Opinion
1:18-cv-02739 (JGK) (SDA)
05-07-2019
Ideavillage Products Corp., Plaintiff, v. Aarhus et al., Defendants.
REPORT AND RECOMMENDATION
STEWART D. AARON, UNITED STATES MAGISTRATE JUDGE.
TO THE HONORABLE JOHN G. KOELTL, UNITED STATES DISTRICT JUDGE:
This is an action in which Plaintiff Ideavillage Products Corp. ("Plaintiff" or "Ideavillage") alleges claims against Defendants, including those Defendants that have defaulted, for trademark infringement and counterfeiting of Plaintiff's federally registered trademarks, copyright infringement of Plaintiff's federally registered copyrights, false designation of origin, unfair competition and related state and common law claims. (Compl., ECF No. 7, ¶¶ 46-105.) After a default judgment was entered against the Defaulting Defendants, this action was referred to me to recommend the damages and other relief to be awarded to Plaintiff. (Am. Order of Reference, ECF No. 125.)
Defendants are merchants on an online marketplace forum. (Compl., ECF No. 7, ¶ 5.)
The Defendants that have defaulted are aweiwei258; best4you666; caicai shoping; CCMC; dadanhuangpai; dingyin96; Ever; fashionhub; flasafe's place; FlyingWing; Gmai Trade Co., Ltd.; Green hill God; guoyingchengxin; hupai; jacobli; lianghaijun; linemartz; Lise; Liu Wu Shop; lseroer; LULU Mall; lyo66881011; MAN CHART (HK) LIMITED; ngytrade; Onemark; pandaman collection; pingpongpong; Rosyclouds Shop; Runofthelion; shixinkeji; Shop_more; SmileFullLtd; SMT; Superaj Store; sweetstars trading co., ltd.; tony Z; WDYFKLKF; wonderful12; XiangGu; ximanchun; yiyishangmaoyouxiangongsi; yuhanbaobei; zhangdabing; zhijia trade; and zhonglitian (hereinafter referred to as the "Defaulting Defendants").
For the reasons set forth below, the Court recommends an award of damages as set forth in the Conclusion below. The Court further recommends that a permanent injunction be issued, that a post-judgment asset freeze be entered and that an Order be entered authorizing the release and transfer of the Defaulting Defendants' frozen assets.
PROCEDURAL HISTORY
On March 28, 2018, Plaintiff filed this action and moved ex parte for a temporary restraining order ("TRO"), an order to show cause why a preliminary injunction ("PI") should not issue, an asset restraining order, an order authorizing alternative service by electronic mail and an order authorizing expedited discovery (the "Application"). (See ECF Nos. 1 & 16-20.) On March 28, 2018, the Court granted Plaintiff's Application and entered a TRO. (ECF No. 22.)
The TRO provided for alternative methods of service of the Summons, Complaint, TRO and all documents filed in support of Plaintiff's Application on Defendants. (Id.) A minor modification was made to the TRO on March 30, 2018. (ECF No. 23.)
Following service of the TRO, the Summons and Complaint and all papers filed in support of Plaintiff's Application on Defendants, including the Defaulting Defendants, pursuant to the terms of the TRO (ECF No. 24), Plaintiff appeared at the show cause hearing on April 10, 2018; however, no Defendants appeared. (4/10/2018 Minute Entry.) Following the hearing, the Court entered a PI Order against all Defendants, including the Defaulting Defendants, mirroring the terms of the TRO and extending through the pendency of the Action. (ECF No. 6.) On the same day, April 10, 2018, pursuant to alternative methods of service authorized in both the TRO and PI Order, all Defendants were served with the PI Order, except Defendant yuhanbaobei. (ECF No. 126.)
On January 6, 2019, the Court entered an Order directing Plaintiff to move for default judgment by February 7, 2019. (ECF No. 106.) On February 7, 2019, Plaintiff timely filed its Motion for Default Judgment against the Defaulting Defendants. (See ECF No. 112.) On February 8, 2019, the Court entered an Order to Show Cause why default judgment and permanent injunction should not be entered against the Defaulting Defendants. (ECF No. 113.)
Plaintiff had obtained Certificates of Default against the Defaulting Defendants on September 10, 2018. (ECF No. 80.)
