Opinion
21 Civ. 8111 (AS) (GWG)
04-01-2024
KELLY TOYS HOLDINGS, LLC, Plaintiff, v. GUANGZHOU LIANQI TECHNOLOGY CO., LTD. D\B\A www.squishmallowss.com and www.squishmallowss.com, Defendants.
REPORT AND RECOMMENDATION
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
This trademark infringement action was brought by Kelly Toys Holdings, LLC (“Kelly Toys”) against Guangzhou Lianqi Technology Co., Ltd. d\b\a www.squishmallowss.com (“Guangzhou”) and www.squishmallowss.com (collectively, “defendants”), alleging that defendants violated trademarks associated with Kelly Toys' “Squishmallows” line of products. Amended Complaint, filed July 15, 2022 (Docket # 43) (“Am. Compl.”). Defendants have defaulted, see Order, filed June 16, 2023 (Docket # 68) (“Default Order”), and the plaintiff has filed proposed findings of fact and an affidavit in support of its request for a default judgment.For the following reasons, judgment should be entered against defendants in the amount of $500,000, plus post-judgment interest.
See Plaintiff's Proposed Findings of Fact and Conclusions of Law, filed Aug. 4, 2023 (Docket # 73) (“Prop. Find.”); Affidavit of Danielle S. Futterman, filed Aug. 4, 2023 (Docket # 74) (“Futterman Aff.”).
I. BACKGROUND
On September 30, 2021, Kelly Toys filed a complaint against Dongguan Yikang Plush Toys Co., Ltd. (“Dongguan”), alleging various causes of action relating to Dongguan's use of Kelly Toys' Squishmallows trademarks. See Complaint, dated Sept. 30, 2021 (Docket # 6) (“Comp.”). Specifically, Kelly Toys alleged that Dongguan (1) infringed Kelly Toys' trademarks in violation of § 32 of the Federal Trademark (Lanham) Act, 15 U.S.C. §§ 1051 et seq.; (2) infringed Kelly Toys' unregistered trademarks in violation of 15 U.S.C. § 1125; (3) counterfeited Kelly Toys' federally registered trademarks in violation of 15 U.S.C. §§ 1114(1)(a)-(b), 1116(d), and 1117(b)-(c); (4) committed false designation of origin, passing off, and unfair competition in violation of § 43(a) of the Trademark Act of 1946, as amended, 15 U.S.C. § 1125(a); (5) infringed on Kelly Toys' federally registered copyrights in violation of the Copyright Act, 17 U.S.C. §§ 101 et seq.; (6) cybersquatted in violation of the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d) (“ACPA”); and (7) violated related state and common law. See Compl. ¶ 1. On the same date it filed the complaint, Kelly Toys filed an ex parte application for interim relief against Dongguan, consisting of requests for (1) a temporary restraining order; (2) an order restraining defendant's websites and assets; (3) an order to show cause why a preliminary injunction should not issue; (4) an order authorizing alternative service; (5) an order authorizing expedited discovery; and (6) an order to seal its filings. See Proposed Order, filed Sept. 30, 2021 (Docket # 11); Prop. Find. ¶ 16. The district court issued an order granting the relief Kelly Toys requested. See Temporary Restraining Order, dated Sept. 30, 2021 (Docket # 15) (“TRO”). On October 13, 2021, the court unsealed the filings, see Unsealing Order, filed Oct. 13, 2021 (Docket # 4), and issued a preliminary injunction on October 15, 2021, see Preliminary Injunction, filed Oct. 15, 2021 (Docket # 16).
