ECF No. 5 at 11 ¶¶ 14-15). Kelly Toys has applied to register “SQUISHMALLOWS HUGMEES” and “ORIGINAL SQUISHMALLOWS” for goods in Class 28 (the “Squishmallows Applications,” together with the Squishmallows Registrations, the “Squishmallows Marks”). (Id. at 11 ¶ 15; see Id. at 45). Only Kelly Toys is authorized to “manufacture, import, export, advertise, offer for sale or sell any goods utilizing the Squishmallows Marks[.]” (Id. at 12-13 ¶ 23). Kelly Toys also owns registered copyrights “in and related to the Squishmallows Products” (the “Squishmallows Works,” together with the Squishmallows Marks, the “Squishmallows IP”). (Id. at 11-12 ¶¶ 1718).
2. Defendants' Unlawful Conduct
Kelly Toys' “valuable reputation and goodwill among the public” have made it a target for “unscrupulous individuals and entities who wish to capitalize on the goodwill,” and introduce in the marketplace “[c]ounterfeit [p]roducts [that] are nearly indistinguishable from” Kelly Toys' Squishmallows Products. (ECF No. 5 at 12 ¶ 22, 15 ¶¶ 31, 35). To protect its intellectual property, Kelly Toys authorized Epstein Drangel LLP (“Epstein Drangel”) to identify “manufacturers, wholesalers, retailers and/or other merchants offering for sale and/or selling [c]ounterfeit [p]roducts on” e-commerce platforms, such as “Alibaba and AliExpress.” (Id. at 15 ¶ 32; see Id. at 1; see also ECF No. 32 at 16). Epstein Drangel's investigation revealed 65 entities, each of which Kelly Toys initially named in this action, that were involved in the “manufacturing, importing, exporting, advertising, marketing, promoting, distributing, displaying, offering for sale and/or selling [of] [c]ounterfeit [p]roducts to U.S. consumers, including those located” in this District. (ECF No. 5 at 15 ¶ 33; see id. at 8 ¶ 3). Epstein Drangel also confirmed that each Defendant is currently offering for sale, or otherwise, actively selling Counterfeit Products on User Accounts with, and Merchant Storefronts on, online marketplace and e-commerce platforms, and provide shipping to customers located in New York. (Id. at 16 ¶ 37).
3. KellyToys' Damages
Defaulting Defendants' failure to appear, despite being properly served, (see ECF No. 16), “has deprived [Kelly Toys] of the ability to confirm whether or not Defaulting Defendants ceased manufacturing, importing, exporting, advertising, marketing, promoting, distributing, displaying, offering for sale and/or selling” Counterfeit Products. (ECF No. 31 at 6-7 ¶ 23; see ECF No. 58 at 4-5 ¶¶ 13-15). Further, Kelly Toys was deprived of any opportunity to participate in meaningful discovery “regarding the scope of [Defaulting Defendants'] sales, profits[,] and costs[.]” (ECF No. 31 at 7 ¶ 24; see ECF No. 58 at 4 ¶ 13). Kelly Toys “cannot determine Defaulting Defendants' profits, quantify any expenses that Defaulting Defendants may have saved by counterfeiting [Kelly Toys'] Squishmallows Marks and/or Squishmallows Works or assess any revenues lost by [Kelly Toys] as a result of Defaulting Defendants' infringing and counterfeiting activities.” (ECF No. 31 at 7 ¶ 25; see ECF No. 58 at 4-5 ¶¶ 14-15).
Due to Kelly Toys' inability to confirm whether the Defaulting Defendants have ceased engaging in unlawful conduct, or otherwise ascertain with precision the lost revenues, profits, and saved expenses from the sale of Counterfeit Products, Kelly Toys has elected to seek only statutory damages under the Lanham Act as compensation for the Defaulting Defendants' sale of Counterfeit Products and infringement of Kelly Toys' Squishmallows Marks. (ECF No. 31 at 67 ¶¶ 23-27; see ECF No. 58 at 5 ¶ 16). Kelly Toys does not request additional damages for infringement of its copyrighted works or attorneys' fees. (ECF Nos. 31 at 4 n.2; 58 at 5 ¶ 17).
B. Procedural Background
On July 14, 2021, Kelly Toys filed the Complaint. (ECF No. 2). In the Complaint, Kelly Toys asserted claims for: (1) trademark counterfeiting under the Lanham Act; (2) trademark infringement of registered trademarks under the Lanham Act; (3) trademark infringement of unregistered trademarks under the Lanham Act; (4) false designation of origin, passing off and unfair competition under the Lanham Act; (5) federal copyright infringement; and (6) unfair competition under New York state common law. (See ECF No. 5 at 21-33 ¶¶ 47-106). Kelly Toys sought damages, a preliminary and permanent injunction enjoining and prohibiting violative conduct by Defendants and their agents, an order requiring the Defendants recall from any distributors and any retailers Counterfeit Products and deliver them to Kelly Toys for destruction, an asset freeze or constructive trust over ill-gotten gains, and attorneys' fees and costs. (Id. at 33-35 ¶¶ A-Q).
Along with the Complaint, Kelly Toys filed an ex parte Application seeking: (1) a temporary restraining order (“TRO”); (2) an order restraining Merchant Storefronts and Defendants' Assets with the Financial Institutions; (3) an order directing Defendants to show cause why the Court should not issue a preliminary injunction; (4) an order authorizing bifurcated and alternative service; and (5) an order authorizing expedited discovery. (ECF No. 14; see ECF No. 57 at 13 ¶ 16).
On July 14, 2021, Judge Schofield issued an order (the “TRO Order”): (1) granting the TRO; (2) ordering Defendants to show cause at a hearing on August 5, 2021 (the “OTSC Hearing”) why the Court should not issue a preliminary injunction pursuant to Fed.R.Civ.P. 65(a); (3) restraining Defendants' Assets pursuant to Fed.R.Civ.P. 64 and 65; (4) authorizing bifurcated and alternative service by electronic means, pursuant to Fed.R.Civ.P. 4(f)(3); (5) authorizing expedited discovery; (vi) requiring Kelly Toys to post a $15,000 security bond; and (6) temporarily sealing the Complaint and the Application. (ECF No. 31-2 at 2-22; see ECF No. 31 at 4 ¶¶ 9, 11).
On July 28, 2021, pursuant to the alternative methods of service authorized by the TRO, Kelly Toys served the Summons, Complaint, TRO, and the Application on Defendants other than Lianyungang Hongwen Toys Co., Ltd (“Hongwen”) and Shanghai Qianjiu Trading Co., Ltd. (“Shanghai Qianjiu”). (ECF No. 16 at 3 ¶ 6).
On July 30, 2021, the Court extended the term of the TRO through August 5, 2021, the date of the OTSC Hearing. (ECF No. 13). On August 5, 2021, the case was unsealed and Defendant DEF was dismissed from the case. (ECF No. 4; see ECF min. entry Sept. 14, 2021).