Following due service of the Order to Show Cause and supporting papers by Plaintiff on the Defaulting Defendants (ECF No. 114), Plaintiff appeared on February 22, 2019, for the show cause hearing, at which no Defendants appeared. (2/22/2019 Minute Entry.) By Order dated February 25, 2019, Judge Koeltl granted a default judgment in favor of Plaintiff against the Defaulting Defendants. (ECF No. 115.) The following day, Judge Koeltl referred this case to me to conduct an inquest and to report and recommend concerning the Plaintiff's damages. (ECF No. 116.)
On February 26, 2019, I issued an Order requiring Plaintiff to serve and file by March 29, 2019 Proposed Findings of Fact and Conclusions of Law concerning all damages and any other monetary relief sought, and requiring the Defaulting Defendants to serve and file their responses by April 9, 2019. (ECF No. 117, ¶¶ 2-3.) The Order also states:
The Court hereby notifies the parties that it may conduct this inquest based solely upon the written submissions of the parties. See Bricklayers & Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 189 (2d Cir. 2015) (quoting Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991)); 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) (citation omitted). To the extent that any party seeks an evidentiary hearing on the issue of damages, such party must set forth in its submission the reason why the inquest should not be
conducted based upon the written submissions alone, including a description of what witnesses would be called to testify at a hearing and the nature of the evidence that would be submitted.(Id. ¶ 4.)
Plaintiff timely filed, on March 29, 2019, its Proposed Findings of Fact and Conclusions of Law (ECF No. 121), as well as a supporting Affidavit of Brieanne Scully (Scully Aff., ECF No. 122) and a supporting memorandum of law. (Pl. Mem., ECF No. 123.) Proof of service of these documents was filed on April 1, 2019. (ECF No. 124.)
No defendant has made any written submissions, nor has any defendant contacted my chambers in any fashion. Plaintiff has not requested an evidentiary hearing on the issue of damages. Because Plaintiff's inquest submissions provide a basis for damages, no hearing was required. See Bricklayers & Allied Craftworkers Local 2, 779 F.3d at 189.
On April 26, 2019, Judge Koeltl amended the Order of Reference to confirm that I was to report and recommend regarding any other relief requested by Plaintiff (in addition to the damages sought). (ECF No. 125.) On April 29, 2019, I ordered Plaintiff to make a supplemental submission that explains the basis for the statutory damages sought as to each Defaulting Defendant. (ECF No. 127.) On May 6, 2019, Plaintiff filed its supplemental submission. (ECF No. 128.)
FINDINGS OF FACT
To the extent that any finding of fact reflects a legal conclusion, it shall to that extent be deemed a conclusion of law, and vice versa.
The following findings of fact are based on the admissible evidence contained in Plaintiff's Complaint and its inquest submissions:
In light of Defendants' default, the Court is required to accept all of Plaintiffs' allegations as true, except for those pertaining to damages. See, e.g., Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009).
I. Ideavillage's Business And Its Copper Fit Products
Ideavillage is a leading developer, producer, marketer and distributor of quality, innovative consumer products. (Compl. ¶ 6; Lombardo Decl., ECF No. 17, ¶ 3.) Ideavillage promotes and sells its products through national direct response television advertising commonly called "As Seen On TV" ("ASOTV"). (Id.) Ideavillage also promotes and sells its ASOTV products at the retail level at well-known mass retail outlets, including, without limitation: Wal-Mart, Target Stores, Bed Bath & Beyond, Toys R Us, Rite-Aid, CVS and Walgreens; through catalog companies; online, through its own website and its retail customers' websites; as well as through a network of international distributors, among other channels of trade. (Id.)
One of Ideavillage's most popular and successful product brands is a line of copper-infused compression garments marketed and sold under the trademark COPPER FIT, including the sub-brands: Copper Fit Knee or Elbow Sleeves, Copper Fit Pro Knee or Elbow Sleeves, Copper Fit Back Pro and Copper Fit Socks ("Copper Fit Products"). (Compl. ¶ 8; Lombardo Decl. ¶ 4.) Ideavillage's line of Copper Fit Products has achieved great success since its introduction in August 2014, due in part to a significant marketing campaign lead by hall of fame and Super Bowl champion quarterback Brett Favre. (Compl. ¶ 6; Lombardo Decl. ¶ 5.)
In addition to the channels described above, Ideavillage markets the Copper Fit Products on its own website, https://www.ideavillage.com, and markets and sells the Copper Fit Products through its other websites: https://www.getcopperfit.com; https://www.copperfitback.com; https://www.copperfitpro.com and https://www.getenergysocks.com. (Compl. ¶ 16 & Ex. C; Lombardo Decl. ¶ 6.) The Copper Fit Products, specifically the Copper Fit Knee or Elbow Sleeves (two sleeves), Copper Fit Pro Knee or Elbow Sleeves (two sleeves), Copper Fit Back Pro and Copper Fit Socks (two pairs), retail for $19.99. (Compl. ¶ 17; Lombardo Decl. ¶ 7.)
