Opinion
Civil Action 21 Civ. 1507 (AJN) (SLC)
02-22-2022
MATTEL, INC., Plaintiff, v. AGOGO STORE, CHIYOU TOY STORE, DEHUA BEAUTY RICH ARTS &CRAFTS CO., LTD., DISNEYS TOY STICKERS STORE, DRAGONMODEL STORE, FUN CHILDHOOD TOY STORE, GUANGZHOU INFINITY AMUSEMENT EQUIPMENT CO., LTD., GUANGZHOU YUEDONG INFLATABLE PRODUCTS CO., LTD., HASTING TOY STORE, HENAN TONG QU PARK AMUSEMENT EQUIPMENT CO., LTD., KIDS FUN TOY STORE, KIRINCARTOON STORE, ORAY INTERNATIONAL TRADING CO., LTD., QUANZHOU DONGSHANG CLOTHING &ACCESSORIES CO., LTD., RISE TOP TOYS LIMITED, SHANTOU CHENGHAI BLUE DEER TOY CO., LTD., SHENZHEN ENJOY INFLATABLES CO., LTD., SHOP5633041 STORE, SHOP5785180 STORE, SHOP910716070 STORE, SIMBOO STORE, SIMCASTLE STORE, THONAS BABY TOY STORE, TIK TOK STORE, TOBAY TOY STORE, XIAMEN MINE TRADING CO., LTD., XINGTAI JIUDA BIKE CO., LTD., YIWU OUNY TRADING CO., LTD. and YIWU YOHE E-COMMERCE FIRM, Defendants.
REPORT AND RECOMMENDATION
SARAH L. CAVE, UNITED STATES MAGISTRATE JUDGE.
| Term | Definition |
| Plaintiff or Mattel | Mattel Inc.___________________________________ |
| Defendants | Agogo Store, ChiYou Toy Store. Dehua Beauty Rich Ails & Crafts Co., Ltd., Disneys toy stickers Store, DragonModel Store, Fiin Childhood Toy Store, Guangzhou Infinity Amusement Equipment Co.. Ltd.. Guangzhou Yuedong Inflatable Products Co.. Ltd.. Hasting Toy Store. Henan Tong Qu Park Amusement Equipment Co., Ltd., Kids Fun Toy Store. KirinCartoon Store. Ofay International Trading Co.. Ltd., Quanzhou Dongshang Clothing & Accessories Co.. Ltd.. RISE TOP TOYS LIMITED. Shantou Chenghai Blue Deer Toy Co., Ltd.. Shenzhen Enjoy Inflatables Co.. Ltd.. Shop5633041 Store. Shop5785180 Store. Shop910716070 Store. Simboo Store. SimCastle Store. Thonas Baby Toy Store. TIK TOK Store. Tobay Toy Store. Xiamen MINE Trading Co., Ltd., Xingtai Jiuda Bike Co., Ltd., Yiwu Ouny Trading Co.. Ltd. and Yiwu Yohe E-Commerce Finn |
| Alibaba | Alibaba.com. an online marketplace platform that allows manufacturers, wholesalers and other third-party merchants, like Defendants, to advertise, offer for sale, sell, distribute and ship their wholesale and retail products originating from China directly to consumers across the world and specifically to consumers residing in the U.S.. including New York__________________ |
| AliExpress | Aliexpress.com. an online marketplace platform that allows manufacturers, wholesalers and other third-party merchants, like Defendants, to advertise, offer for sale. sell, distribute and ship their wholesale and retail products originating from China directly to consumers across the world and specifically to consumers residing in the U.S.. including New York__________________ |
| Epstein Drangel | Epstein Drangel LLP. counsel for Plaintiff |
| New York Address | 244 Madison Ave. Suite 411. New York, New York 10016 |
| Complaint | Plaintiff s Complaint filed on February 17, 2021 |
| Application | Plaintiff s Ex Parte Application for: 1) a temporary restraining order; 2) an order restraining Merchant Storefronts (as defined infra) and Defendants1 Assets (as defined infra) with the Financial Institutions (as defined infra); 3) an order to show cause why a preliminary injunction should not issue; 4) an order authorizing bifurcated and alternative seivice and 5) an order authorizing expedited discovery filed on February 17, 2021 |
| Reichenberger Dec. | Declaration of Diane Reichenberger in Support of Plaintiffs Application |
| Drangel Dec. | Declaration of Jason M. Drangel in Support of Plaintiffs Application |
| Thomas the Tank Engine | A blue, cheery anthropomorphic steam engine that encourages Iris fellow trains to be the best they can be, and imparts lessons about friendship, altruism and perseverance |
| Thomas & Friends Products | A vast range of commercial products, including trains and tracks, games, puzzles and books sold under the Thomas and Friends brand |