After plaintiff served Dongguan pursuant to the alternative service methods authorized by the TRO, see Certificate of Service, filed May 20, 2022 (Docket # 31), Dongguan responded to the district court's order to show cause why default judgment should not be entered, see Defendant's Response to Order to Show Cause, filed June 10, 2022 (Docket # 37). Principally, Dongguan argued that service was improperly effectuated. Id. at 1-3. Shortly afterwards, Kelly Toys “learned that Guangzhou Lianqi Technology Co., Ltd. d/b/a www.squishmallowss.com and www.squishmallowss.com were the correct Defendants,” Prop. Find. ¶ 19, and filed an amended complaint against only Guangzhou and www.squishmallowss.com, see Am. Compl. Dongguan was terminated as a party on July 18, 2022. See Docket Entry for July 18, 2022. The amended complaint alleged the same causes of action against the new defendants. On November 11, 2022, the injunction was amended to account for the change in defendants. See Amended Preliminary Injunction Order, filed Nov. 9, 2022 (Docket # 52) (“Am. Preliminary Injunction”).
Kelly Toys served the new defendants on August 15, 2022. See Certificate of Service, filed Aug. 16, 2022 (Docket # 51). Defendants never responded to the complaint. On May 3, 2023, the Clerk of Court issued a certificate of default as to both defendants. See Clerk's Certificate of Default, filed May 3, 2022 (Docket # 60). On May 5, 2023, Kelly Toys filed a motion for entry of final judgment and permanent injunction. See Proposed Final Default Judgment and Permanent Injunction Order, filed May 5, 2023 (Docket # 64) (“Prop. Order”). On June 16, 2023, the district court found defendants were in default. See Default Order.
The case was referred to the undersigned for an inquest on damages, “as well as any other provisions of an appropriate judgment.” Default Order. The Court issued a scheduling order directing Kelly Toys to file proposed findings of fact and conclusions of law, see Scheduling Order for Damages Inquest, filed June 20, 2023 (Docket # 70) (“Scheduling Order”), which it filed on August 4, 2023, see Prop. Find.; Futterman Aff. Kelly Toys' inquest papers and the scheduling order were served upon defendants, see Certificate of Service, filed Aug. 4, 2023 (Docket # 75), but defendants did not file any response.
II. LEGAL STANDARD
In light of defendants' default, Kelly Toys' properly pleaded allegations in the amended complaint, except those related to damages, are accepted as true. See City of New York 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 punctuation 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.”).
As to damages, “[t]he 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). 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.
Kelly Toys bears the burden of establishing its entitlement to the amount sought. See Trs. of Local 813 Ins. Tr. Fund v. Rogan Bros. Sanitation Inc., 2018 WL 1587058, at *5 (S.D.N.Y. Mar. 28, 2018). In the case of a default where the defendants have never appeared, “a court may base its determination of damages solely on the plaintiff's submissions.” Id. (citing Fustok v. Conti Commodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989)). 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, 873 F.2d at 40.
Here, the Court's Scheduling Order notified the parties that the Court might conduct the inquest into damages based upon the written submissions of the parties, but that a party may seek an evidentiary hearing. See Scheduling Order ¶ 3. No party has requested an evidentiary hearing. Moreover, because plaintiff's submissions provide a basis for an award of damages, no hearing is required.
III. DISCUSSION
In its proposed findings, Kelly Toys indicates it “only seeks monetary damages for its First, Second and Fifth Causes of Action (Trademark Counterfeiting and Infringement and Cybersquatting).” Prop. Find. at 7 n.3. We therefore discuss plaintiff's entitlement to damages for the trademark claims, relief under the ACPA, a permanent injunction, and post-judgment interest.
A. Trademark Claims
Kelly Toys pleads two causes of action under 15 U.S.C. § 1114, one for trademark counterfeiting, see Am. Compl. ¶¶ 41-50, and one for trademark infringement, see Am. Compl. ¶¶ 51-63. We discuss only the trademark counterfeiting claim because a plaintiff “is not entitled to duplicative recoveries for the same intellectual property theft under multiple theories of liability.” BJB Ltd. v. iStar Jewelry LLC, 533 F.Supp.3d 83, 101 (E.D.N.Y. 2021) (citation and punctuation omitted).