Ideavillage has gained significant common law trademark and other rights in its Copper Fit Products, through use, advertising and promotion. (Compl. ¶ 10; Lombardo Decl. ¶ 8.) Ideavillage also has protected its rights by filing for and obtaining federal trademark registrations. (Id.) Ideavillage is the owner of U.S. Trademark Registration No. 4,676,558 for the wordmark "COPPER FIT" for goods in Class 25, U.S. Trademark Reg. No. 4,774,235 for the wordmark "COPPER FIT" for a wide variety of goods in Class 24, U.S. Trademark Registration No. 5,403,018 for "COPPER FIT" for a variety of goods in Class 25, and U.S. Trademark Registration No. 5,301,755 for the wordmark "COPPER FIT" for a wide variety of goods in Class 25 (collectively, the "CopperFit Marks"). (Compl. ¶ 11; Lombardo Decl. ¶ 9.)
In addition, Ideavillage also owns both registered and unregistered copyrights related to the Copper Fit Products. (Compl. ¶ 13; Lombardo Decl. ¶ 11.) For example, Ideavillage is the owner of U.S. Copyright Reg. No. VA 1-914-217 covering the Copper Fit Elbow Sleeve packaging and instructions, U.S. Copyright Reg. No. VA 1-914-211 covering the Copper Fit Knee Sleeve packaging and instructions, U.S. Copyright Reg. No. VA 1-945-394 covering the Copper Fit Socks packaging, U.S. Copyright Reg. No. VA 1-948-947 covering the Copper Fit Back Pro Packaging and U.S. Copyright Reg. No. VA 2-089-046 covering the Copper Fit Back Belt Packaging Artwork (collectively, the "Copper Fit Works"). (Compl. ¶¶ 14-15; Lombardo Decl. ¶ 12.)
The success of the Copper Fit Products is due in part to Ideavillage's marketing and promotional efforts. (Compl. ¶ 19; Lombardo Decl. ¶ 13.) These efforts include advertising and promotion through print, television and websites, and participation in trade shows, among other promotional efforts domestically and abroad, including in New York. (Id.) Ideavillage's success is also due to its use of the highest quality materials and processes in making the Copper Fit Products. (Compl. ¶ 20; Lombardo Decl. ¶ 14.) Further, Ideavillage owes a substantial amount of the success of the Copper Fit Products to its consumers and word of mouth "buzz" that its consumers have generated. (Compl. ¶ 21; Lombardo Decl. ¶ 15.)
Ideavillage's efforts, the quality of its Copper Fit Products, its marketing, promotion and distribution efforts, and the word-of-mouth "buzz" generated by its consumers have made the Copper Fit Products, Copper Fit Marks and Copper Fit Works prominently placed in the minds of the public. (Compl. ¶ 22; Lombardo Decl. ¶ 16.) Retailers, retail buyers, consumers and members of the public have become familiar with the Copper Fit Products and associate them exclusively with Ideavillage. (Lombardo Decl. ¶ 16.) As a result of such associations, Ideavillage and its Copper Fit Products, Copper Fit Marks and Copper Fit Works, have acquired a valuable reputation and goodwill among the public. (Compl. ¶ 22; Lombardo Decl. ¶ 17.)
Ideavillage has gone to great lengths to protect its interests in the Copper Fit Products, Copper Fit Marks and Copper Fit Works. (Compl. ¶ 23; Lombardo Decl. ¶ 18.) No one other than Ideavillage is authorized to manufacture, import, export, advertise, offer for sale, or sell any goods utilizing the Copper Fit Marks or Copper Fit Works without the express permission of Ideavillage. (Id.)
II. Defaulting Defendants' Unlawful Counterfeiting And Infringing Conduct
Wish.com ("Wish") is a California-based, global online marketplace and e-commerce platform owned by ContextLogic, Inc. ("ContextLogic"), a Delaware corporation, that allows manufacturers and third-party merchants, like the Defaulting Defendants, to advertise, distribute, offer for sale, sell and ship their retail products, which originate primarily from China, directly to consumers worldwide, including the United States. (See Compl. ¶¶ 24-25; Wolgang Decl., ECF No. 19, ¶ 3.) A large number of counterfeit and infringing products are sold and/or offered for sale on Wish. (See Compl. ¶ 27; Wolgang Decl. ¶ 9.)
