Opinion
22 Civ. 2483 (LGS) (GWG)
03-31-2023
ZURU (SINGAPORE) PTE., LTD., et al, Plaintiffs, v. THE INDIVIDUALS, CORPORATIONS, LIMITED LIABILITY COMPANIES, PARTNERSHIPS, AND UNINCORPORATED ASSOCIATIONS IDENTIFIED ON SCHEDULE A HERETO, Defendants.
REPORT & RECOMMENDATION
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE.
Plaintiff Zuru (Singapore) PTE., LTD., and Zuru, Inc. (collectively, “Zuru”), brought this action against various entities that Zuru alleges have infringed on Zuru's trademarks and copyright registrations through the sale of counterfeit goods on the internet. See Complaint, filed Mar. 28, 2022 (Docket # 1) (“Compl.”). Some defendants have been dismissed since the filing of the complaint. 104 defendants have defaulted, however, and Zuru seeks a judgment against them for statutory damages and other relief. For the following reasons, Zuru should be awarded a judgment of $50,000 against each of these defendants.
See Proposed Findings of Fact and Conclusions of Law, filed Dec. 9, 2022 (Docket # 102) (“PFFCL”); Affidavit of Christopher Tom, filed Dec. 9, 2022 (Docket # 103) (“Tom Aff.”).
I. BACKGROUND
Zuru filed the instant action alleging trademark infringement and counterfeiting, false designation of origin, copyright infringement, and a New York common law claim of unfair competition. See Compl. On the same day Zuru began this case, it sought (and later obtained) (a) a temporary restraining order against all defendants from infringing Zuru's “ROBO FISH trademark” (U.S. Trademark Registration No. 4440702), “ROBO ALIVE trademark” (U.S. Trademark Registration No. 5294215), and what it termed the “ROBO FISH Copyrights” (U.S. Copyright Office Registration Nos. VA 2-248-953, VA 2-249-214, VA 2-253-391, VA 2-253392, VA 2-253-394, and VA 2-253-396); (b) temporary transfer of control to Zuru of defendants' online stores; (c) a temporary restraint of some of the defendants' assets “to preserve Plaintiffs' right to an equitable accounting”; (d) expedited discovery; (e) permission to effectuate service by email and electronic publication; and (f) an order requiring defendants to show cause why a preliminary injunction should not issue. See Proposed Order to Show Cause, filed Mar. 28, 2022 (Docket # 5), at 1-2; Memorandum in Support of Plaintiffs' Ex Parte Application, filed Mar. 28, 2022 (Docket # 6); Order to Show Cause for Preliminary Injunction and Temporary Restraining Order, filed Apr. 4, 2022 (Docket # 21); Third Amended Order to Show Cause for Preliminary Injunction and Temporary Restraining Order, filed Apr. 29, 2022 (Docket # 40) (“TRO”). On April 18 and 29, 2022, Zuru served defendants according to the methods the Court permitted. See Proof of Summons, filed May 10, 2022 (Docket # 45); Proof of Summons, filed May 10, 2022 (Docket # 46).
Zuru later obtained certificates of default against the defaulting defendants, see Clerk's Certificate of Default, filed June 15, 2022 (Docket # 62), and the district court issued a default judgment against them, see Default Judgment, filed Oct. 25, 2022 (Docket # 98) (“Default Judgment”). We have listed the defaulting defendants in the chart attached to the end of this report. The case is now before the Court for an inquest on damages. See Order of Reference, filed Oct. 25, 2022 (Docket # 99).
II. APPLICABLE LAW
In light of the defaults, Zuru's properly pleaded allegations in its complaint, except those related to damages, are accepted as true. See, e.g., 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.”) (citation and internal quotation marks omitted); Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (“In light of [defendant's] default, a court is required to accept all . . . factual allegations as true and draw all reasonable inferences in [plaintiff's] favor”) (citation omitted).
As to damages, “[t]he district court must instead 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) (citation omitted). This inquiry requires the district court to: (1) “determin[e] the proper rule for calculating damages on . . . a claim” and (2) “assess[] plaintiff's evidence supporting the damages to be determined under this rule.” Id.
Zuru “bears the burden of establishing its entitlement to the amount” sought. See Trustees of Loc. 813 Ins. Tr. Fund v. Rogan Bros. Sanitation Inc., 2018 WL 1587058, at *5 (S.D.N.Y. Mar. 28, 2018). While a court must “take the necessary steps to establish damages with reasonable certainty,” Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997), a court need not hold a hearing “as long as it ensure[s] that there [is] a basis for the damages specified in a default judgment,” Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989). In the case of a default where the defendant has never appeared, “a court may base its determination of damages solely on the plaintiff's submissions.” Trustees of Loc. 813 Ins. Tr. Fund, 2018 WL 1587058, at *5 (citing Fustok, 873 F.2d at 40).