1. Liability
To prove liability for trademark counterfeiting, “a plaintiff must establish that (1) it has a valid mark entitled to protection and (2) the defendant's use of the mark is likely to cause consumers confusion as to the origin or sponsorship of the defendant's goods.” Mattel, Inc. v. www.fisher-price.online, 2022 WL 2801022, at *5 (S.D.N.Y. July 18, 2022); see Allstar Mktg. Grp. LLC v. andnov73, 2023 WL 5208008, at *4 (S.D.N.Y. Aug. 14, 2023). Additionally, the Lanham Act defines a “counterfeit” as a “spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” 15 U.S.C. § 1127.
As to the first element, a “certificate of registration with the [Patent and Trademark Office] is prima facie evidence that the mark is registered and valid (i.e., protectible).” Lane Capital Mgmt., Inc. v. Lane Capital Mgmt., Inc., 192 F.3d 337, 345 (2d Cir. 1999). As for the second element, “the standard for consumer confusion is easily satisfied in the case of counterfeits ‘because counterfeits, by their very nature, cause confusion.'” Off-White LLC v. 5HK5584, 2020 WL 1646692, at *5 (S.D.N.Y. Apr. 3, 2020) (quoting Coach, Inc. v. Horizon Trading USA Inc., 908 F.Supp.2d 426, 433 (S.D.N.Y. 2012)), adopted by 2020 WL 3050552 (S.D.N.Y. June 8, 2020).
Kelly Toys has successfully alleged facts supporting liability. As to whether the mark is entitled to protection, Kelly Toys provides trademark registration numbers for the marks at issue, see Am. Compl. ¶ 15, which is prima facie evidence that the mark is protectable, see Lane Capital Mgmt., Inc., 192 F.3d at 345; see 15 U.S.C. § 1115(a) (“Any registration . . . of a mark . . . shall be prima facie evidence of the validity of the registered mark.”); Hudson Furniture, Inc. v. Mizrahi, 2023 WL 6214908, at *4 (S.D.N.Y. Sept. 25, 2023). As for counterfeiting, the complaint alleges that “Defendants' Infringing Products listed on Defendants' Website are nearly identical to Plaintiff's Squishmallows Products, only with minor variations that no ordinary consumer would recognize.” Am. Compl. ¶ 27. This allegation is supported further by the fact that the photographs of the products offered by defendants are virtually identical to the authentic products. See Side-by-Side Comparison, annexed as Ex. D to Am. Compl. (Docket # 43-4) (“Product Comparison”).
While Kelly Toys attached copies of registration certificates for only three of the four marks, see Squishmallows Trademark Registrations, annexed as Ex. B to Am. Compl. (Docket # 43-2), it provides the registration numbers for all four marks, see Am. Compl. ¶ 15, and registration numbers are sufficient to show the marks' validity. W. Union Holdings, Inc. v. Haideri Paan & Cigarettes Corp., 2020 WL 1061653, at *6 (E.D.N.Y. Mar. 5, 2020).
Accordingly, Kelly Toys has established liability.
2. Damages
The Lanham Act permits a party to either recover lost profits under 15 U.S.C. § 1117(a) or to obtain statutory damages of “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.” 15 U.S.C. § 1117(c)(1); accord Mattel, Inc. v. www.power-wheels-outlet.com, 2022 WL 2900763, at *2 (S.D.N.Y. July 22, 2022), adopted by 2022 WL 3159317 (S.D.N.Y. Aug. 8, 2022). If the infringement is willful, a court may award 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)(2). “District courts have wide discretion in awarding statutory damages” under § 1117(c). Malletier v. Artex Creative Int'l Corp., 687 F.Supp.2d 347, 355 (S.D.N.Y. 2010). “Because a key purpose of § 1117(c) is to provide a monetary remedy in cases of amorphous damage, courts assessing statutory damages must exercise discretion in examining whatever facts and considerations are available in a setting of limited information.” Sara Lee Corp. v. Bags of N.Y., Inc., 36 F.Supp.2d 161, 166 (S.D.N.Y. 1999).