The Defaulting Defendants conduct business in the United States and other countries by means of storefronts on Wish. (Compl. ¶ 28; Wolgang Decl. ¶¶ 18-19; Lombardo Decl. ¶¶ 21-22; Arnaiz Decl., ECF No. 18, ¶¶ 4, 6.) Ideavillage retained New Alchemy Limited, a company that provides trademark infringement research services and other intellectual property research services, to investigate and research manufacturers, wholesalers and/or third-party merchants offering for sale and/or selling Counterfeit Products on Wish. (Arnaiz Decl. ¶ 4; Lombardo Decl. ¶ 20; Wolgang Decl. ¶ 16.) Ideavillage has confirmed that, without Ideavillage's authorization, the Defaulting Defendants sold Counterfeit Products on Wish. (Arnaiz Decl. ¶¶ 6-10; Scully Aff. ¶ 17, Ex. D; see also Compl. ¶¶ 29-32.) Ideavillage has submitted to the Court a report produced by ContextLogic that reflects the Counterfeit Products sold by the Defaulting Defendants. (See Scully Aff., Ex. D, ECF No. 122-4.) In addition, Ideavillage filed with the Court printouts from Defendants' user accounts and merchant storefronts on Wish. (Compl. Ex. D.)
"Counterfeit Products" are defined as products bearing or used in connection with the Copper Fit Marks and/or Copper Fit Works, and/or products in packaging and/or containing labels bearing the Copper Fit Marks and/or Copper Fit Works, and/or bearing or used in connection with marks and/or artwork that are confusingly or substantially similar to the Copper Fit Marks and/or Copper Fit Works and/or products that are identical or confusingly or substantially similar to the Copper Fit Products.
Ideavillage also has filed with the Court evidence that six of the Defaulting Defendants operate merchant storefronts with third party service providers other than Wish, on which they sell Counterfeit Products. (5/6/19 Ltr., Ex. A, ECF No. 28-1.)
LEGAL STANDARDS
I. Damages
Under the Lanham Act, at any time before final judgment is entered, a trademark owner may elect to recover an award of statutory damages, rather than actual damages, in cases of infringement. 15 U.S.C. § 1117(c), (d). Statutory damages particularly are appropriate where actual damages are difficult to calculate. See Bus. Trends Analysts, Inc. v. Freedonia Grp., Inc., 887 F.2d 399, 406 (2d Cir. 1989). Indeed, the rationale underlying the Lanham Act's statutory damages framework "is the practical inability to determine profits or sales made by counterfeiters." All-Star Mktg. Grp., LLC v. Media Brands Co., Ltd., 775 F. Supp. 2d 613, 620-21 (S.D.N.Y. 2011) (citing Bus. Trends Analysts, Inc., 887 F.2d at 406); see also Sara Lee Corp. v. Bags of New York, Inc., 36 F. Supp. 2d 161, 165 (S.D.N.Y. 1999) ("Statutory damages are most appropriate when infringer nondisclosure during fact finding leaves damages uncertain. This problem motivated the enactment of § 1117(c)[.]").
For the use of a counterfeit mark, a 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 (2) if the use of the counterfeit mark is found to be willful, up to "$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(c). "District courts have wide discretion in awarding statutory damages." Malletier v. Artex Creative Int'l Corp., 687 F. Supp. 2d 347, 355 (S.D.N.Y. 2010).
Under Section 1117(c)(2), the Lanham Act provides for enhanced statutory damages when the use of the counterfeit mark was willful. "The standard for willfulness is 'whether the defendant had knowledge that [his] conduct represented infringement or perhaps recklessly disregarded the possibility.'" Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283, 288 (2d Cir. 1999) (quoting Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1382 (2d Cir. 1993)); see also Yurman Studio, Inc. v. Castaneda, 591 F. Supp. 2d 471, 503 (S.D.N.Y. 2008) (quoting NFL v. PrimeTime 24 Joint Venture, 131 F. Supp. 2d 458, 475 (S.D.N.Y. 2001)) (stating that willfulness can be measured by a defendant's "'reckless disregard of the high probability' that it was infringing"). Such knowledge may be actual or constructive and may be inferred from a defendant's conduct rather than proven directly. See N.A.S. Import Corp. v. Alentino, Ltd., 968 F.2d 250, 252 (2d Cir. 1992) (holding that for "the purpose of awarding enhanced statutory damages, the knowledge component of willfulness "need not be proven directly but may be inferred from the defendant's conduct.").