Here, the Court's Scheduling Order notified the parties that the Court may conduct the inquest into damages based upon the written submissions of the parties, but that any party could seek an evidentiary hearing. See Order, filed Oct. 26, 2022 (Docket # 100) (“Scheduling Order”), ¶ 3. No party has requested an evidentiary hearing. Moreover, because Zuru's submissions provide a basis for an award of damages, no hearing is required.
III. DISCUSSION
A. Facts Relating to Liability
Plaintiffs are members of the “ZURU Group of companies,” which is the “exclusive licensee and official source of ROBO FISH products in the United States.” Compl. ¶ 22. Zuru has the exclusive right to the ROBO FISH and ROBO ALIVE trademarks, id. ¶¶ 23-26, and owns the exclusive rights to the copyrights for the ROBO FISH products, id. ¶¶ 27-28, including those covered by U.S. Copyright Office Registration Nos. VA253-391, VA 2-253-392, VA 2-253-394, VA 2-253-396, VA 2-249-214 and VA 2-248-953, id. ¶ 65. See also Exhibit Trademark Registration, annexed as Exhibit # 1 to Compl. (Docket # 1-1) (“ROBO FISH Trademarks”); Exhibit Copyright Registration, annexed as Exhibit # 2 to Compl. (Docket # 1-2) (“ROBO FISH Copyrights”). The copyrights refer to “ROBO FISH sculptures,” Compl. ¶ 28, which appear to be toy fish in different colors, see id. Zuru has “expended substantial time, money, and other resources” to market and promote the ROBO FISH trademarks, and products bearing these marks “are widely recognized and exclusively associated by consumers, the public, and the trade as being products sourced from Plaintiffs.” Id. ¶ 26.
Defendants operate online stores selling counterfeit versions of Zuru products, see Id. ¶¶ 29-35, and “deceive unknowing consumers by using the ROBO FISH Copyright Registrations without authorization within the product descriptions of their Defendant Internet Stores to attract customers,” id. ¶¶ 36, 47, 49-51. Defendants have their stores listed on various internet marketplaces, including AliExpress, Amazon, DHgate, eBay, and Wish. Id. ¶ 29. In their posts on these marketplaces, the defendants have copied ROBO FISH copyrights or produced strikingly or substantially similar images to the ROBO FISH copyrights. Id. ¶¶ 68-69. Zuru “attempted to initiate the purchase of a Counterfeit Product from each of the Defendant Internet Stores.” Declaration of Stephen Drysdale, filed Mar. 28, 2022 (Docket # 8) (“Drysdale Decl.”), ¶ 15; see also PFFCL ¶ 18. Zuru asserts that each defaulting defendant “[u]sed at least one (1) of Plaintiff's registered copyrights.” See Chart Detailing Defaulting Defendants, annexed as Exhibit A to PFFCL (Docket # 102-1). None of the defaulting defendants “have the right or authority to use the ROBO FISH Copyrights and/or ROBO FISH Trademarks for any reason.” PFFCL ¶ 14; Drysdale Decl. ¶ 18. “Prior to and contemporaneous with their counterfeiting and infringing actions . . ., Defendants had knowledge of Plaintiffs' ownership of the ROBO FISH Copyright Registrations and ROBO FISH Trademarks, of the fame and incalculable goodwill associated therewith and of the popularity and success of the ROBO FISH products, and in bad faith proceeded to manufacture, market, develop, offer to be sold, and/or sell the Counterfeit Products.” Compl. ¶ 50. This “has caused confusion, mistake, and deception by and among consumers and is irreparably harming Plaintiffs.” Id. ¶ 49.
To establish a claim of copyright infringement, Zuru “must show: (i) ownership of a valid copyright; and (ii) unauthorized copying of the copyrighted work.” Jorgensen v. Epic/Sony Records, 351 F.3d 46, 51 (2d Cir. 2003) (citing Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991) and Castle Rock Entm't, Inc. v. Carol Publ'g Grp., Inc., 150 F.3d 132, 137 (2d Cir. 1998)). Zuru has proven ownership of a valid copyright by providing the registration number and date of registration for the copyrights at issue, see ROBO FISH Copyrights, and has shown unauthorized copying by alleging facts showing each of the defaulting defendants used the ROBO FISH Copyrights or imagery that is at least substantially similar to the copyrights without Zuru's permission, see Compl. ¶¶ 49-50.