On August 5, 2021, Judge Schofield held the OTSC Hearing, at which Defendants failed to appear, (ECF No. 31 at 6 ¶ 17), and issued the Preliminary Injunction Order. (Id. at 6 ¶ 18; see ECF No. 19 (the “Preliminary Injunction Order”); see also ECF No. 14). The Preliminary Injunction Order provided that (i) “[t]he injunctive relief previously granted in the TRO shall remain in place through the pendency of this action,” (ii) the asset restraint and expedited discovery should remain in place, and (iii) permitted service on Defendants in accordance with Fed.R.Civ.P. 4(f)(3). (ECF No. 19 at 9 ¶ 1; see id. at 9-17). The Preliminary Injunction Order also permitted Kelly Toys' bond to remain with the Court until either the final disposition of the case or the termination of the Preliminary Injunction Order. (Id. at 17). On September 20, 2021, the Court directed Kelly Toys to “file a status letter by September 27, 2021, advising the Court on the status of the action[.]” (ECF No. 14 at 1).
On September 27, 2021, Kelly Toys advised the Court that it had served the Summons, Complaint, TRO, and the Application on every Defendant except Hongwen and Shanghai Qianjiu.(ECF No. 17). On September 28, 2021, the Court directed Kelly Toys to: “(1) move for default judgment as to the defendants that have been served, . . . and (2) show cause as to why the case should not be dismissed as to Defendants [Hongwen] and [Shanghai Qianjiu] for failure to prosecute.” (ECF No. 18). On September 29, 2021, the Court dismissed Kelly Toys' claims against Defendants Hongwen, Shanghai Qianjiu, and, High Hope International Group Jiangsu Champion Holdings Ltd. (“High Hope”). (ECF Nos. 21, 22).
Kelly Toys misspelled the name of Defendant Shanghai Qianjiu omitting the letter “n” in several filings. (See ECF Nos. 17, 21). The Court presumes, as the Clerk of Court has presumed, (see ECF No. 21), that Kelly Toys meant Defendant Shanghai Qianjiu.
On September 30, 2021, the Clerk of Court issued Certificates of Default against the 61 Remaining Defendants. (ECF No. 26). Thereafter, Kelly Toys voluntarily dismissed the case against nine additional Defendants: Nanning Huahang Yigou E-Commerce Co., Ltd., Qingdao Aoding Industry And Trade Co., Ltd, Qingdao Hongwuyue Industry And Trade Co., Ltd, Yangzhou Yuanjia Crafts Co., Ltd, Guangdong Jinyang Children's Products Industrial Co., Ltd, Shenzhen Levin Plush Toys Co., Ltd, Yiwu Zhengzhi Qin Trading Firm, Yancheng Trust Toys Co., Ltd., and Shenzhen Huashunchang Toys Co., Ltd. (together with DEF, Hongwen, Shanghai Qianjiu, and High Hope, the “Terminated Defendants”). (ECF Nos. 29, 36, 38, 41, 43, 45, 49).
On October 12, 2021, the Court entered an order directing the 52 Defaulting Defendants to respond in writing by November 4, 2021 why default judgment should not be entered against them. (ECF No. 34 (the “Default Order”)). The Court cautioned the Defaulting Defendants that failure to respond by that date may result in a “judgment . . . entered against them[.]” (Id. at 11). None of the Defaulting Defendants filed any response to the Default Order or otherwise appeared in the action then or since.
On December 3, 2021, the Court entered the Final Judgment, which provided that “[j]udgment is granted in favor of Plaintiff on all claims properly pled against Defaulting Defendants[,]” and “[a]n order addressing damages will issue separately.” (ECF No. 52 at 8). On December 6, 2021, Judge Schofield referred this matter to me to conduct an inquest on Kelly Toys' damages. (ECF No. 54 (the “Order of Reference”)).
On February 7, 2022, the Court directed Kelly Toys to submit proposed findings of fact and conclusions of law concerning damages no later than March 7, 2022. (ECF No. 55 (the “Scheduling Order”)). The Court warned that if the Defaulting Defendants failed to respond to Kelly Toys' submission in response to the Scheduling Order or to contact the Court to request an in-court hearing, the Court would issue a Report and Recommendation based on Kelly Toys' submission alone, without an in-court hearing. (Id.) (citing Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997)). On February 22, 2022, Kelly Toys filed proof of service of the Scheduling Order on the Defaulting Defendants pursuant to the authorized alternative service methods. (ECF No. 56). On March 7, 2022, Kelly Toys submitted the Proposed Findings (ECF No. 57), the Futterman Aff. (ECF No. 58), a chart detailing Defaulting Defendants' prohibited use of the Squishmallows IP (ECF No. 57-1 (the “Wrongful Use Chart”); see ECF No. 58-3), and copies of the Scheduling Order (ECF No. 58-2), and the Order of Reference (ECF No. 58-1) (together, the “Damages Submission”). The Defaulting Defendants have not responded to Kelly Toys' Damages Submission or contacted the Court.
III. LEGAL STANDARD
A party seeking a default judgment must follow the two-step procedure set forth in Federal Rule of Civil Procedure 55. See Bricklayers & Allied Craftworkers Loc. 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 186-87 (2d Cir. 2015). First, under Rule 55(a), where a party has failed to plead or otherwise defend in an action, the Clerk of the Court must enter a certificate of default. Fed.R.Civ.P. 55(a). Second, after entry of the default, if the party still fails to appear or move to set aside the default, the Court may enter a default judgment. Fed.R.Civ.P. 55(b). Whether to enter a default judgment lies in the “sound discretion” of the trial court. Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). Because a default judgment is an “extreme sanction” that courts are to use as a tool of last resort, Meehan v. Snow, 652 F.2d 274, 277 (2d Cir. 1981) (per curiam), the district court must “carefully balance the concern of expeditiously adjudicating cases, on the one hand, against the responsibility of giving litigants a chance to be heard, on the other.” Fermin v. Las Delicias Peruanas Rest., Inc., 93 F.Supp.3d 19, 29 (E.D.N.Y. 2015) (citing Enron, 10 F.3d at 96). In considering whether to grant a default judgment, district courts are “guided by the same factors [that] apply to a motion to set aside entry of a default.” First Mercury Ins. Co. v. Schnabel Roofing of Long Is., Inc., No. 10 Civ. 4398 (JS) (AKT), 2011 WL 883757, at *1 (E.D.N.Y. Mar. 11, 2011). Specifically, a “district court is to be guided principally by three factors: (1) whether the default was willful, (2) whether the defendant demonstrates the existence of a meritorious defense, and (3) whether, and to what extent, vacating the default will cause the nondefaulting party prejudice.” S.E.C. v. McNulty, 137 F.3d 732, 738 (2d Cir. 1998).
A defendant's default is deemed “a concession of all well-pleaded allegations of liability,” Rovio Ent., Ltd. v. Allstar Vending, Inc., 97 F.Supp.3d 536, 545 (S.D.N.Y. 2015), but a default “only establishes a defendant's liability if those allegations are sufficient to state a cause of action against the defendants.” Gesualdi v. Quadrozzi Equip. Leasing Corp., 629 Fed.Appx. 111, 113 (2d Cir. 2015). The Court must determine “whether the allegations in a complaint establish the defendants' liability as a matter of law.” Id.