As noted, section 1117(c)(2) “provides for enhanced statutory damages when the use of the counterfeit mark was willful.” Allstar Mktg. Grp., LLC v. 4utoto, 2022 WL 938220, at *4 (S.D.N.Y. Mar. 2, 2022), adopted by 2022 WL 930638 (S.D.N.Y. Mar. 28, 2022). “The standard for willfulness is ‘whether the defendant had knowledge that [its] 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)).
To determine an appropriate award of statutory damages under the Lanham Act, courts rely on seven factors:
(1) the expenses saved and the profits reaped by the defendant infringer; (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.FoxMind Canada Enterprises Ltd. v. Beijing Hui Xin Zhi Xiang Shangmao Youxian Gongsi, 2024 WL 532056, at *4 (S.D.N.Y. Feb. 9, 2024) (punctuation and citation omitted); accord AllStar Mktg. Group, LLC v. Media Brands Co., Ltd., 775 F.Supp.2d 613, 622 (S.D.N.Y. 2011). Because defendants have not appeared in this action, there has been no discovery, and Kelly Toys is understandably lacking information as to factors one and two. Kelly Toys has shown, however, that defendants offered their counterfeit products through the internet, and thus we may draw upon the “inference of a broad scope of operations in cases dealing specifically with websites that ship and sell to a wide geographic range.” Spin Master Ltd. v. Alan Yuan's Store, 325 F.Supp.3d 413, 426 (S.D.N.Y. 2018). Factors one and two thus favor plaintiff. See Off-White LLC v.AAWarm HouseAAStore, 2019 WL 418501, at *5 (S.D.N.Y. Jan. 17, 2019) (“The first two factors weigh in favor of an award of damages because Plaintiff should not be deprived of its right to recover statutory damages simply because it is impossible to discern the expenses saved and profits reaped by the Defaulting Defendants.”); Chesa Int'l, Ltd. v. Fashion Assocs., Inc., 425 F.Supp. 234, 238 (S.D.N.Y. 1977) (invoking the “well-known and ancient doctrine” that doubts about actual damages will be resolved against party who evades ascertainment of actual damages).
As to the third factor, Kelly Toys contends that “Squishmallows Products have achieved worldwide recognition” through the company's “efforts in building up and developing consumer recognition, awareness and goodwill.” Prop. Find. ¶ 52. Kelly Toys also indicates that “[s]ince their debut in 2017, over 73 million Squishmallows Products have been sold worldwide, and sales of Squishmallows have tripled in the past six months.” Am. Compl. ¶ 10. Finally, in 2020, “Squishmallows were awarded ‘Best Toy of the Year' by Learning Express.” Id. ¶ 11. We 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.” Lane Crawford LLC v. Kelex Trading (CA) Inc., 2013 WL 6481354, at *4 (S.D.N.Y. Dec. 3, 2013) (citation and quotation marks omitted), adopted by 2014 WL 1338065 (S.D.N.Y. Apr. 3, 2014). This finding also aligns with other courts that have addressed Kelly Toys' Squishmallows marks. See Kelly Toys Holdings, LLC v. Airpods Pro Store, 2022 WL 2801077, at *7 (S.D.N.Y. July 18, 2022) (“The Court thus finds the marks and copyrights to be highly valuable.”); Kelly Toys Holdings, LLC v. alialialiLL Store, 2022 WL 1948311, at *9 (S.D.N.Y. May 19, 2022) (“Plaintiff has established that Squishmallow products have achieved global recognition and success as a result of Plaintiff's efforts in building up and developing consumer recognition, awareness, and goodwill in those products.”), adopted by 606 F.Supp.3d 32 (S.D.N.Y. 2022).