| Thomas & Friends Marks | U.S. Trademark Registration Nos.: 3, 799, 968 for (Image Omitted)" for a variety of goods in Classes 9, 16. 24, 25 and 28; 3, 085, 762 for "THOMAS & FRIENDS" for a variety of goods in Classes 9, 16, 25, 28; and 3, 531, 151 for "THOMAS & FRIENDS" for a variety of goods in Classes 18, 20, 21 and 29 |
| Thomas & Friends Works | U.S. Copyright Reg. Nos.: PA 1-930-773, covering Thomas & Friends: The Thomas Way; TX 7-953-676, covering Thomas & Friends: Story Time Collection; TX 7-973-191, covering Thomas & Friends: Special Delivery (Lift-a-Flap Sound Book): TX 7-973-196, covering Thomas & Friends: Railway Race Day (Lift-a-Flap Sound Book); TX 7-973-208, covering Thomas & Friends: I'm Ready to Read with Thomas (Play-a-Sound book): TX 7-985-398, covering Thomas & Friends: I Can Help Thomas (Play-a-Sound book); TX 7-992-119, covering Thomas & Friends: Nine Favorite Tales (Little Golden Book Collection); TX 8-149-304, covering Thomas & Friends: Books & Blocks; and TX 4-442-061. covering Thomas the Tank Engine |
| Counterfeit Products | Products bearing or used in connection with the Thomas & Friends Marks and or Thomas & Friends Works, and or products in packaging and or containing labels bearing the Thomas & Friends Marks and/or Thomas & Friends Works, and or bearing or used in connection with marks and/or artwork that are confusingly or substantially similar to the Thomas & Friends Marks and or Thomas & Friends Works and or products that are identical or confusingly or substantially similar to the Thomas & Friends Products |
| Infringing Listings | Defendants' listings for Counterfeit Products |
| User Accounts | Any and all websites and any and all accounts with online marketplace platforms such as Alibaba, AliExpress, as well as any and all as yet undiscovered accounts with additional online marketplace platforms Any and all User Accounts through which Defendants. then respective officers, employees, agents, servants and all persons in active conceit or participation with any of them operate storefronts to manufacture, import. export, advertise, market, promote, distribute, display. offer for sale, sell and or otherwise deal in Counterfeit Products, which are held by or associated with Defendants, then respective officers, employees, agents, servants and all persons in active concert or participation with any of them |
| Defendants' Assets | .Any and all money, securities or other property or assets of Defendants (whether said assets are located in the U.S. or abroad) |
| Defendants' Financial Accounts | Any and all financial accounts associated with or utilized by any Defendants or any Defendants' User Accounts or Merchant Storefront(s) (whether said account is located in the U.S. or abroad) |
| Financial Institutions | |
| Third Party Service Providers | Merchant Storefronts |
I. INTRODUCTION
Plaintiff Mattel, Inc., a leading designer and manufacturer of well-known children's toys, including Thomas the Tank Engine (“Thomas”), asserts trademark and copyright claims against Defendants, 29 merchants selling Counterfeit Products that violate Plaintiff's Thomas & Friends Marks and Thomas & Friends Works. (See generally ECF No. 10). After Defendants failed to answer and defend in this action, the Clerk of Court entered Certificates of Default against each of them. (ECF No. 30). Before the Court is Plaintiff's motion for default judgment and for a permanent injunction against Defendants (ECF No. 31 (the “Motion”)), which the Honorable Alison J. Nathan referred to me for a Report and Recommendation. (ECF No. 36).
Defined terms are set forth in the Glossary or otherwise defined in this Report and Recommendation.
For the reasons set forth below, I respectfully recommend that the Motion be GRANTED and: (i) judgment be entered in favor of Plaintiff and against Defendants in the amount of $1,450,000.00 ($50,000.00 per Defendant for each of the 29 Defendants), plus statutory postjudgment interest; (ii) a permanent injunction be entered; and (iii) an asset restraining notice be issued pursuant to N.Y. C.P.L.R. § 5222 (“Section 5222”).