Section 1117(c)(2) instructs courts to award a "just" amount and establishes a cap on the award; it provides no further guidance on determining damages. See All-Star Mktg. Grp., 775 F. Supp. 2d at 621-22 (citing Malletier, 648 F. Supp. 2d. at 504). Courts in this district have sought guidance from the analogous statutory damages provision in the Copyright Act, 17 U.S.C. § 504(c), which contemplates that a finding of willfulness should result in damages that are both compensatory and, as a deterrent, punitive. See id. at 622 n.5 (citing cases); Sara Lee Corp., 36 F. Supp. 2d at 167 ("The Copyright Act is not only similar in principle to the Trademark Act but identical in much of its statutory damages language. . . . [I]n interpreting Copyright Act language parallel to that in . . . 15 U.S.C. § 1117(c), the Second Circuit has held that uncapped statutory damages . . . may be punitive as necessary to deter the defendants, to deter others, and to redress wrongful litigation conduct."). Relevant factors for determining the damages under Section 1117(c)(2) include:
(1) the expenses saved and the profits reaped; (2) the revenues lost by the plaintiff; (3) the value of the [trademark]; (4) the deterrent effect on others besides the defendant; (5) whether the defendant's conduct was innocent or willful; (6) whether a defendant has cooperated in providing particular records from which to assess the value of the infringing material produced; and (7) the potential for discouraging the defendant.All-Star Mktg. Grp., 775 F. Supp. 2d at 622-23 (citation omitted). Statutory damages typically are awarded in an amount per trademark per type of goods, with "type of goods" defined by "the functional purpose of the product." Gucci Am., Inc. v. MyReplicaHandbag.com, No. 07-CV-02438 (JGK) (DFE), 2008 WL 512789, at *4 (S.D.N.Y. Feb. 26, 2008) (listing the examples of handbags, eyeglasses and belts).
II. Injunctive Relief
To obtain a permanent injunction, Ideavillage "must demonstrate (1) actual success on the merits, and (2) irreparable harm." Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F. Supp. 2d 284 (S.D.N.Y. 2003). To prevail on the merits of a trademark infringement claim, a plaintiff must prove that (1) it has legally protectable trademarks, and (2) defendants' misuse of the trademarks creates a likelihood of confusion among customers. See The Sports Auth., Inc. v. Prime Hosp. Corp., 89 F.3d 955, 960 (2d Cir. 1996); Lorillard Tobacco Co. v. Jamelis Grocery, Inc., 378 F. Supp. 2d 448, 454 (S.D.N.Y. 2005).
III. Post-Judgment Asset Freeze
Federal Rule of Civil Procedure 69(a)(1) provides that "[t]he procedure on execution — and in proceedings supplementary to and in aid of judgment or execution — must accord with the procedure of the state where the court is located . . .." Fed. R. Civ. P. 69(a)(1). In New York, where this Court is located, Section 5222 of the New York Civil Practice Law and Rules ("CPLR") permits a judgment creditor to serve a restraining notice on a judgement debtor, which prohibits the judgment debtor from "mak[ing] or suffer[ing] any sale, assignment, transfer or interference with any property in which [it] has an interest," except in limited circumstances. N.Y. C.P.L.R. § 5222(b). Thus, once a defendant is found liable and a money judgment is rendered against a defendant, a district court sitting in New York has the power to restrain a defendant's assets. See, e.g., Off-White LLC v. ^_^Warm House^_^Store, No. 17-CV-08872 (GBD) (GWG), 2019 WL 418501, at *7 (S.D.N.Y. Jan. 17, 2019) (motion for post-judgment asset restraint granted); WowWee Grp. Ltd. v. Haoqin, No. 17-CV-09893, 2019 WL 1316106, at *6 (S.D.N.Y. Mar. 22, 2019) (same).
IV. Order Authorizing Release And Transfer Of Frozen Assets
Rule 64 of the Federal Rules of Civil Procedure provides that "[a]t the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment." Fed. R. Civ. P. 64. In New York, Section 5225 of the CPLR authorizes this Court to compel a nonparty to surrender a judgment debtor's property. N.Y. C.P.L.R. § 5225. Section 34(a) of the Lanham Act provides that the Court has the "power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of" a trademark owner's rights. 15 U.S.C. § 1116(a).