Factors four and seven, which relate to the need to deter the defendants and others, weigh in Kelly Toys' favor. “The need to deter other counterfeiters is particularly compelling given the apparent extent of counterfeit activity.” Bumble & Bumble, LLC v. Pro's Choice Beauty Care, Inc., 2016 WL 658310, at *5 (S.D.N.Y. Feb. 17, 2016). “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.'” Qlay Co. v. Adajay, 2021 WL 6065800, at *6 (S.D.N.Y. July 30, 2021) (quoting Louis Vuitton Malletier, S.A. v. LY USA, 2008 WL 5637161, at *2 (S.D.N.Y. Oct. 3, 2008)), adopted in relevant part, 2021 WL 6064404 (S.D.N.Y. Dec. 21, 2021).
As to factor five, the defendants' willfulness, “by virtue of their default[,] [defendants] are deemed to be willful infringers.” Lane Crawford LLC, 2013 WL 6481354, at *3 (collecting cases); accord Allstar Mktg., 2022 WL 938220, at *6; Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 124 (S.D.N.Y. 2003). “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.” Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *6 (S.D.N.Y. May 31, 2020) (citation omitted). Given the similarity between the registered marks and the defendants' infringing products, see Product Comparison, we infer that defendants acted willfully and find that this factor weighs in favor of Kelly Toys.
Factor six, the cooperativeness of the defendants, supports a substantial award of statutory damages, as defendants' failure to appear in this matter has deprived Kelly Toys of records that would have assisted in a calculation of damages. See Qlay, 2021 WL 6065800, at *6 (factor six met by defaulting defendants); Spin Master Ltd. v. ALVY, 2021 WL 5746426, at *9 (S.D.N.Y. Nov. 17, 2021) (same), adopted in relevant part, 2022 WL 103575 (S.D.N.Y. Jan. 10, 2022).
Accordingly, the balance of the factors strongly supports Kelly Toys' request for an award of damages significantly higher than the minimum statutory award of $1,000. Because we have determined that the defendants' infringement was willful, the statutory maximum is $2,000,000 per counterfeit mark, see 15 U.S.C. § 1117(c)(2), or $8,000,000 for the four marks at issue. Kelly Toys seeks an award of $500,000. See Prop. Find. ¶ 55.
An important factor in considering the appropriate level of statutory damages is the scale of the counterfeiting operation. “In cases involving large scale operations, some courts have awarded significant statutory damages without awarding the maximum.” N. Atl. Operating Co., Inc. v. Evergreen Distributors, LLC, 2015 WL 13856995, at *12 (E.D.N.Y. Jan. 5, 2015); Tiffany (NJ) LLC v. Dong, 2013 WL 4046380, at *6 (S.D.N.Y. Aug. 9, 2013) (noting the significance of the scale of the counterfeiting operation); N. Face Apparel Corp. v. Moler, 2015 WL 4385626, at *7 (S.D.N.Y. July 16, 2015) (same), adopted by 2015 WL 5472939 (S.D.N.Y. Sept. 16, 2015).
In the instant case, defendants used their website to sell dozens of different types of counterfeited goods, see Product Comparison, which suggests defendants' operated a large-scale operation. In light of this fact, and the fact the complaint alleges that four trademarks were infringed, see Compl. ¶ 15, we find that the $500,000 figure sought by plaintiff (amounting to $125,000 per trademark) is appropriate. See Kenneth Jay Lane, Inc. v. Heavenly Apparel, Inc., 2006 WL 728407, *6 (S.D.N.Y. March 21, 2006) ($125,000 awarded per infringed mark in case with no information in the record regarding defendants' business, the market in which it sold products, or the volume of its profits because that amount would sufficiently “impress upon [defendant] that there are consequences for its misconduct” and would “serve as a specific deterrent to [defendant] and as a general deterrent to others who might contemplate engaging in infringing behavior in the future”); see also Lane Crawford LLC, 2013 WL 6481354, at *5 (collecting cases awarding over $500,000 despite the lack of information on defaulting defendants' sales).
Accordingly, Kelly Toys is entitled to statutory damages of $500,000 against the defendants.