IV. DISCUSSION
A. Jurisdiction
As a threshold matter, the Court has federal subject matter jurisdiction over Kelly Toys' federal trademark claims pursuant to 28 U.S.C. § 1331 (federal question jurisdiction) and 28 U.S.C. § 1338 (jurisdiction over trademark, copyright, and patent claims), 15 U.S.C. § 1121 (jurisdiction over federal trademark claims), and supplemental jurisdiction over related state claims pursuant to 28 U.S.C. § 1367(a). See Gucci Am., Inc. v. MyReplicaHandbag.com, No. 07 Civ. 2438 (JGK), 2008 WL 512789, at *2 (S.D.N.Y. Feb. 26, 2008); see also William Mark Corp. v. 1&CC, No. 18 Civ. 3889 (RA) (RWL), 2019 WL 4195365, at *5 (S.D.N.Y. May 20, 2019), adopted by, 2019 WL 4194536 (S.D.N.Y. Sept. 3, 2019); Ideavillage Prod. Corp. v. Shenzen City Poly Hui Foreign Trade Co., No. 17 Civ. 8704 (JGK) (BCM), 2019 WL 12339638, at *8 (S.D.N.Y. Dec. 12, 2019); Wowwee Grp. Ltd. v. Meirly, No. 18 Civ. 706 (AJN), 2019 WL 1375470, at *2 (S.D.N.Y. May 27, 2019) (granting default judgment and entering a permanent injunction against defendant merchants who sold infringing or counterfeit products online).
The Court also has personal jurisdiction over Defendants under N.Y. C.P.L.R. § 302(a)(1) (“Section 302”), the “jurisdictional net” of which “reaches those defendants who, under the totality of circumstances, ‘purposefully avail themselves of the privilege of conducting activities within New York, thus invoking the benefits and protections of its law.'” Wowwee, 2019 WL 1375470, at *3-5 (finding personal jurisdiction existed under Section 302(a)(1) for defaulting defendants who maintained an interactive website, some of whom completed sales to New York customers) (quoting Mattel, Inc. v. Adventure Apparel, No. 00 Civ. 4085 (RWS), 2001 WL 286728, at *2 (S.D.N.Y. Mar. 22, 2001)) (internal alterations omitted); see Off-White LLC v. 5HK5584, No. 19 Civ. 672 (RA) (JLC), 2020 WL 1646692, at *4 (S.D.N.Y. Apr. 3, 2020), adopted by, 2020 WL 3050552 (S.D.N.Y. June 8, 2020) (finding that the court had personal jurisdiction under Section 302 where “New York customers [were] able to order goods for delivery from the Defaulting Defendants through” online e-commerce platforms); see also Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 170 (2d Cir. 2010) (“[D]istrict courts in this circuit have concluded that the ‘single act' of selling counterfeit goods into New York satisfies the long-arm statute under [Section 302].”).
The Court also finds that the assertion of personal jurisdiction over the Defaulting Defendants comports with due process, because the Defaulting Defendants “regularly conduct, transact and/or solicit business in New York, and/or derive substantial revenue from their business transactions in New York[.]” (ECF No. 5 at 8 ¶ 3; see id. at 16 ¶¶ 36-37; see also ECF Nos. 5-4 - 5-6). First, the “single act” of shipping a counterfeit product into New York, in and of itself, is sufficient to establish jurisdiction over the Defaulting Defendant that made the sale, Queen Bee, 616 F.3d at 170, and Epstein Drangel has confirmed that “each Defendant provides shipping and/or has actually shipped Counterfeit Products to the U.S., including to customers located in New York.” (ECF No. 5 at 16 ¶ 37). Second, although “[a] website that merely provides information that is accessed by individuals in New York is not grounds for the exercise of personal jurisdiction[,]” EnviroCare Techs., LLC v. Simanovsky, No. 11 Civ. 3458 (JS) (ETB), 2012 WL 2001443, at *3 (E.D.N.Y. June 4, 2012), “an interactive website supports a finding of personal jurisdiction over the defendant.” Hsin Ten Enter. USA, Inc. v. Clark Enters., 138 F.Supp.2d 449, 456 (S.D.N.Y. 2000); see Poof-Slinky, LLC v. A.S. Plastic Toys Co., No. 19 Civ. 9399 (ER), 2020 WL 5350537, at *4 (S.D.N.Y. Sept. 4, 2020) (observing that characteristics of a “highly-interactive” website include the ability to: “communicate with consumers, accept orders in United States dollars, and advertise, sell, and ship counterfeit products from their online marketplaces to New York”); see also Smart Study Co. v. A Pleasant Trip Store, No. 20 Civ. 1733 (MKV), 2020 WL 2227016, at *3 (S.D.N.Y. May 7, 2020) (finding that the “Alibaba platforms” are “highly interactive” websites, and therefore, “may provide a basis for personal jurisdiction under” Section 302). Because each Defaulting Defendant operates a “highly interactive website[,]” Lifeguard Licensing Corp. v. Ann Arbor T-Shirt Co., LLC, No. 15 Civ. 8459 (LGS), 2016 WL 3748480, at *3 (S.D.N.Y. July 8, 2016), and “provides shipping to . . . New York Addresses[,]” personal jurisdiction over them is appropriate. (ECF No. 5 at 16 ¶ 36; see id. at 13-14 ¶¶ 24-30; see also ECF Nos. 5-4 - 5-6).
In addition, Kelly Toys served on each of the 52 Defaulting Defendants “the Summons, Complaint, TRO[,] and all papers filed in support of the Application[,]” pursuant to the “alternative methods of service authorized by the TRO[.]” (ECF No. 16 at 3 ¶ 6; see ECF No. 56). Accordingly, Kelly Toys has established personal jurisdiction over the Defaulting Defendants.
B. Default Judgment
As noted above, before entering a default judgment, the Court must consider “(1) the willfulness of default, (2) the existence of any meritorious defenses, and (3) prejudice to the nondefaulting party.” Guggenheim Cap., LLC v. Birnbaum, 722 F.3d 444, 455 (2d Cir. 2013); see Gonzaga Cortez v. Hang Lin, No. 19 Civ. 0905 (LGS), 2019 WL 4256363, at *3 (S.D.N.Y. Sept. 9, 2019) (listing three factors).
Here, each factor supports entry of a default judgment. First, although willfulness “requires something more than mere negligence, such as egregious or deliberate conduct[,]” Gonzaga, 2019 WL 4256363, at *3 (quoting Guardian Life Ins. Co. of Am. v. Premier Wealth Grp., LLC, No. 12 Civ. 9099 (AJN), 2017 WL 1040425, at *3 (S.D.N.Y. Mar. 16, 2017)), “a clear pattern of willful and deliberate disregard for the litigation” is sufficient. Bricklayers, 779 F.3d at 187. Defaulting Defendants' failure to respond to the Complaint and the Court's orders is sufficient to “support an inference of willful default.” Guggenheim, 722 F.3d at 455 (2d Cir. 2013); see J & J Sports Prods., Inc. v. 1400 Forest Ave Rest. Corp., No. 13 Civ. 04299 (FB) (VMS), 2014 WL 4467774, at *4 (E.D.N.Y. Sept. 9, 2014) (collecting cases where “a defendant's failure to respond to the complaint is sufficient to demonstrate willfulness”); see also Bridge Oil Ltd. v. Emerald Reefer Lines, LLC, No. 06 Civ. 14226 (RLC) (RLE), 2008 WL 5560868, at *2 (S.D.N.Y. Oct. 27, 2008) (“Since Defendants have been entirely unresponsive, their continued failure is willful.”).
Second, “[i]n order to make a sufficient showing of a meritorious defense in connection with a motion to vacate a default judgment, the defendant need not establish his defense conclusively, but he must present evidence of facts that, if proven at trial, would constitute a complete defense.” State St. Bank & Tr. Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 167 (2d Cir. 2004); see Am. All. Ins. Co. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996) (“A defense is meritorious if it is good at law so as to give the factfinder some determination to make.”). Here, having failed to file an answer, or otherwise participate in the litigation, Defaulting Defendants cannot establish a meritorious defense. See 1400 Forest Ave, 2014 WL 4467774, at *4 (E.D.N.Y. Sept. 9, 2014).