B. Statutory Damages
“[A]n infringer of copyright is liable for either” actual damages or statutory damages. 17 U.S.C. § 504(a)(1)-(2). Here, Zuru has elected to recover statutory damages. See PFFCL ¶ 60. Where a copyright owner elects to recover statutory damages, it may recover “with respect to any one work, . . . no[] less than $750 or more than $30,000 as the court considers just.” 17 U.S.C. § 504(c)(1).
If the court finds the “infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.” 17 U.S.C. § 504(c)(2). In order to “prove that a copier's infringement was willful [a copyright holder] must show that the infringer ‘had knowledge that its conduct represented infringement or . . . recklessly disregarded the possibility.'” Bryant v. Media Right Prods., Inc., 603 F.3d 135, 143 (2d Cir. 2010) (quoting Twin Peaks Prods., Inc. v. Publ'ns Int'l Ltd., 996 F.2d 1366, 1382 (2d Cir. 1993)). “Courts frequently infer willfulness where a defendant defaults.” Hounddog Prods., L.L.C. v. Empire Film Grp., Inc., 826 F.Supp.2d 619, 631 (S.D.N.Y. 2011) (collecting cases).
“No proof of actual damages or, in fact, any damages, is necessary for the award of statutory damages.” Hollander Glass Texas, Inc. v. Rosen-Paramount Glass Co., Inc., 291 F.Supp.3d 554, 559 (S.D.N.Y. 2018) (citation omitted), adopted by 2019 WL 416327 (S.D.N.Y. Feb. 1, 2019). To calculate statutory damages, courts in this Circuit examine:
(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.Bryant, 603 F.3d at 144 (citation omitted). The court has “wide discretion” in determining an appropriate award of statutory damages. See Fitzgerald Publ'g Co., Inc. v. Baylor Publ'g Co., Inc., 807 F.2d 1110, 1116 (2d Cir. 1986); accord Noble v. Crazetees.com, 2015 WL 5697780, at *6 (S.D.N.Y. Sept. 28, 2015) (citations omitted).
Zuru seeks $50,000 per defaulting defendant for a total of $5,200,000 in statutory damages as expressed in the attached chart. See PFFCL at 17-18. The Court turns next to the Bryant factors.
As to the first Bryant factor, defendants' state of mind, the defendants are deemed to have acted willfully in light of their failure to defend this action. See Experience Hendrix, L.L.C. v. Pitsicalis, 2020 WL 3564485, at *11 (S.D.N.Y. July 1, 2020) (“With respect to the first factor, by virtue of their default, [defendants] are deemed to be willful infringers.”) (citation and quotation marks omitted), adopted by 2020 WL 4261818 (S.D.N.Y. July 24, 2020); Malibu Media, LLC v. Greenwood, 2019 WL 7580083, at *4 (S.D.N.Y. Dec. 17, 2019) (“the Court may . . . find that [defendant's] conduct was willful by virtue of [defendant's] default”) (citation and quotation marks omitted), adopted by 2020 WL 209140 (S.D.N.Y. Jan. 14, 2020). The first factor therefore weighs in favor of an increased statutory damages award.
Factors two and three weigh slightly in favor of an increased statutory damages award. Zuru acknowledges that the amount of “expenses saved and profits reaped” by the defaulting defendants as well as the “revenues lost” by Zuru “are unknown.” PFFCL ¶ 54. Despite the lack of precision on these factors, the facts and context provided tend to show significant savings and profits by the infringing parties and corresponding loss to the holder and licensee of the copyrighted materials. Zuru has alleged this counterfeiting operation took place entirely online, and so “[a]lthough the Court cannot determine the extent of [defendants'] gain, or [Zuru]'s loss, . . . by selling over the internet, the [defendants] had access to a virtually limitless number of customers.'” Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 125 (S.D.N.Y. 2003) (quoting Rolex Watch U.S.A., Inc. v. Jones, 2002 WL 596354, at *5 (S.D.N.Y. April 17, 2002)). Courts in this district make such inferences routinely. See, e.g., Smart Study Co. v. lizhiwangluo16, 2020 WL 3639659, at *6 (S.D.N.Y. July 6, 2020) (“[T]he fact that the defaulting defendants in these cases operate on web platforms to distribute and sell the counterfeiting products supports an inference of a broad scope of operations and thus heightened statutory damages are appropriate . . . despite the lack of specific evidence attesting to actual damages suffered by the plaintiff in lost revenue or profits reaped by the defaulting defendants.”) (punctuation omitted); AW Licensing, LLC v. Bao, 2016 WL 4137453, at *3 (S.D.N.Y. Aug. 2, 2016). Additionally, Zuru has provided uncontroverted evidence that it has widely marketed its ROBO FISH products through print media, a ROBO FISH website, social media, and point of sale materials. See PFFCL ¶¶ 3-4. The expense of “significant efforts to build and maintain” the brand is thus evidence supporting the third factor of this analysis in favor of heightened statutory damages. Smart Study Co., 2020 WL 3639659, at *6.