B. Cybersquatting
Kelly Toys also seeks transfer of the infringing domain name under the ACPA. See Prop. Find. ¶¶ 63-64. To prevail on a claim under the ACPA, a plaintiff must demonstrate that “(1) its trademark is either distinctive or famous, (2) the domain name is identical or confusingly similar to the trademark, and (3) the defendant acted with a bad-faith intent to profit from the trademark.” Mattel, Inc. v. www.fisher-price.online, 2022 WL 2801022, at *6 (S.D.N.Y. July 18, 2022) (citing Webadviso v. Bank of Am. Corp., 448 Fed.Appx. 95, 97 (2d Cir. 2011) (summary order)); accord Experience Hendrix, L.L.C. v. Pitsicalis, 2020 WL 3564485, at *4 (S.D.N.Y. July 1, 2020). In assessing bad faith intent to profit, “a court may consider factors such as, but not limited to”
(I) the trademark or other intellectual property rights of the person, if any, in the domain name;
(II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;
(III) the person's prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;
(IV) the person's bona fide noncommercial or fair use of the mark in a site accessible under the domain name;
(V) the person's intent to divert consumers from the mark owner's online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site;
(VI) the person's offer to transfer, sell, or otherwise assign the domain name to
the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person's prior conduct indicating a pattern of such conduct;
(VII) the person's provision of material and misleading false contact information when applying for the registration of the domain name, the person's intentional failure to maintain accurate contact information, or the person's prior conduct indicating a pattern of such conduct;
(VIII) the person's registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties; and
(IX) the extent to which the mark incorporated in the person's domain name registration is or is not distinctive and famous within the meaning of subsection (c).15 U.S.C. § 1125(d)(1)(B)(i). A “classic ACPA claim arises where a defendant registers ‘a domain name of an established entity in bad faith, and then offer[s] to sell the domain name to the entity at an exorbitant price.'” Curated Works Inc. v. Deal.com, Inc., 2020 WL 2375079, at *5 (S.D.N.Y. May 12, 2020) (quoting Target Advert., Inc. v. Miller, 2002 WL 999280, at *10 (S.D.N.Y. May 15, 2002)). However, a complaint also states an ACPA claim where it alleges “a defendant ‘intend[s] to profit by diverting customers from the website of the trademark owner to the defendant's own website, where those consumers would purchase the defendant's products or services instead of the trademark owner's.'” Gioconda L. Grp. PLLC v. Kenzie, 941 F.Supp.2d 424, 434 (S.D.N.Y. 2013) (citation and quotation marks omitted); see also Webadviso, 448 Fed.Appx. at 98 (defendant “ran afoul of the ACPA” because regardless of “whether or not he had any intention of selling the domain names to [plaintiff], he clearly had the intention to profit from the goodwill associated with the trademarks that comprised the domain names. His business model relied upon diverting internet users (presumably, among others, those who were attempting to access the websites of [plaintiff]) to his own website.”); Target Advert., 2002 WL 999280, at *10 (“[I]t would be logically inconsistent for the [ACPA] to prohibit the unlawful registration or use of a domain name in order to profit through its sale, but permit the unlawful registration and use of a domain name in order to profit through its use.”).