Third, “[p]rejudice results when delay causes ‘the loss of evidence, create[s] increased difficulties of discovery or provide[s] greater opportunity for fraud and collusion.'” Ward v. Ramkalawan, No. 11 Civ. 4295 (JS) (ARL), 2013 WL 1149108, at *5 (E.D.N.Y. Feb. 11, 2013), adopted by, 2013 WL 1149068 (E.D.N.Y. Mar. 19, 2013). Accordingly, Kelly Toys would be prejudiced if default judgment is not entered, “as there are no additional steps available to secure relief in this Court.” Bridge Oil, 2008 WL 5560868, at *2.
Because all three factors have been satisfied, the Court finds that entry of default judgment is warranted. Because their default equates to Defaulting Defendants' concession of “all well-pleaded factual allegations of liability in the [C]omplaint,” the question becomes whether Kelly Toys' allegations, accepted as true, establish liability for its claims. 1400 Forest Ave, 2014 WL 4467774, at *5; see Cement & Concrete Workers Dist. Council Welfare Fund, Pension Fund, Annuity Fund, Educ. & Training Fund & Other Funds v. Metro Found. Contractors Inc., 699 F.3d 230, 234 (2d Cir. 2012) (explaining that “a party's default is deemed to constitute a concession of all well-pleaded allegations of liability,” but not “an admission of damages”) (quoting Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)); see also City of N.Y. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (“It is an ‘ancient common law axiom' that a defendant who defaults thereby admits all ‘well-pleaded' factual allegations contained in the complaint.”) (quoting Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)).
C. Defaulting Defendants' Liability
Kelly Toys' Complaint and Damages Submission sufficiently illustrate a sound legal basis for finding Defaulting Defendants liable for willful counterfeiting and infringement of Kelly Toys' Squishmallows IP.
1. Trademark Infringement and Counterfeiting
Kelly Toys alleges that Defaulting Defendants' actions constitute trademark counterfeiting and infringement of Kelly Toys' “federally registered Squishmallows Registrations in violation of § 32 of the Lanham Act[,]” 15 U.S.C. §§ 1114(1)(a)-(b). (ECF No. 5 at 22 ¶ 54, 25 ¶ 67). Section 32 empowers “the owner of a mark registered with the Patent and Trademark Office [(‘USPTO')] [with the ability to] bring a civil action against a person alleged to have used the mark without the owner's consent.” Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93, 102 (2d Cir. 2010). The Lanham Act imposes civil liability on any person who reproduces, counterfeits, copies, or colorably imitates a registered mark without consent and applies the reproduced or counterfeited mark to goods offered for sale in a way that is likely to cause confusion. 15 U.S.C. § 1114(1)(b). Courts evaluating whether a plaintiff has established these claims for purposes of a default judgment, look “first to whether the plaintiff's mark is entitled to protection, and second to whether the defendant's use of the mark is likely to cause consumers confusion as to the origin or sponsorship of the defendant's goods.” Hypnotic Hats, Ltd. v. Wintermantel Enters., LLC, 335 F.Supp.3d 566, 580-81 (S.D.N.Y. 2018) (quoting eBay Inc., 600 F.3d at 102).
With respect to the first element, “[a] certificate of registration with the [US]PTO is prima facie evidence that the mark is registered and valid (i.e., protectible), that the registrant owns the mark, and that the registrant has the exclusive right to use the mark in commerce.” Lane Cap. Mgmt., Inc. v. Lane Cap. Mgmt., Inc., 192 F.3d 337, 345 (2d Cir. 1999) (citing 15 U.S.C. § 1115(a)); see PaperCutter, Inc. v. Fay's Drug Co., 900 F.2d 558, 562 (2d Cir. 1990) (“[A] certificate of registration, once issued, is prima facie evidence that the registered mark is valid[.]”). For the second element, “[l]ikelihood of confusion includes confusion of any kind, including confusion as to source, sponsorship, affiliation, connection, or identification.” Star Indus., Inc. v. Bacardi & Co., 412 F.3d 373, 383 (2d Cir. 2005). Courts in this Circuit have generally agreed that, “where the alleged infringement involves counterfeit goods, a detailed analysis of the Polaroid factors is unnecessary.” BBK Tobacco & Foods, LLP v. Galaxy VI Corp., 408 F.Supp.3d 508, 521 (S.D.N.Y. 2019) (collecting cases); see River Light V, L.P. v. Lin & J Int'l, Inc., No. 13 Civ. 3669 (DLC), 2014 WL 6850966, at *16 (S.D.N.Y. Dec. 4, 2014) (“Counterfeit marks are inherently confusing, and thus it is not clear that a distinct likelihood-of-confusion analysis is required for a counterfeit claim.”). A “counterfeit” mark is one that is “identical with, or substantially indistinguishable from, a registered mark.” Coach, Inc. v. Horizon Trading USA Inc., 908 F.Supp.2d 426, 433 (S.D.N.Y. 2012) (quoting 15 U.S.C. § 1127).
Here, Kelly Toys' allegations satisfy these elements. Kelly Toys has submitted proof of trademark registrations for the Squishmallows Marks, (see ECF Nos. 5 at 11 ¶ 15; 5-2 at 2-17), satisfying the first element. Kelly Toys' allegation that Defaulting Defendants' Counterfeit Products are “nearly indistinguishable” from the Squishmallows Products, with only “minor variations that no ordinary consumer would recognize” (ECF No. 5 at 15 ¶ 35), illustrates that the Counterfeit Products are “likely to cause confusion[.]” Wowwee, 2019 WL 1375470, at *7. With both elements met, the Court finds that Kelly Toys has shown Defaulting Defendants' liability for trademark counterfeiting and infringement claims under the Lanham Act.
2. Copyright Infringement
Kelly Toys alleges that Defaulting Defendants unlawfully infringed on the Squishmallows Works, in violation of the Copyright Act, 17 U.S.C. § 5-1(a). (ECF No. 5 at 7 ¶ 1, 30-31 ¶¶ 92-99). To establish a copyright infringement claim, the burden rests on plaintiff to prove: “(1) ownership of a valid copyright, and (2) that the defendant copied constituent elements of the work that are original.” Innovation Ventures, LLC v. Ultimate One Distrib. Corp., 176 F.Supp.3d 137, 156 (E.D.N.Y. 2016) (citing Feist Publ'n, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345 (1991)). For the first element, “[t]here is a statutory presumption that registered copyrights are valid.” WowWee, 2019 WL 1375470, at *7; see Spin Master Ltd. v. Alan Yuan's Store, 325 F.Supp.3d 413, 422 (S.D.N.Y. 2018) (“[A copyright] registration is prima facie evidence of the first element of copyright infringement-ownership of a valid copyright.”). For the second element, infringement, “the copyright owner must demonstrate (1) that the defendant has actually copied the owner's work and (2) that the copying is illegal because a substantial similarity exists between the defendant's work and the protectable elements of the owner's work.” William Mark, 2019 WL 4195365, at *7. Like trademark infringement, “copyright infringement is a strict liability offense, meaning ‘intent or knowledge is not an element of infringement.'” Alan Yuan's Store, 325 F.Supp.3d at 422.