Courts in this district routinely order transfers of infringing defendants' frozen assets to plaintiffs in counterfeit cases, relying on the authority to issue injunctive relief under Rule 64 of the Federal Rules of Civil Procedure, Section 34(a) of the Lanham Act and "this Court's inherent equitable power to issue remedies ancillary to its authority to provide final relief." Gucci Am., Inc. v. Curveal Fashion, No. 09-CV-08458 (RJS), 2010 WL 308303, at *5-6 (S.D.N.Y. Jan. 20, 2010); see also Spin Master Ltd. v. Alan Yuan's Store, 325 F. Supp. 3d 413, 428 (S.D.N.Y. 2018) (ordering the transfer of infringing defendants' frozen assets to the plaintiff).
This authority stems from the All Writs Act. See 28 U.S.C. § 1651(a) ("The Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.").
CONCLUSIONS OF LAW
The Court makes the following conclusions of law after carefully considering Plaintiff's written submissions:
I. Plaintiff Is Entitled To Statutory Damages Based Upon Willfulness
In its inquest submissions, Ideavillage has elected to seek statutory damages solely under the Lanham Act. (Pl. Mem. at 12.) The Court finds Ideavillage's request for statutory damages, in lieu of actual damages, appropriate given that (1) the Defaulting Defendants have produced no records on which the Court could calculate actual damages, and (2) the Defaulting Defendants engaged in willful conduct. Regarding this second point, the Court deems the Defendants' default and subsequent failure to participate in this inquest as an admission that their use of the counterfeit marks was willful under the Lanham Act standard. See Malletier, 648 F. Supp. 2d. at 504 (citing Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993)) ("Here, by virtue of its default, [the defendant] has admitted [the plaintiff's] allegation that it acted knowingly and intentionally or with reckless disregard or willful blindness to [the plaintiff's] rights."); All-Star Mktg. Grp., 775 F. Supp. 2d at 621-22 ("Defendants have defaulted . . . and by virtue of their default are deemed to be willful infringers.") (citing cases).
Ideavillage is not seeking to recover attorneys' fees. (Pl. Mem. at 2-3 n. 2.)
The seven factors that courts have considered in assessing statutory damages under the Lanham Act all favor Ideavillage or give rise to a reasonable inference in Ideavillage's favor. The first and second factors, i.e., the expenses saved and the profits reaped by the Defaulting Defendants as a result of their infringement and the revenues lost by Plaintiff, are unknown. Thus, the Court resolves any uncertainty in favor of Ideavillage so as not to allow the Defaulting Defendants to benefit from their lack of participation in this litigation. See Philip Morris USA Inc. v. A & V Minimarket, Inc., 592 F. Supp. 2d 669, 674 (S.D.N.Y. 2009) (in trademark infringement suit, where defendants fail to respond to complaint or to papers seeking a default judgment and provide no information relating to their circumstances, "the Court draws every reasonable inference on these points against the defendants"); Sara Lee Corp., 36 F. Supp. 2d at 169 ("The Second Circuit instructs that in determining infringement damages, courts are to resolve against the defendants any factual uncertainties, such as whether any portion of the defendants' revenue may be deducted from damages, when the defendants left the uncertainty by not responding to the evidence of counterfeit sales with evidence of their own.").
Regarding the third factor, the Court finds Ideavillage's trademarks to be highly valuable. Ideavillage established that its Copper Fit Products have achieved worldwide recognition and success as a result of its efforts in building up and developing consumer recognition, awareness and goodwill in its Copper Fit Products. (Lombardo Decl. ¶¶ 13-17.) Consequently, Plaintiff amassed significant value in its Copper Fit Marks. (Id. ¶ 16.) Thus, we can "'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.'" Lane Crawford LLC v. Kelex Trading (CA) Inc., No. 12-CV-09190 (GBD) (AJP), 2013 WL 6481354, at *4 (S.D.N.Y. Dec. 3, 2013) (citations omitted).
Factors four and seven, which relate to deterring the conduct of the Defaulting Defendants and others, weigh in Ideavillage's favor. "The need to deter other counterfeiters is particularly compelling given the apparent extent of counterfeit activity." See Bumble & Bumble, LLC v. Pro's Choice Beauty Care, Inc., No. 14-CV-6911 (VEC) (JLC), 2016 WL 658310, at *5 (S.D.N.Y. Feb. 17, 2016). A substantial award is necessary to discourage the Defaulting Defendants from continuing to engage in their illicit conduct. In addition, the Defaulting Defendants' willful misconduct and failure to appear in this litigation merit a finding that "a slight damage award is unlikely to deter them from continuing their illegal business." See Louis Vuitton Malletier, S.A. v. LY USA, No. 06-CV-13463 (AKH), 2008 WL 5637161, at *2 (S.D.N.Y. Oct. 3, 2008) (citations omitted).