The Court also recommends dissolving the automatic stay under Fed.R.Civ.P. 62, permitting immediate enforcement of the judgment, and, as set forth in the Preliminary Injunction Order, returning Plaintiff's $5,000 bond on the final disposition of this case. (ECF No. 21 at 16).
II. BACKGROUND
A. Factual Background
Unless otherwise noted, the factual background is drawn from Plaintiff's allegations in its Complaint (ECF No. 10), which are accepted as true for the liability portion of this Report and Recommendation, as well as the Temporary Restraining Order (“TRO”) issued by Judge Nathan on February 22, 2021. Mattel, Inc. v. Agogo Store, No. 21 Civ. 1507 (AJN), 2021 WL 1159906 (S.D.N.Y. Feb. 22, 2021) (“Mattel I”). Where noted, additional facts are drawn from documents Plaintiff submitted in support of the Motion, including Plaintiff's counsel's declaration (ECF No. 32 (the “Declaration”)), supporting exhibits (ECF Nos. 32-1-32-5), memorandum of law (ECF No. 33), and Proposed Default Judgment (ECF No. 34).
“Mattel is a leading designer, developer, marketer, manufacturer and distributor of well-known children's toys and games under its iconic brands, ” including Thomas & Friends. Mattel I, 2021 WL 1159906, at *1. Thomas, a “blue, cheery anthropomorphic steam engine” is the main character of Mattel's Thomas & Friends brand. Id. Thomas & Friends, and particularly Thomas, have become internationally famous and venerated: Thomas & Friends inspired a television series; Thomas has been listed by The Independent as “one of the 100 people that make Britain a happier place, ” and Mattel has collaborated with the United Nations to educate children concerning certain Sustainable Development Goals through the Thomas & Friends brand. (ECF No. 10 ¶¶ 11-13).
Global retail sales of Thomas & Friends Products have totaled approximately $1 billion dollars, and in 2017, “more than 37 million Thomas & Friends Product engines were sold.” (ECF No. 10 ¶ 14). Mattel sells its Mattel Products worldwide through major retailers and online marketplaces, among them, Wal-Mart, Target Stores, Walgreens, and Amazon. Mattel I, 2021 WL 1159906, at *1.
Mattel has protected its intellectual property, and through its wholly-owned subsidiary Gullane (Thomas) Limited, is the owner and/or licensee of U.S. Trademark Reg. Nos. 3, 799, 968, 3, 085, 762, and 3, 531, 151 for a variety of goods in several classes for “Thomas & Friends.” Mattel I, 2021 WL 1159906, at *1. Mattel, through Gullane (Thomas) Limited, is also the owner and/or licensee of “both registered and unregistered copyrights in and related to the Thomas & Friends Products.” Id.
These include: (i) U.S. Copyright Reg. Nos. PA-1-930-773, covering Thomas & Friends: The Thomas Way; (ii) TX 7-953-676, covering Thomas & Friends: Story Time Collection; (iii) TX 7-973-191, covering Thomas & Friends: Special Delivery (Lift-a-Flap Sound Book); (iv) TX 7-973-196, covering Thomas & Friends: Railway Race Day (Lift-a-Flap Sound Book); (v) TX 7-973-208, covering Thomas & Friends: I'm Ready to Read with Thomas (Play-a-Sound book); (vi) TX 7-985-398, covering Thomas & Friends: I Can Help Thomas (Play-a-Sound book); (vii) TX 7-992-119, covering Thomas & Friends: Nine Favorite Tales (Little Golden Book Collection); (viii) TX 8-149-304, covering Thomas & Friends: Books & Blocks; and (ix) TX 4-442-061, covering Thomas. Mattel, 2021 WL 1159906, at *1.
Defendants are merchants on the Alibaba and/or AliExpress online marketplace platforms who manufacture, import, export, advertise, market, promote, distribute, display and/or offer for sale Counterfeit Products. (ECF No. 10 ¶ 6); Mattel I, 2021 WL 1159906, at *2. Plaintiff alleges on information and belief that Defendants are located in China, but do business in the United States by means of their User Accounts and Merchant Storefronts on Alibaba and/or AliExpress. (ECF No. 10 ¶ 30). Defendants' Counterfeit Products are specifically advertised and sold to consumer in the United States, including New York. (See id. ¶ 31). Mattel I, 2021 WL 1159906, at *2. Defendants are not, and have never been, authorized distributors or licensees of the Thomas & Friends Products. Mattel I, 2021 WL 1159906, at *2.