Here, both elements are met. Kelly Toys has established ownership of the Squishmallows Works, (see ECF Nos. 5 at 11-12 ¶¶ 17-18; 5-3 at 2-224), and therefore, satisfies the first element. See Innovation Ventures, 176 F.Supp.3d at 156. Defaulting Defendants have, by virtue of their default, admitted that they sold Counterfeit Products, (see § IV.B, supra), which are “confusingly similar to, identical to, [and/or] substantially similar to” Squishmallows Products, (ECF No. 5 at 19-20 ¶ 41), and therefore Defaulting Defendants are liable for copyright infringement. See Mattel, Inc. v. 1622758984, No. 18 Civ. 8821 (AJN), 2020 WL 2832812, at *4 (S.D.N.Y. May 31, 2020) (granting default judgment where “the average lay observer would recognize defaulting Defendants' alleged copies as being appropriated from Plaintiff's work”).
3. Willful Misconduct
Kelly Toys alleges that Defaulting “Defendants' actions constitute willful counterfeiting of the Squishmallows Registrations in violation of 15 U.S.C. §§ 1114(1)(a)-(b), 1116(d)[,] and 1117(b)-(c).” (ECF No. 5 at 22 ¶ 54)). “Willfulness may be established by a party's default because an innocent party would presumably have made an effort to defend itself.” Chloe v. Zarafshan, No. 06 Civ. 3140 (RJH) (MHD), 2009 WL 2956827, at *7 (S.D.N.Y. Sept. 15, 2009); see Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 124 (S.D.N.Y. 2003) (“By virtue of the default, the [defendant's] infringement is deemed willful[.]”); see also Fallaci v. New Gazette Literary Corp., 568 F.Supp. 1172, 1173 (S.D.N.Y. 1983) (“[W]e draw a further inference of willfulness from the defendant's failure to appear and defend this action, especially in light of plaintiff's allegation of willfulness and demand for increased statutory damages applicable to willful infringers.”) (internal citations omitted). Here, Defaulting Defendants, by virtue of their default, are “deemed to be . . . willful infringer[s].” Gucci Am., Inc. v. Tyrrell-Miller, 678 F.Supp.2d 117, 122 (S.D.N.Y. 2008).
Apart from Defaulting Defendants' failure to defend, the Complaint and Damages Submission sufficiently demonstrate that the Defaulting Defendants engaged in willful counterfeiting. (ECF Nos. 5 at 28-29 ¶ 86; 35 at 19-20 ¶ 35; 57 at 12 ¶¶ 10-14). See, e.g., WowWee, 2019 WL 1375470, at *10 (“Even in the absence of a default, courts in this district have concluded that use of marks that are virtually identical to the registered marks renders inescapable the conclusion that the defendant's infringement and counterfeiting was intentional.”) (citations omitted); see also Spin Master, Inc. v. Amy & Benton Toys & Gifts Co., No. 17 Civ. 5845 (VSB), 2019 WL 464583, at *6 (S.D.N.Y. Feb. 6, 2019) (“Here, because Defendants marks are almost identical to Plaintiffs' marks, ‘the conclusion is inescapable that defendants' infringement and counterfeiting is intentional.'”) (quoting Coach, Inc. v. Melendez, No. 10 Civ. 6178 (BSJ) (HBP), 2011 WL 4542971, at *5 (S.D.N.Y. Sept. 2, 2011)) (internal citation omitted); Allstar Marketing Group, LLC v. Adfaderal, No. 19 Civ. 5022 (ALC) (KHP), 2021 WL 5362640, at *6 (S.D.N.Y. Sept. 20, 2021) (same); Am. Auto. Ass'n, Inc. v. AAA Logistics, Inc., No. 18 Civ. 6040 (FPG), 2019 WL 1349283, at *5 (W.D.N.Y. Mar. 26, 2019) (“Here, the Court finds that Defendant's infringement of AAA's marks was willful given the nearly-identical nature of the marks ....”). Because the Counterfeit Products are “confusingly similar to, identical to, [and/or] substantially similar to” the Squishmallows Products, (ECF No. 5 at 19-20 ¶ 41), the Defaulting Defendants cannot evade the inescapable conclusion that their infringement and counterfeiting was willful. See Amy & Benton, 2019 WL 464583, at *6. Accordingly, Kelly Toys has demonstrated Defaulting Defendants' liability for willful counterfeiting.
D. Statutory Damages
Because Kelly Toys is unable “to prove a specific amount of actual damages” due to Defaulting Defendants' failure to participate in this matter, it “instead elects to seek statutory damages under the Lanham Act.” (ECF No. 31 at 7 ¶ 26). The Court examines Kelly Toys' requested relief below.
1. Law Applicable to Statutory Damages Under the Lanham Act
As discussed above, (see § IV.B, supra), a defendant's default is deemed “a concession of all well pleaded allegations of liability,” however, “it is not considered an admission of damages.” Greyhound, 973 F.2d 155, 158 (2d Cir. 1992). Accordingly, a district court must “conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.” Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999).
The Lanham Act permits a plaintiff to elect either actual damages and profits or statutory damages for the use of a counterfeit mark. 15 U.S.C. § 1117. Section 1117 was amended by the Anticounterfeiting Consumer Protection Act in 1996, adding subsection (c), which provides for statutory damages, because “Congress appear[ed] to have been motivated by a gap in the law: Plaintiffs who were victorious on their civil counterfeiting claims were often unable to obtain an adequate recovery in actual damages because counterfeiters often maintain sparse business records, if any at all.” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 110 (2d Cir. 2012) (citing S. Rep. No. 104-177, at 10 (1995)); see Coach, Inc. v. Zhen Zhen Weng, No. 13 Civ. 445, 2014 WL 2604032, at *18 (S.D.N.Y. June 9, 2014) (“Congress intended the statutory damages under 15 U.S.C. § 1117(c) to both compensate and deter.”).
Under Section 1117(c)(2), if the Court finds that the use of the counterfeit mark was willful, the court may award statutory damages in the amount of: “(1) not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just;” or otherwise, if use of the mark is found to be useful, “(2) not more than $2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just.” 15 U.S.C. § 1117. The award of statutory damages rests in the “wide discretion” of the district court. Malletier v. Artex Creative Int'l Corp., 687 F.Supp.2d 347, 355 (S.D.N.Y. 2010); see Alan Yuan's Store, 325 F.Supp.3d at 426. To determine an appropriate award under the Lanham Act, “courts consider: (1) the infringer's state of mind; (2) the expenses saved, and profits earned, by the infringer; (3) the revenue lost by the copyright holder; (4) the deterrent effect on the infringer and third parties; (5) the infringer's cooperation in providing evidence concerning the value of the infringing material; and (6) the conduct and attitude of the parties.” Spin Master Ltd. v. 13385184960@163.com, No. 18 Civ. 10524 (LGS), 2020 WL 2614766, at *3 (S.D.N.Y. May 22, 2020) (quoting Bryant v. Media Right Prods., Inc., 603 F.3d 135, 144 (2d Cir. 2010)); see Fitzgerald Pub. Co. v. Baylor Pub. Co., 807 F.2d 1110, 1117 (2d Cir. 1986) (adding consideration of “the potential for discouraging the defendant”); see also Ideavillage Prod. Corp. v. Longteng, No. 18 Civ. 7329 (AT), 2022 WL 2467731, at *5 (S.D.N.Y. July 6, 2022) (considering the factors set forth in Fitzgerald); Off-White LLC v. 6014350, No. 18 Civ. 5322 (GBD) (GWG), 2021 WL 5014821, at *2 (S.D.N.Y. Oct. 27, 2021) (“Off-White I”) (same); Alan Yuan's Store, 325 F.Supp.3d at 425-26 (same); All-Star Mktg. Grp., LLC v. Media Brands Co., 775 F.Supp.2d 613, 622 (S.D.N.Y. 2011) (same).