With respect to the fifth factor, "by virtue of their default [defendants] are deemed to be willful infringers." Lane Crawford LLC, 2013 WL 6481354, at *3 (collecting cases); accord Tiffany (NJ) Inc. v. Luban, 282 F. Supp. 2d 123, 124 (S.D.N.Y. 2003). With respect to the sixth factor, Defendants have failed to participate in this litigation, and thus have deprived Ideavillage of any records from which to assess the value of the infringing materials. Thus, the above seven factors justify a substantial award of statutory damages under Sections 1117(c) and (d).
As for the quantum of damages, Ideavillage proposes a recovery structure with statutory damages awards tiered by the number of documented sales made by each Defaulting Defendant. Based upon documents produced by ContextLogic, Plaintiff requests statutory damages of $50,000.00 from each of the Defaulting Defendants that sold less than 100 Counterfeit Products; $75,000.00 from each of the Defaulting Defendants that sold between 100 and 200 Counterfeit Products; $150,000.00 from each of the Defaulting Defendants that sold between 250 and 300 Counterfeit Products; $300,000.00 from each of the Defaulting Defendants that sold between 650 and 1,000 Counterfeit Products; $500,000.00 from each of the Defaulting Defendants that sold between 1,500 and 2,000 Counterfeit Products; $750,000.00 from each of the Defaulting Defendants that sold between 2,500 and 5,500 Counterfeit Products; $1,000,000.00 from each of the Defaulting Defendants that sold between 10,000 and 15,000 Counterfeit Products; $1,500,000.00 from a single Defaulting Defendant that sold about 24,000 Counterfeit Products; and $2,000,000.00 from a single Defaulting Defendant that sold about 30,363 Counterfeit Products. (Scully Aff., Ex. D.)
Based upon Ideavillage's submissions, the Court finds that the statutory damages sought by Ideavillage are appropriate. Ideavillage has submitted proof that several of the Defaulting Defendants made sales of Counterfeit Products through sources other than Wish. (5/6/19 Ltr., Ex. A.) Thus, it is likely that the sales of Counterfeit Products upon which Ideavillage's statutory damages are based are under-counted. Since the Defaulting Defendants have not produced discovery in this case, the Court resolves the uncertainty regarding the number of Counterfeit Products against the Defaulting Defendants. See Philip Morris USA Inc., 592 F. Supp. 2d at 674.
The Court takes particular note of the cases from this district cited in Plaintiff's May 6, 2019 letter supporting the damages amount sought. (5/6/19 Ltr., ECF No. 28, at 2-4.)
II. A Permanent Injunction Should Be Entered In Favor Of Ideavillage
Ideavillage has established success on the merits because the Defendants' default constitutes an admission of liability. See Pitbull Prods., Inc. v. Universal Netmedia, Inc., No. 07-CV-01784 (RMB) (GWG), 2007 WL 3287368, at *6 (S.D.N.Y. Nov. 7, 2007). Ideavillage also has established irreparable injury as, in a trademark action, "irreparable injury is established where there is any likelihood that an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question." Lobo Enters., Inc. v. Tunnel, Inc., 822 F.2d 331, 333 (2d Cir. 1987). Generally, a Court must examine the factors set forth in Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961), to determine whether there is a sufficient likelihood of consumer confusion; "[h]owever, where counterfeit marks are involved, the court need not engage in a Polaroid analysis because counterfeit marks are inherently confusing." Fendi Adele S.R.L. v. Burlington Coat Factory Warehouse Corp., 689 F. Supp. 2d 585, 596-97 (S.D.N.Y. 2010) (internal quotation marks omitted). The Court finds that the Defaulting Defendants sold counterfeit items bearing Ideavillage's trademarks, thus constituting a likelihood of confusion. Because Ideavillage has satisfied the requirements of success on the merits and irreparable harm, the Court recommends that Ideavillage's request for a permanent injunction be granted. The Court already has entered a preliminary injunction with provisions designed to prevent the Defaulting Defendants from further infringing. (See PI Order.) The terms of the preliminary injunction should be continued on a permanent basis.