Here, Kelly Toys alleges that defendants “direct[ed] and/or target[ed] their business activities at consumers in the U.S.” Am. Compl. ¶ 3(a). Defendants registered a domain name, www.squishmallowss.com, that incorporated Kelly Toys' federally registered and incontestable trademarks, and Kelly Toys' marks were distinctive at the time the infringing website was registered. Id. ¶ 87. These allegations are sufficient to establish the first and second elements of the ACPA claim: “infringing use of a domain name that is identical or confusingly similar to a distinctive registered mark.” Pitsicalis, 2020 WL 3564485, at *4. Regarding bad-faith intent to profit, we turn to the factors outlined in 15 U.S.C. § 1125(d)(1)(B)(i). Defendants have accepted orders for the infringing products on their website. Am. Compl. ¶ 32; Defendants' Infringing Products, annexed as Ex. E to Am. Compl. (Docket # 43-5), at *58-60 (providing order confirmation for Kelly Toys' “test purchase”); see 15 U.S.C. § 1125(d)(1)(A)(i); id. § 1125(d)(1)(B)(i)(V). Defendants have no intellectual property rights in the domain name. Am. Compl. ¶ 89; see 15 U.S.C. § 1125(d)(1)(B)(i)(I). There is no evidence that defendants previously used the domain name to make bona fide sales, or that there is non-commercial or fair use of the Squishmallows marks occurring in the domain name. See id. § 1125(d)(1)(B)(i)(III); id. § 1125(d)(1)(B)(i)(IV). Finally, while there is only one domain name at issue, see 15 U.S.C. § 1125(d)(1)(B)(i)(VIII), “registration of a single domain name when Defendant knows that it incorporates a competitor's mark still supports an inference of bad faith,” Mattel, Inc., 2022 WL 2801022, at *8. Accordingly, Kelly Toys has adequately pled defendants' bad faith intent to profit, and thus has established defendants' liability under the ACPA. See Pitsicalis, 2020 WL 3564485, at *4.
Page numbers identified by “*” refer to the pagination provided by the Court's ECF system.
As mentioned above, Kelly Toys does not seek damages associated with its ACPA claim; rather, it seeks to have the infringing domain named transferred. See Prop. Find. ¶ 64. The ACPA allows for a court to “order the forfeiture or cancellation of the domain name or the transfer of the domain name to the owner of the mark.” 15 U.S.C. § 1125(d)(1)(C). “Transfer of a domain name is particularly appropriate if Defendants have expressed a willingness to continue to use the infringing domain name.” Ideavillage Products Corp. v. Liuzhou Weimao Mobile Accessory Co., Ltd., 2021 WL 3621788, at *7 (S.D.N.Y. Aug. 16, 2021). Courts will typically infer a willingness to continue use of the infringing domain name based on a defendant's default. Pearson Educ., Inc. v. Vergara, 2010 WL 3744033, at *4 (“A court may infer from a defendant's default that it is willing to, or may continue its infringement.”); accord Ideavillage Products Corp., 2021 WL 3621788, at *7 n.4; see Mattel, Inc., 2022 WL 2801022, at *14.
Accordingly, Kelly Toys is entitled to transfer of the infringing domain name.
C. Injunctive Relief
Kelly Toys seeks injunctive relief against the defaulting defendants. See Prop. Order at 2-4; see also Affidavit of Danielle S. Futterman, filed May 5, 2023 (Docket # 62); Plaintiff's Memorandum of Law in Support, filed May 5, 2023 (Docket # 63). “A court may issue an injunction on a motion for default judgment provided that the moving party shows that (1) it is entitled to injunctive relief under the applicable statute and (2) it meets the prerequisites for the issuance of an injunction.” Kingvision Pay-Per-View Ltd. v. Lalaleo, 429 F.Supp.2d 506, 516 (E.D.N.Y. 2006) (citation and internal quotation marks omitted); accord Off-White LLC v. 6014350, 2020 WL 6478544, at *6 (S.D.N.Y. Nov. 4, 2020), adopted by 2021 WL 5014821 (S.D.N.Y. Oct. 27, 2021). As explained in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), to obtain a permanent injunction, a plaintiff must show:
(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.Id. at 391 (citations omitted); accord Salinger v. Colting, 607 F.3d 68, 77-78 (2d Cir. 2010); Rovio Ent., Ltd. v. Allstar Vending, Inc., 97 F.Supp.3d 536, 547 (S.D.N.Y. 2015); Pitsicalis, 2020 WL 3564485, at *13 (S.D.N.Y. July 1, 2020).