Defendants' Counterfeit Products “are nearly indistinguishable from Plaintiff's Thomas & Friends Products, only with minor variations that no ordinary consumer would recognize.” (ECF No. 10 ¶ 37). The Counterfeit Products are designed to confuse and mislead consumers into believing either that they are Plaintiff's Thomas & Friends Products or are otherwise approved by, or sourced from, Plaintiff. (Id. ¶ 40).
The Complaint includes side-by-side comparisons of Thomas & Friends Products and Counterfeit Products. (See ECF No. 10 at 17-19). The Counterfeit Products feature and incorporate “one or more of the Thomas & Friends Marks and/or Thomas & Friends Works and/or confusingly or substantially similar marks and/or artwork in the descriptions and/or product images in the body of the listing.” (Id. ¶ 40). The Court includes below one representative comparison. When this action commenced, each Defendant was still offering for sale and/or selling Counterfeit Products through their User Accounts and/or Merchant Storefronts and providing shipping and/or actually shipping Counterfeit Products to the U.S., including to New York customers. (Id. ¶ 39).
(Image Omitted) (ECF No. 10 at 18).
Plaintiff alleges that Defendants' illegal counterfeiting and infringing actions were undertaken with knowledge of Plaintiff's ownership of the Thomas & Friends Marks and Thomas & Friends Works, or in bad faith, and will cause irreparable harm and economic loss to Plaintiff as well as consumer confusion. (ECF No. 10 ¶¶ 45-48). The Counterfeit Products are substandard, and therefore may injure Plaintiff's reputation and goodwill among consumers. Mattel I, 2021 WL 1159906, at *2. Plaintiff states in the Declaration that, as a result of Defendants' defaults and the inability to engage in discovery, Plaintiff cannot determine Defendants' profits, quantify Plaintiff's lost revenues flowing from the infringing and counterfeiting activities, or quantify the extent to which Defendants minimized expenses by counterfeiting the Thomas & Friends Marks and/or Thomas & Friends Works. (ECF No. 32 ¶¶ 2425).
B. Procedural Background
On February 19, 2021, Plaintiff filed the Complaint, along with an application to seal the case and for a TRO described below. (ECF Nos. 10, 14-17). In the Complaint, Plaintiff asserted claims for: (1) trademark counterfeiting under the Lanham Act; (2) trademark infringement under the Lanham Act; (3) false designation of origin, passing off and unfair competition under the Lanham Act; (4) federal copyright infringement; and (5) unfair competition under New York state common law. (See ECF No. 10). Plaintiff sought damages, a permanent injunction enjoining and prohibiting violative conduct by Defendants and their agents, an asset freeze or constructive trust over ill-gotten gains, and attorneys' fees and costs. (Id. at 30-35).
Along with the Complaint, Plaintiff filed an ex-parte Application seeking: (1) a TRO; (2) an order restraining Merchant Storefronts and Defendants' Assets with the Financial Institutions; (3) an order directing Defendants to show cause why the Court should not issue a preliminary injunction; (4) an order authorizing bifurcated and alternative service; and (5) an order authorizing expedited discovery. (ECF Nos. 14-17).
On February 22, 2022, Judge Nathan issued Mattel I: (i) granting a TRO; (ii) ordering Defendants to show cause at a hearing on March 8, 2021 why the Court should not issue a preliminary injunction pursuant to Fed.R.Civ.P. 65(a) (the “OTSC”); (iii) restraining Defendants' assets pursuant to Fed.R.Civ.P. 64 and 65; (iv) authorizing bifurcated and alternative service by electronic means, pursuant to Fed.R.Civ.P. 4(f)(3); (v) authorizing expedited discovery; (vi) requiring Plaintiff to post a $5,000 security bond; and (vii) temporarily sealing the Complaint and the Application. 2021 WL 1159906, at *3-9.
On March 9, 2021, “pursuant to the alternative methods of service authorized by the TRO, Plaintiff served the Summons, Complaint, TRO, all papers filed in support of the Application and the February 26, 2021 Order on each and every Defendant.” (ECF No. 22 at 4).