Kelly Toys seeks heightened statutory damages under the Lanham Act of $50,000.00 against each of the 52 Defaulting Defendants, plus post-judgment interest. (ECF No. 57 at 21-25 ¶¶ 61, 64-65). As detailed in the Wrongful Use Chart (ECF No. 58-3), however, only 51 Defaulting Defendants infringed the Squishmallow Marks (the “Infringing Defendants”) - Kelly Toys concedes that Defaulting Defendant Yangzhou Caisheng Handicraft Product Co., Ltd. (“Caisheng Handicraft”) had “[z]ero (0) infringing uses of [Kelly Toys'] Squishmallow[s] Marks[.]” (ECF No. 571 at 6). Because Kelly Toys “only seeks damages for its First and Second Causes of Action (Trademark Counterfeiting and Infringement),” (ECF No. 31 at 4 n.2; see ECF No. 31 at 7 ¶ 26), and the Lanham Act “does not protect the content of a creative work of artistic expression because an artist's right in an abstract design or other creative work is protected by copyright law[,]” Ward v. Andrews McMeel Pub., LLC, 963 F.Supp.2d 222, 235 (S.D.N.Y. 2013) (quoting EMI Catalogue P'ship v. Hill, Holliday, Connors, Cosmopulos Inc., 228 F.3d 56, 63 (2d Cir. 2000)) (internal quotation marks omitted), no statutory damages can be recovered against Caisheng Handicraft because it did not engage in any conduct for which it can be held liable under the Lanham Act. See Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *6. Accordingly, the Court excludes Caisheng Handicraft from the damages analysis.
Each of the Infringing Defendants had at least one infringing use of the Squishmallows Marks, ranging from one to eleven instances of infringing use, with a mean of 2.14 infringing uses, by the Court's calculation. (See ECF No. 57-1). Notwithstanding the information in the Wrongful Use Chart, Infringing Defendants' failure to appear deprived Kelly Toys of any opportunity to confirm these figures in discovery, (see § II.A.3, supra), such that Kelly Toys has no evidence “regarding the scope of their sales, profits[,] and costs, among other discoverable issues.” (ECF No. 57 at 16 ¶ 33).
2. Analysis of the Relevant Factors
The Court finds that Kelly Toys is entitled to a substantial award of statutory damages pursuant to the Fitzgerald factors. 807 F.2d at 1117. With respect to the first and second factors, despite Kelly Toys' contention that it “cannot determine [Infringing] Defendants' profits, quantify any expenses that [Infringing] Defendants may have saved by counterfeiting and/or infringing [Kelly Toys'] Squishmallows Marks and Squishmallows Works or assess any revenues lost by [Kelly Toys] as a result of [Infringing] Defendants' infringing and counterfeiting activities[,]” (ECF No. 57 at 16 ¶ 34), courts recognize “an inference of a broad scope of operations in cases dealing specifically with websites that ship and sell to a wide geographic range, such as the websites on which defendants operate in this case.” Alan Yuan's Store, 325 F.Supp.3d 413, 426 (S.D.N.Y. 2018) (citing Rolex Watch U.S.A., Inc. v. Jones, No. 99 Civ. 2359 (DLC) (FM), 2002 WL 596354, at *5 (S.D.N.Y. Apr. 17, 2002)) (observing that the “inference” applied to Alibaba, AliExpress, and DHgate). Here, Infringing Defendants used their Merchant Storefronts on e-commerce platforms, Alibaba and AliExpress, to advertise, distribute, sell, and ship their Counterfeit Products “to customers located in the U.S., including New York, and throughout the world.” (ECF No. 5 at 14 ¶ 28; see id. at 13-14 ¶¶ 24-30). These factors, therefore, support Kelly Toys' requested statutory damages.
The third factor, the value of the trademark, also supports Kelly Toys' requested damages. Kelly Toys' Squishmallows Products enjoy a “valuable reputation and goodwill among the public[,]” built on Kelly Toys' effective “marketing and promotional efforts[,]” including “advertising and promotion through social media, [and] the Squishmallows' website[.]” (ECF No. 5 at 12 ¶¶ 19-22). Further, Kelly Toys alleges in the Complaint that over 73 million Squishmallows Products have been sold since 2017, with sales tripling in the last six months. (Id. at 10 ¶ 10). The Court may “infer from the well-known reputations of most or all of the trademarks and the sea of advertising that presses them on the consciousness of the buying public that they are indeed valuable.” Polo Ralph Lauren, L.P. v. 3M Trading Co., No. 97 Civ. 4824 (JSM) (MHD), 1999 WL 33740332, at *6 (S.D.N.Y. Apr. 19, 1999). Accordingly, the Court finds that Kelly Toys' trademarks are valuable.
The fourth factor, deterrence, also favors Kelly Toys' requested damages because “the goal of deterring similar conduct by other enterprises requires a substantial award.” Louis Vuitton Malletier, S.A. v. LY USA, No. 06 Civ. 13463 (AKH), 2008 WL 5637161, at *2 (S.D.N.Y. Oct. 3, 2008). As to the fifth factor, the Infringing Defendants' willfulness, this Court has already found that that the Infringing Defendants' conduct was willful “by virtue of the[ir] default,” Luban, 282 F.Supp.2d at 124, and the inescapable conclusion that only intentionality could have resulted in nearly identical marks. (See § IV.C.3, supra). Likewise, the sixth factor, noncooperation, favors a statutory award as the Defendants never appeared in this case, despite being served. (See § II.B, supra). The final factor, “the potential for discouraging the defendant[,]” i.e. specific deterrence, does not necessarily favor a higher award, since the Court has already approved a permanent injunction in this case. See WowWee, 2019 WL 1375470, at *10.
Because six of the seven Fitzgerald factors favor statutory damages, the Court respectfully recommends that Kelly Toys be awarded statutory damages.
3. The Amount Awarded
As discussed above, Kelly Toys seeks heightened statutory damages under the Lanham Act of $50,000.00 against each Infringing Defendant. “Most judges have issued awards far below the statutory maximum ($2 million per infringed mark), on a per mark basis, where the defendant willfully infringes on the plaintiff's mark and fails to stop such behavior after being put on notice by the plaintiff or the court, but where there is no concrete information about the defendant's actual sales figures and profits and the estimate of plaintiff's lost revenue.” All-Star Mktg., 775 F.Supp.2d at 624 (collecting cases awarding between $25,000 and $250,000 per mark); see Stark Carpet Corp. v. Stark Carpet & Flooring Installations, Corp., 954 F.Supp.2d 145, 155 (E.D.N.Y. 2013) (“Courts regularly award statutory damages in the realm of up to $50,000 as amounts that both account for a defendant's willful disregard of trademark laws and as a deterrent to others who might consider engaging in infringing conduct in the future.”) (collecting cases); see also Cartier Int'l B.V. v. Ben-Menachem, No. 06 Civ. 3917, 2008 WL 64005, at *15 (S.D.N.Y. Jan. 3, 2008) (“[T]he Court concludes that standard statutory damages in the amount of $50,000 for each of Plaintiffs' nineteen Marks counterfeited by Defendants will be sufficient to meet the goals of the statute, including compensating the Plaintiffs and deterring future violations.”).