In this case, the eBay factors weigh in favor of granting Kelly Toys an injunction. “In a trademark case, 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) (citation and internal quotation marks); accord Louis Vuitton Malletier v. Burlington Coat Factory Warehouse Corp., 426 F.3d 532, 537 (2d Cir. 2005) (“In trademark disputes, a showing of likelihood of confusion establishes . . . irreparable harm.”) (citation and internal quotation marks omitted). Accepting its allegations as true, Kelly Toys has alleged a likelihood of confusion in the marketplace that could lead to diminished reputation and loss of sales. Thus, the first factor weighs in favor of Kelly Toys' request.
The readiness with which defendants engaged in illegal sales shows that the defendants here “might continue to engage in infringing activities and counterfeiting unless enjoined by the Court, demonstrating the danger that monetary damages will fail to fully provide [plaintiff] with relief.” Rovio Entm't, 97 F.Supp.3d at 547; accord Broad. Music, Inc. v. Prana Hospitality, Inc., 158 F.Supp.3d 184, 195 (S.D.N.Y. 2016) (“Courts in this Circuit have consistently found monetary damages inadequate where the defendant poses a significant threat of future infringement.”) (collecting cases). Thus, the second factor weighs in Kelly Toys' favor.
“As to the balance of hardships, ‘[i]t is axiomatic that an infringer . . . cannot complain about the loss of ability to offer its infringing product.'” Rovio Entm't, 97 F.Supp.3d at 547 (alteration in original) (quoting WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 287 (2d Cir. 2012)). Finally, “‘the public has an interest in not being deceived - in being assured that the mark it associates with a product is not attached to goods of unknown origin and quality.'” Id. (quoting N.Y.C. Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F.Supp.2d 305, 344 (S.D.N.Y. 2010)); accord Broad. Music, 158 F.Supp.3d at 196 (“[I]njunctive relief here will advance the public's compelling interest in protecting copyright owners' marketable rights to their work so as to encourage the production of creative work.”) (citations, alterations and internal quotation marks omitted).
A preliminary injunction with provisions designed to prevent the defendants from further infringing activity has already been issued. See Am. Preliminary Injunction. Therefore, an order with similar terms, which are contained in the proposed order submitted by plaintiff, see Prop. Order at 2-4, should be issued.
D. Post-Judgement Interest
Kelly Toys also seeks post-judgment interest, see Prop. Find. ¶¶ 60-62, a category of damages “to which they are presumptively entitled,” Desvarieux v. Axiom Holdings, Inc., 2022 WL 1467973, at *5 (S.D.N.Y. May 10, 2022), adopted by 2022 WL 1689395 (S.D.N.Y. May 26, 2022) (citing Schipani v. McLeod, 541 F.3d 158, 165 (2d Cir. 2008) (“[W]e have consistently held that an award of postjudgment interest is mandatory.”)); accord Juul Labs, Inc. v. EZ Deli Grocery Corp I, 2022 WL 1085406, at *10 (E.D.N.Y. Feb. 10, 2022) (awarding post-judgment interest pursuant to 28 U.S.C. § 1961(a) in Lanham Act action), adopted by 2022 WL 819152 (E.D.N.Y. Mar. 18, 2022).
Accordingly, Kelly Toys should be awarded post-judgment interest at the statutory rate provided under 28 U.S.C. § 1961(a) from the date final judgment is entered to the date the judgment is satisfied.
IV. CONCLUSION
For the foregoing reasons, judgment should be entered jointly against defendants Guangzhou Lianqi Technology Co., Ltd. d\b\a www.squishmallowss.com and against www.squishmallowss.com in favor of Kelly Toys in the amount of $500,000 with post-judgment interest to run at the statutory rate provided in 28 U.S.C. § 1961(a). In addition, the judgment should order the transfer of the infringing domain name (www.squishmallowss.com) and a permanent injunction should be entered.
These terms are embodied in the Proposed Final Default Judgment and Permanent Injunction Order (Docket # 64) submitted by plaintiff. Thus, this proposed order should be entered.
Kelly Toys is directed to serve copies of this Report and Recommendation on the defaulting defendants by the means of service previously approved by the Court (see Docket # 52) and to file proof of service thereof within 7 days.
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 Subramanian. 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).