On March 18, 2021, the case was unsealed. (ECF No. 6).
On March 22, 2021, Judge Nathan held a hearing concerning the OTSC, (ECF Minute Entry Mar. 22, 2021), and issued the Preliminary Injunction Order. (ECF No. 21 (the “Preliminary Injunction Order”)). Defendants did not appear at the hearing. (ECF No. 21 at 6). The Preliminary Injunction Order provided that “[t]he injunctive relief previously granted in the TRO shall remain in place through the pendency of this litigation, ” that the asset restraint and expedited discovery should remain in place, and permitted service on Defendants in accordance with Fed.R.Civ.P. 4(f)(3). (Id. at 7, 14). The Preliminary Injunction Order provided that Plaintiff's bond would remain with the Court until either the final disposition of the case or the termination of the Preliminary Injunction Order, and directed Plaintiff to provide a status report within 60 days in the event Defendants failed to appear. (Id. at 16).
On July 15, 2021, the Clerk of Court issued Certificates of Default against the Defendants. (ECF No. 30). On July 21, 2021, Plaintiff filed the Motion and supporting documents. (ECF Nos. 31-34).
On November 5, 2021, Judge Nathan referred the Motion for a Report and Recommendation. (ECF No. 36). On November 18, 2021, the Court ordered Defendants to respond to the Motion by no later than December 17, 2021. (ECF No. 37 (the “Scheduling Order”)). The Court warned that if Defendants failed to respond to the Motion or to contact the Court to request an in-court hearing, the Court would issue a Report and Recommendation based on Plaintiff's motion alone, without an in-court hearing. (Id.) (citing Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997)). On November 29, 2021, Plaintiff filed proof of service of the Scheduling Order on Defendants pursuant to the authorized alternative service methods. (ECF No. 38). Defendants have not responded to the Motion or contacted the Court.
III. LEGAL STANDARD
A party seeking a default judgment must follow the two-step procedure set forth in Federal Rule of Civil Procedure 55. See Bricklayers & Allied Craftworkers Loc. 2 v. Moulton Masonry & Constr., LLC, 779 F.3d 182, 186-87 (2d Cir. 2015). First, under Rule 55(a), where a party has failed to plead or otherwise defend in an action, the Clerk of the Court must enter a certificate of default. Fed.R.Civ.P. 55(a). Second, after entry of the default, if the party still fails to appear or move to set aside the default, the Court may enter a default judgment. Fed.R.Civ.P. 55(b). Whether to enter a default judgment lies in the “sound discretion” of the trial court. Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). Because a default judgment is an “extreme sanction” that courts are to use as a tool of last resort, Meehan v. Snow, 652 F.2d 274, 277 (2d Cir. 1981), the district court must “carefully balance the concern of expeditiously adjudicating cases, on the one hand, against the responsibility of giving litigants a chance to be heard, on the other.” Fermin v. Las Delicias Peruanas Rest., Inc., 93 F.Supp.3d 19, 29 (E.D.N.Y. 2015) (citing Enron, 10 F.3d at 96). In considering whether to grant a default judgment, district courts are “guided by the same factors [that] apply to a motion to set aside entry of a default.” First Mercury Ins. Co. v. Schnabel Roofing of Long Is., Inc., No. 10-CV-4398 (JS) (AKT), 2011 WL 883757, at *1 (E.D.N.Y. Mar. 11, 2011). “These factors include: (1) whether the default was willful; (2) whether ignoring the default would prejudice the opposing party; and (3) whether the defaulting party has presented a meritorious defense.” J & J Sports Prods. Inc. v. 1400 Forest Ave. Rest. Corp., No. 13-CV-4299 (FB) (VMS), 2014 WL 4467774, at *4 (E.D.N.Y. Sept. 10, 2014) (citing Swarna v. Al-awadi, 622 F.3d 123, 142 (2d Cir. 2010)).
A defendant's default is deemed “a concession of all well-pleaded allegations of liability, ” Rovio Ent., Ltd. v. Allstar Vending, Inc., 97 F.Supp.3d 536, 545 (S.D.N.Y. 2015), but a default “only establishes a defendant's liability if those allegations are sufficient to state a cause of action against the defendants.” Gesualdi v. Quadrozzi Equip. Leasing Corp., 629 Fed.Appx. 111, 113 (2d Cir. 2015). The Court must determine “whether the allegations in the complaint establish the defendants' liability as a matter of law.” Id.