III. A Post-Judgment Asset Freeze Should Be Entered
Since Ideavillage will have a money judgment entered against the Defaulting Defendants, a post-judgment asset freeze is available pursuant to Federal Rule of Civil Procedure 69 and CPLR § 5222. In its Complaint, Ideavillage sought an accounting of the Defendants' profits attributable to the infringing activity. (See Compl., Prayer for Relief, ¶ N.) Case law makes clear that equitable remedies such as an asset freeze may be sought as part of an action for an accounting of profits. See Gucci Am. Inc. v. Bank of China, 768 F.3d 122, 131 (2d Cir. 2014). While Ideavillage now is seeking statutory damages in lieu of an accounting, an asset restraint is nonetheless appropriate to ensure that defendants do not hide assets. See Tiffany (NJ) LLC v. Forbse, No. 11-CV-04976 (NRB), 2015 WL 5638060, at **3-4 (S.D.N.Y. Sept. 22, 2015). The Court already issued such an Order on a preliminary basis. (See PI Order at 6-7.) That Order should be continued.
But see WowWee Grp. Ltd. v. Meirly, No. 18-CV-00706 (AJN), 2019 WL 1375470, at *11 (S.D.N.Y. Mar. 27, 2019) (declining to grant post-judgment asset freeze for non-equitable relief) (reconsideration motion pending).
IV. Plaintiff Is Entitled To An Order Authorizing Release And Transfer Of Frozen Assets
Pursuant to Rule 64 of the Federal Rules of Civil Procedure, Section 34(a) of the Lanham Act and this Court's inherent equitable power, Ideavillage should be granted an Order authorizing release and transfer of the Defaulting Defendants' Frozen Assets to satisfy the damages awarded to Ideavillage.
"Frozen Assets" are defined as any of the Defaulting Defendants' assets from any accounts associated with or utilized by any Defaulting Defendant (including merchant storefronts and user accounts) that were frozen or restrained pursuant to the TRO and/or PI Order.
CONCLUSION
For the foregoing reasons, the Court recommends that Plaintiff be awarded damages against the Defaulting Defendants as follows:
| CCMC | $50,000.00 |
| Onemark | $50,000.00 |
| zhangdabing | $50,000.00 |
| zhonglitian | $50,000.00 |
| shixinkeji | $50,000.00 |
| SmileFullLtd | $50,000.00 |
| guoyingchengxin | $50,000.00 |
| lianghaijun | $50,000.00 |
| yuhanbaobei | $50,000.00 |
| zhijia trade | $50,000.00 |
| ximanchun | $50,000.00 |
| best4you666 | $50,000.00 |
| linemartz | $50,000.00 |
| Liu Wu Shop | $50,000.00 |
| lyo66881011 | $50,000.00 |
| aweiwei258 | $50,000.00 |
| Rosyclouds Shop | $50,000.00 |
| dadanhuangpai | $50,000.00 |
| SMT | $50,000.00 |
| lseroer | $50,000.00 |
| dingyin96 | $50,000.00 |
| jacobli | $50,000.00 |
| hupai | $50,000.00 |
| WDYFKLKF | $50,000.00 |
| LULU Mall | $50,000.00 |
| flasafe's place | $50,000.00 |
| ngytrade | $50,000.00 |
| Superaj Store | $75,000.00 |
| yiyishangmaoyouxiangongsi | $75,000.00 |
| Green hill God | $75,000.00 |
| FlyingWing | $150,000.00 |
| wonderful12 | $150,000.00 |
| caicai shoping | $300,000.00 |
| Shop_more | $300,000.00 |
| pingpongpong | $300,000.00 |
| fashionhub | $500,000.00 |
| Runofthelion | $500,000.00 |
| Gmai Trade Co., Ltd | $750,000.00 |
| Lise | $750,000.00 |
| XiangGu | $750,000.00 |
| tony Z | $750,000.00 |
| Ever | $1,000,000.00 |
| sweetstars trading co., ltd | $1,000,000.00 |
| MAN CHART (HK) LIMITED | $1,500,000.00 |
| pandaman collection | $2,000,000.00 |
The Court also recommends that a permanent injunction be entered in Plaintiff's favor, that a post-judgment asset freeze be entered in Plaintiff's favor, and that an Order be entered authorizing the release and transfer of the Defaulting Defendants' frozen assets to Plaintiff. DATED: New York, New York
May 7, 2019
/s/_________
STEWART D. AARON
United States Magistrate Judge
* * *
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 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 Koeltl.
THE FAILURE TO FILE THESE TIMELY OBJECTIONS WILL RESULT IN A WAIVER OF THOSE OBJECTIONS FOR PURPOSES OF APPEAL. 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).