After undertaking this analysis and reviewing precedent in this district, the Court recommends that $50,000 in statutory damages per Infringing Defendant is appropriate and is consistent with awards in similar cases. See, e.g., Kelly Toys Holdings, LLC v. alialialiLL Store, No. 21 Civ. 8434 (AKH) (RWL), 2022 WL 1948311, at *16 (S.D.N.Y. May 19, 2022), adopted by, 2022 WL 2072567 (S.D.N.Y. June 9, 2022) (recommending award of $50,000 per defendant, plus post-judgment interest, for infringement on Kelly Toys' marks); Alan Yuan's Store, 325 F.Supp.3d at 426 (awarding $50,000 per defendant for infringement on Plaintiff's toy marks); Off-White LLC v. 6014350, No. 18 Civ. 5322 (GBD) (GWG), 2020 WL 6478544, at *6 (S.D.N.Y. Nov. 4, 2020) (“Off-White II”) (awarding $100,000 for each defendant who sold less than 100 counterfeit products); Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *7 (awarding $25,000 to each defendant with fewer than ten counterfeit sales, and $50,000 from remaining first tier defendants); WowWee, 2019 WL 1375470, at *10 (approving tiered statutory damages ranging from $50,000 to $500,000 for infringement of plaintiff's robotic toys).
As discussed above, (see § IV.D.1, supra), because Kelly Toys has not shown that Caisheng Handicraft violated the Lanham Act, and Kelly Toys “seek[s] statutory damages under the Lanham Act[,]” (ECF No. 31 at 7 ¶ 26), the Court excludes Caisheng Handicraft from the calculation and finds that Kelly Toys is entitled to statutory damages against only the 51 Infringing Defendants.
Accordingly, the Court respectfully recommends a statutory damages award of $50,000 per each Infringing Defendant, for a total award of $2,550,000.00 under Section 1117(c)(2).
4. Post-Judgment Interest
Finally, Kelly Toys seeks post-judgment interest on any damages award. (ECF No. 57 at 21-22 ¶ 61, 24-25 ¶ 65; see id. at 22 n.2). “Post-judgment interest is awarded on any money judgment recovered in a civil case.” Alan Yuan's Store, 325 F.Supp.3d at 426 (citing 28 U.S.C. § 1961). Post-judgment interest is “calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, . . . for the calendar week preceding[] the date of judgment.” 28 U.S.C. § 1961(a). Accordingly, the Court respectfully recommends that Kelly Toys be awarded post-judgment interest in an amount to be determined according to the statutory formula set forth in 28 U.S.C. § 1961.
V. CONCLUSION
For the reasons set forth above, I respectfully recommend that judgment be entered in favor of Kelly Toys and against the Infringing Defendants, in the amount of $2,550,000.00 ($50,000.00 per each Infringing Defendant), plus post-judgment interest.
* * *
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D), or (F)). A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Schofield.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).
GLOSSARY OF DEFINED TERMS
Term Definition ECF Number(s) Kelly Toys Kelly Toys Holdings, LLC. 5 at 3. Epstein Drangel Epstein Drangel LLP, counsel for Kelly Toys. 5 at 1, 4. Shanghai Qianjiu Shanghai Qianjiu Trading Co., Ltd. 5. Hongwen Lianyungang Hongwen Toys Co., Ltd. 5. High Hope High Hope International Group Jiangsu Champion Holdings Ltd. 5. Caisheng Handicraft Yangzhou Caisheng Handicraft Product Co., Ltd. 26. Defendants Baoding Mi Xiaomei Trading Co., Ltd.; DEF; Dongguan Gaodenbao Toys Co., Ltd.; Dongguan Joy Sum Toys Manufacturing Co., Ltd.; Dongguan Mito Technology Co., Ltd.; Dongguan Nansen Plush Toys Co., Ltd.; Dongguan Qingyu Electronic Technology Co., Ltd.; Dongguan Woodfield Baby Products Company Limited; Dongguan Yikang Plush Toys Co., Ltd.,; Foreigners Store; Foshan Nalu Apparel Co., Ltd.; Guangdong Jinyang Children's Products Industrial Co., Ltd.; Guangzhou Epsilon Import And Export Co., Ltd.; Guangzhou Happy Island Toys Co., Ltd.; High Hope; Hunan Uyeah International Trade Co., Ltd.; Jinhua Hairong Import And Export Co., Ltd.; Hongwen; Long Way Wooden Toys & Crafts Co., Ltd.; Nanjing Unico International Trade Co., Ltd.; Nanning Huahang Yigou E-Commerce Co., Ltd.; Nantong Opera Imp.& Exp. Co., Ltd.; Ningbo Yima Import And Export Co., Ltd.; Peaceful (guangzhou) Import And Export Co., Ltd.; Qingdao Aoding Industry And Trade Co., Ltd; Qingdao Hongwuyue Industry And Trade Co., Ltd.; Qingdao Qunze Toys Co., Ltd.; Quanzhou Guanghe Mingliang Trading Co., Ltd.; Quanzhou Huaerfeiya Electronic Commerce Co., Ltd.; Salvatore Store; Shandong Peach Town Toys & Gifts Co., Ltd.; Shanghai Kedi Toys Co., Ltd.; Shanghai Nova Industrial Co., Ltd.; Shanghai Qianjiu; Shenzhen Huashunchang Toys Co., Ltd.; Shenzhen Levin Plush Toys Co., Ltd.; ECF min. entry Sep. 3, 2021; 5 at 3-4. 30 Shenzhen Mina Technology Co., Ltd.; Shijiazhuang Qunze Traning Co., Ltd.; Suzhou Mygreen Textiles Co., Ltd.; The road to happiness Store; Toy Encyclopedia Store; Vanci Store; Yancheng Lanyi International Trading Co., Ltd.; Yancheng Trust Toys Co., Ltd.; Caisheng Handicraft; YANGZHOU DIXIN TOY Store; Yangzhou Haitong Textile Products Co., Ltd.; Yangzhou Hobby Import & Export Co., Ltd.; Yangzhou Jijia Toys Co., Ltd.; Yangzhou Lerddy Toys & Gifts Co., Ltd.; Yangzhou Marisa Toy Gifts Co., Ltd.; Yangzhou Rongjiang Liangpin Toy Co., Ltd.; Yangzhou Tay Chain Import & Export Co., Ltd.; Yangzhou Yijiang Product Trading Co., Ltd.; Yangzhou Youpu Household Products Co., Ltd.; Yangzhou Yuanjia Crafts Co., Ltd.; Yangzhou Yurui Household Products Co., Ltd.; Yiwu Galore Accessories Co., Ltd.; Yiwu Jianyu E-Commerce Firm; Yiwu Jinbiao Textile Co., Ltd.; Yiwu Lenora Trading Co., Ltd.; Yiwu Niuluo Trade Firm; Yiwu Quanfa Import & Export Company Limited; Yiwu Yizhou Trading Co., Ltd.; and Yiwu Zhengzhi Qin Trading Firm. Remaining Defendants Defendants excluding DEF, Hongwen, Shanghai Qianjiu, and High Hope. 26. Terminated Defendants DEF; Guangdong Jinyang Children's Products Industrial Co., Ltd.; High Hope; Hongwen; Nanning Huahang Yigou E-Commerce Co., Ltd.; Qingdao Aoding Industry And Trade Co., Ltd; Qingdao Hongwuyue Industry And Trade Co., Ltd.; Shanghai Qianjiu; Shenzhen Huashunchang Toys Co., Ltd.; Shenzhen Levin Plush Toys Co., Ltd.; Yancheng Trust Toys Co., Ltd.; Yangzhou Yuanjia Crafts Co., Ltd.; and Yiwu Zhengzhi Qin Trading Firm. ECF min. entry Sep. 3, 2021; 21, 22, 29; 36; 38; 41; 43; 45; 49. Defaulting Defendants Defendants excluding the Terminated Defendants. 57 at 6-7. Infringing Defendants Defendants excluding the Terminated Defendants and Caisheng Handicraft. 