IV. DISCUSSION
A. Jurisdiction
As a threshold matter, the Court has federal subject matter jurisdiction over Plaintiff's federal trademark and copyright claims under 28 U.S.C. §§ 1331 and 1338(a)-(b) and 15 U.S.C. §1121, and supplemental jurisdiction over related state law claims under 28 U.S.C. § 1367(a). See Wowwee Grp. Ltd. v. Meirly, No. 18 Civ. 706 (AJN), 2019 WL 1375470, at *2 (S.D.N.Y. May 27, 2019) (granting default judgment and entering a permanent injunction against defendant merchants who sold infringing or counterfeit products online).
Plaintiff alleges that the Court has personal jurisdiction over the Defendants because, on information and belief, Defendants “systematically direct[ed] and/or target[ed] their business activities at consumers in the U.S., including New York, through accounts with online marketplace platforms such as Alibaba and/or AliExpress” and Defendants transacted business with U.S. consumers, including in New York, for the sale and shipment of Counterfeit Products. ECF No. 10 ¶ 3(a)-(e). In Mattel I, Judge Nathan found that AliBaba and AliExpress “allow manufacturers and other third-party merchants, like Defendants, to advertise, distribute, offer for sale, sell and ship their retail products . . . directly to consumers worldwide and specifically to consumers residing in the U.S., including New York.” Mattel I, 2021 WL 1159906, at *2.
The Court concludes it has personal jurisdiction over Defendants under N.Y. C.P.L.R. § 302(a)(1) (“Section 302”), the “jurisdictional net” of which “reaches those defendants who, under the totality of circumstances, ‘purposefully avail themselves of the privilege of conducting activities within New York, thus invoking the benefits and protections of its law.'” Wowwee, 2019 WL 1375470, at *3-5 (finding personal jurisdiction existed under Section 302(a)(1) for defaulting defendants who maintained an interactive website, some of whom completed sales to New York customers) (quoting Mattel, Inc. v. Adventure Apparel, No. 00 Civ. 4085 (RWS), 2001 WL 286728, at *2 (S.D.N.Y. Mar. 22, 2001)) (cleaned up).
The Court notes too that there may also be a second, independent basis for jurisdiction over Defendants under N.Y. C.P.L.R. § 302(a)(3)(ii), which permits long-arm jurisdiction over defendants who (1) committed a tortious act outside of New York; (2) causing injury within New York state; (3) that defendants knew or should reasonably have known would have consequences in New York; and (4) derive substantial revenue from interstate or international commerce. Energy Brands Inc. v. Spiritual Brands, Inc., 571 F.Supp.2d 458, 470-71 (S.D.N.Y. 2008).
The exercise of personal jurisdiction over Defendants under a state long-arm statute like Section 302, which provides for narrower jurisdiction than the due process clause, thus comports with due process. See Energy Brands, 571 F.Supp.2d at 468-69 (citing United States v. Montreal Trust Co., 358 F.2d 239, 242 (2d Cir. 1966)).
B. Default Judgment
As noted above, before entering a default judgment, the Court must consider “(1) whether the default was willful; (2) whether ignoring the default would prejudice the opposing party; and (3) whether the defaulting party has presented a meritorious defense.” 1400 Forest Ave., 2014 WL 4467774, at *4; see Mason Tenders Dist. Council v. Duce Constr. Corp., No. 02 Civ. 9044 (LTS) (GWG), 2003 WL 1960584, at *2 (S.D.N.Y. Apr. 25, 2003) (listing three factors).
Here, each factor supports entry of default judgment. First, Defendants' failure to respond to the Complaint is itself “sufficient to demonstrate willfulness.” 1400 Forest Ave., 2014 WL 4467774, at *4 (collecting cases); see Bridge Oil Ltd. v. Emerald Reefer Lines, LLC, No. 06 Civ. 14226 (RLC) (RLE), 2008 WL 5560868, at *2 (S.D.N.Y. Oct. 27, 2008) (“Since Defendants have been entirely unresponsive, their continued failure is willful.”). Second, Defendants' failure to respond to Plaintiff's efforts to prosecute its claims demonstrate that failing to grant the Motion would prejudice Plaintiff, “as there are no additional steps available to secure relief in this Court.” Id. Third, Defendants, having failed to file an answer, cannot establish a meritorious defense. See id.