As to the fourth factor, relating to deterrence, we consider the impact of a particular award level on defaulting defendants “and other potential copyright infringing parties.” Malibu Media, LLC, 2021 WL 707274, at *4. Courts find “[t]he need to deter other counterfeiters is particularly compelling” where the “apparent extent of counterfeit activity” involves many parties and at a substantial amount. Bumble & Bumble, LLC v. Pro's Choice Beauty Care, Inc., 2016 WL 658310, at *5 (S.D.N.Y. Feb. 17, 2016), adopted, 2016 WL 1717215 (S.D.N.Y. Apr. 27, 2016). In such circumstances, courts readily find this factor favors “a significant award” as it can “put infringers on notice that it costs less to obey the copyright laws than to violate them.” Manno v. Tennessee Prod. Ctr., Inc., 657 F.Supp.2d 425, 434 (S.D.N.Y. 2009) (citations and internal quotations omitted). While our current inquiry addresses only the copyright violation, the uncontested allegations tie the copyright violations to an extensive online counterfeiting operation such that the need for a potential deterrent effect is high.
As for the fifth factor, the defaulting defendants have obviously not cooperated in providing evidence concerning the value of the infringing material given their defaults. And, given their defaults, defendants have not provided any evidence of their conduct that might militate against an award of heightened statutory damages. “The fact that this case proceeded by default establishes . . . that there was no participation, much less cooperation, by [d]efendants.” AW Licensing, LLC, 2016 WL 4137453, at *3 (S.D.N.Y. Aug. 2, 2016). This factor thus supports increased damages.
Having weighed the Bryant factors, the Court concludes that Zuru has justified the amount it has requested, that is, $50,000 per infringed work. This figure is below the statutory maximum of $150,000 for willful violations, and we find the facts shown here justify this level of damages. See 17 U.S.C. § 504(c)(2). While an award of this magnitude might not be justified in the context of a copyright violation alone, see, e.g., Korzeniewski v. Sapa Pho Vietnamese Rest. Inc., 2019 WL 312149, at *8-9 (E.D.N.Y. Jan. 3, 2019), adopted, 2019 WL 291145 (E.D.N.Y. Jan. 23, 2019) (awarding $7,500 as five times the licensing fee of the violated copyright), the instant case involves both trademark and copyright infringement and the use of the internet to sell the products suggests extensive online counterfeiting operations. In such situations, courts have awarded similar amounts to the amount requested here. See, e.g., WowWee Grp. Ltd. v. Meirly, 2019 WL 1375470, at *10 (S.D.N.Y. Mar. 27, 2019) ($50,000 $500,000 per defaulting defendant in a trademark and copyright case brought against counterfeiters); All-Star Mktg. Grp., LLC v. Media Brands Co., 775 F.Supp.2d 613, 624, 627 (S.D.N.Y. 2011) ($25,000-$50,000 per trademark violation and $25,000 for copyright violation in online counterfeiting context); Spin Master Ltd. v. Alan Yuan's Store, 325 F.Supp.3d 413, 425-426 (S.D.N.Y. 2018) ($50,000 awarded in a counterfeit suit based on a trademark claim in order not to duplicate copyright damages that otherwise would have been available). Thus, Zuru should be awarded $50,000 in statutory damages per defaulting defendant.
IV. CONCLUSION
For the foregoing reasons, judgment should be entered against each defaulting defendant on the attached chart in the amount of $50,000 for a total damages award of $5,200,000.
The Default Judgment in this case states that the inquest ordered in that judgment is for the purpose of determining “damages.” See Default Judgment, filed October 25, 202 (Docket # 98); accord Scheduling Order for Damages Inquest, filed October 26, 2022 (Docket # 100). We thus do not address the plaintiff's requests for injunctive and other equitable relief, which were granted on a preliminary basis early in this case. See Preliminary Injunction Order, filed May 18, 2022 (Docket # 53).
PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file any objections. See also Fed.R.Civ.P. 6(a), (b), (d). A party may respond to any objections within 14 days after being served. Any objections and responses shall be filed with the Clerk of the Court. Any request for an extension of time to file objections or responses must be directed to Judge Schofield. If a party fails to file timely objections, that party will not be permitted to raise any objections to this Report and Recommendation on appeal. See Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).