57 at 6-7. 31 Alibaba Alibaba.com, an online marketplace platform that allows manufacturers, wholesalers and other third-party merchants, like Defendants, to advertise, offer for sale, sell, distribute and ship their wholesale and retail products originating from China directly to consumers across the world and specifically to consumers residing in the U.S., including New York. 5 at 4; see id. at 13-14 ¶¶ 24-30. AliExpress Aliexpress.com, an online marketplace platform that allows manufacturers, wholesalers and other third-party merchants, like Defendants, to advertise, offer for sale, sell, distribute and ship their wholesale and retail products originating from China directly to consumers across the world and specifically to consumers residing in the U.S., including New York. 5 at 4; see id. at 13-14 ¶¶ 24-30. User Account(s) Any and all websites and any and all accounts with online marketplace platforms such as Alibaba and AliExpress, as well as any and all as yet undiscovered accounts with employees, agents, servants and all persons in active concert or participation with any of them. 5 at 5; see id. at 14-16 ¶¶ 27, 33, 37. Merchant Storefronts Any and all User Accounts through which Defendants, their respective officers, employees, agents, servants and all persons in active concert or participation with any of them operate storefronts to manufacture, import, export, advertise, market, promote, distribute, display, offer for sale, sell and/or otherwise deal in Counterfeit Products, which are held by or associated with Defendants, their respective officers, employees, agents, servants and all persons in active concert or participation with any of them. 5 at 5; see id. at 14-16 ¶¶ 27-29, 33, 36; 5-4 - 5-6. USPTO The United States Patent and Trademark Office. 5 at 11 n.4. Squishmallows Registrations U.S. Trademark Registration Nos.: 5,454,574 for “SQUISHMALLOW” for goods in Class 28; 6,137,521 for “FLIP A MALLOWS” for goods in Class 28; 5,962,289 for “MYSTERY SQUAD” for goods in Class 28; and 2,029,047 for “KELLYTOY” for goods in Class 28. 5 at 4-5; see id. at 11 ¶ 15; 5-2 at 2-8. Squishmallows Applications U.S. Trademark Serial Application Nos.: 88/471,796 for “SQUISHMALLOWS HUGMEES” for goods in Class 28 and 90/676,140 for “ORIGINAL SQUISHMALLOWS,” for goods in Class 28. 5 at 4; see id. at 11 ¶ 15; 5-2 at 9-17. Squishmallows Marks The marks covered by the Squishmallows Registrations and Squishmallows Applications. 5 at 5; see id. at 11 ¶ 16; 5-2. Squishmallows Works The works covered by the U.S. copyright registrations listed in Exhibit C to the Complaint. 5 at 5; 5-3. Squishmallows IP The marks covered by the Squishmallows Marks and the works covered by the Squishmallows Works. 5-2; 5-3. Squishmallows Products A line of loveable buddies made with a super soft, marshmallow-like texture that come in a variety of sizes from 3.5-inch clip-ons to extra-large 24 inch plush toys, and have 5 at 5; see id. at 10-13 ¶¶ 7-23. 32 expanded to other styles including Hug Mees, Stackables, Mystery Squad and Flip-A-Mallows. Counterfeit Products Products bearing or used in connection with the Squishmallows Marks and/or Squishmallows Works, and/or products in packaging and/or containing labels and/or hang tags bearing the Squishmallows Marks and/or Squishmallows Works, and/or bearing or used in connection with marks and/or artwork that are confusingly or substantially similar to the Squishmallows Marks and/or Squishmallows Works and/or products that are identical or confusingly or substantially similar to the Squishmallows Products. 5 at 5; see id. at 9 ¶ 6. Defendants' Assets Any and all money, securities or other property or assets of Defendants (whether said assets are located in the U.S. or abroad). 5 at 5. Financial Institutions Any banks, financial institutions, credit card companies and payment processing agencies, such as PayPal Inc., Payoneer Inc., the Alibaba Group d/b/a Alibaba.com payment services (e.g., Alipay.com Co., Ltd., Ant Financial Services Group), PingPong Global Solutions, Inc. and other companies or agencies that engage in the processing or transfer of money and/or real or personal property of Defendants. 5 at 6. Complaint Kelly Toys' Complaint filed on July 14, 2021. 5. Application Kelly Toys' Ex Parte Application for: 1) a temporary restraining order; 2) an order restraining Merchant Storefronts and Defendants' Assets with the Financial Institutions; 3) an order to show cause why a preliminary injunction should not issue; 4) an order authorizing bifurcated and alternative service and 5) an order authorizing expedited discovery filed on July 14, 2021. 5 at 4; 10-12. TRO Temporary Restraining Order 10. TRO Order 1) Temporary Restraining Order; 2) Order Restraining Merchant Storefronts and Defendants' Assets with the Financial Institutions; 3) Order to Show Cause Why a Preliminary Injunction Should Not Issue; 4) Order Authorizing Bifurcated and Alternative Service; and 5) Order Authorizing Expedited Discovery, entered on July 14, 2021. 31-2. OTSC Hearing August 5, 2021 Hearing held before the Honorable Lorna G. Schofield scheduled in the TRO. 31-2 at 15-16. Preliminary Injunction Order August 5, 2021 Preliminary Injunction Order. 19. Memorandum of Law Kelly Toys' Memorandum of Law in Support of its Motion for Default Judgment and a Permanent Injunction against Defaulting Defendants, filed on October 11, 2021. 32. Default Order Order to Show Cause why Default Judgment and a Permanent Injunction Should Not be Entered Against the Defaulting Defendants, entered October 12, 2021. 34. Final Judgment Final Default Judgment and Permanent Injunction Order, 52. 33 entered on December 3, 2021. Order of Reference Order of Reference to a Magistrate Judge, entered on December 3, 2021. 54 Scheduling Order Inquest Scheduling Order for Damages Inquest entered on February 7, 2022. 55. Proposed Findings Kelly Toys' Proposed Findings of Fact and Conclusions of Law, filed on March 7, 2022. 57. Futterman Aff. Affidavit of Danielle S. Futterman in Support of Kelly Toys' Request for Statutory Damages, filed on March 7, 2022. 58. Wrongful Use Chart Chart detailing Defaulting Defendants' prohibited use of the Squishmallows IP. 57-1; 58-3. Damages Submission The Order of Reference, Scheduling Order, Proposed Findings, Futterman Aff., and Wrongful Use Chart. 57; 57-1; 58; 58-1; 58-2; 58-3.