Because all three factors have been satisfied, entry of default judgment is warranted. Because their default equates to Defendants' concession of “all well-pleaded factual allegations of liability in the [C]omplaint, ” the question becomes whether Plaintiff's allegations, accepted as true, establish liability for their claims. 1400 Forest Ave., 2014 WL 4467774, at *5; see Cement & Concrete Workers Dist. Council Welfare Fund v. Metro Found. Contractors, Inc., 699 F.3d 230, 234 (2d Cir. 2012) (explaining that “a party's default is deemed to constitute a concession of all well-pleaded allegations of liability, ” but not “an admission of damages”) (quoting Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)).
1. Trademark Counterfeiting and Trademark Infringement Claims
In the Complaint, Plaintiff alleges five causes of action arising out of Defendants' alleged marketing and sale of Counterfeit Products. (See ECF No. 10). In the Motion, however, Plaintiff “only seeks damages for its First and Second Causes of Action, ” that is, for trademark counterfeiting and trademark infringement under the Lanham Act, not for its third or fourth claims for false designation of origin, passing off & unfair competition and copyright infringement, and “does not seek monetary relief in connection with the remaining causes of action [pled] in the Complaint or attorneys' fees.” (ECF No. 33 at 12 n.2; see ECF No. 10 at 2129). Accordingly, the Court limits its assessment and recommended damages to Plaintiff's first and second causes of action.
The two claims for which Plaintiff seeks damages allege trademark counterfeiting and infringement in violation of the Lanham Act, 15 U.S.C. §§ 1114(1)(b), 1116(d), 1117(b)-(c). (ECF No. 10 at 21-25). The Lanham Act imposes civil liability on any person who reproduces, counterfeits, copies, or colorably imitates a registered mark without consent and applies the reproduced or counterfeited mark to goods offered for sale in a way that is likely to cause confusion. 15 U.S.C. § 1114(1)(b).
In evaluating whether a plaintiff has established these claims for purposes of a default judgment, the court must “ask whether the allegedly infringed mark ‘is entitled to protection' and, if so, ‘whether use of the allegedly infringing mark is likely to cause consumer confusion as to the origin or sponsorship of the products to which it is attached.'” Mattel, Inc. v. 1622758984, No. 18 Civ. 8821 (AJN), 2020 WL 2832812, at *3 (S.D.N.Y. May 31, 2020) (quoting Cross Commerce Media, Inc. v. Collective, Inc., 841 F.3d 155, 168 (2d Cir. 2016)). With respect 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 . . . that the registrant owns the mark, and that the registrant has the exclusive right to use the mark in commerce.” Lane Cap. Mgmt., Inc. v. Lane Cap. Mtmt., Inc., 192 F.3d 337, 345 (2d Cir. 1999) (citing 15 U.S.C. § 1115(a)). For the second element, consumer confusion, courts in this Circuit recognize that “counterfeits, by their very nature, cause confusion.” Coach, Inc. v. Horizon Trading USA Inc., 908 F.Supp.2d 426, 433 (S.D.N.Y. 2012) (quoting Gucci Am., Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284, 287 (S.D.N.Y. 2003)).
The Court finds that both elements are met in this case. Plaintiff alleges that it possesses, through its wholly-owned subsidiary Gullane (Thomas) Limited, certificates of trademark registration for the Thomas & Friends Marks used in the Thomas & Friends Products, images of which it attached as an exhibit to the Complaint. (ECF No. 10 ¶¶ 16-18; id. at 39-46); see Mattel I, 2021 WL 1159906, at *1. Plaintiff's allegation that Defendants' Counterfeit Products are “nearly indistinguishable” from the Thomas & Friends Products, with only “minor variations that no ordinary consumer would recognize” (ECF No. 10 ¶ 37) is “sufficient to support the conclusion that the marks deployed by defaulting Defendants are counterfeits, ” and therefore both elements are met, warranting default judgment. Mattel Inc. v. 1622758984, 2020 WL 2832812 at *3 (granting default judgment on, among other claims, trademark counterfeiting, trademark infringement and false designation claims under the Lanham Act) (citing Montres Rolex, S.A. v. Snyder, 718 F.2d 524, 531-32 (2d Cir. 1983); Coach, 908 F.Supp.2d at 434).
C. Remedies
As remedies for Defendants' trademark counterfeiting and trademark infringement, Plaintiff seeks the entry of a permanent injunction, heightened statutory damages, and permission to serve restraining notices pursuant to Section 5222. (ECF No. 33 at 15-30).
1. Permanent Injunction
Under the Lanham Act, the Court has the authority to grant injunctive relief to prevent further trademark or copyright violations. 15 U.S.C. § 1116. Where a plaintiff has succeeded on the merits, “a permanent injunction is appropriate if the plaintiff has demonstrated (1) that it suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that the balance of hardships between the parties warrants a remedy in equity for the plaintiff; and (4) that the public interest would not be disserved.” Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *5 (citing eBay Inc. v. MercExchange LLC, 547 U.S. 388, 391 (2006); Salinger v. Colting, 607 F.3d 68, 77-78 (2d Cir. 2010) (extending eBay standard to copyright actions); U.S. Polo Ass'n, Inc. v. PRL USA Holdings, Inc., 800 F.Supp.2d 515, 539 (S.D.N.Y. 2011) (extending eBay & Salinger to trademark infringement actions), aff'd, 511 Fed.Appx. 81 (2d Cir. 2013)).
The Court finds that these factors are met here, and therefore a permanent injunction is appropriate. First, Plaintiff's allegation that Defendants' infringements have caused, and will continue to cause “confusion, mistake, economic loss” and deception to consumers (ECF No. 10 ¶¶ 44-46; see ECF No. 33 at 17) establishes irreparable harm. See Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *5 (finding that allegations of loss of goodwill established irreparable harm) (citing U.S. Polo Ass'n, 800 F.Supp.2d at 540-41); Mint, Inc. v. Amad, No. 10 Civ. 9395 (SAS), 2011 WL 1792570, at *3 (S.D.N.Y. May 9, 2011) (finding irreparable harm notwithstanding that plaintiff could not ascertain the amount of damages stemming from infringing conduct, because “the loss of pricing power resulting from the sale of inexpensive ‘knock-offs' is, by its very nature, irreparable”).
The second factor is met because, by not appearing, Defendants have “fail[ed] to provide assurances that [they] will stop infringing the plaintiff's trademarks.” Off-White LLC v. aAWarm HouseA AStore, No. 17 Civ. 8872 (GBD) (GWG), 2019 WL 418501, at *6 (S.D.N.Y. Jan. 17, 2019) (citing Rovio, 97 F.Supp.3d at 547; see Hounddog Prods., LLC v. Empire Film Grp., Inc., 826 F.Supp.2d 619, 633 (S.D.N.Y. 2011) (inferring from default that defendant would continue infringing conduct).
The third factor, the balance of the hardships “clearly tips” in Plaintiff's favor, because “[i]t is axiomatic that an infringer of copyright cannot complain about the loss of ability to offer its infringing product.” WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 287 (2d Cir. 2012) (internal citation omitted); see Mint, Inc., 2011 WL 1792570, at *3 (“[o]ne who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected.”) (citation omitted).
Finally, the public interest will be served if the Court grants a permanent injunction against Defendants because their infringement of Plaintiff's trademarks “imped[es] the public's ability to reliably identify the goods associated with Plaintiff's trademarks, ” and an injunction “discourages public deception.” Off-White LLC v.A AWarm HouseA AStore, 2019 WL 418501, at *6 (citing N.Y.C. Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F.Supp.2d 305, 344-55 (S.D.N.Y. 2010)).
Accordingly, the Court respectfully recommends granting a permanent injunction.
2. Statutory Damages
As noted above, a defendant's default is deemed “a concession of all well-pleaded allegations of liability, ” but it is not deemed an admission of damages. Rovio, 97 F.Supp.3d at 545. “The district court must instead conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.” Am. Jewish Comm. v. Berman, No. 15 Civ. 5983 (LAK) (JLC), 2016 WL 3365313, at *3 (S.D.N.Y. June 15, 2016), adopted by 2016 WL 4532201 (S.D.N.Y. Aug. 29, 2016) (quoting Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)).
The Lanham Act permits a Plaintiff to elect either actual damages and profits or statutory damages for the use of a counterfeit mark. 15 U.S.C. § 1117 (“Section 1117”). Section 1117 was amended by the Anticounterfeiting Consumer Protection Act in 1996, adding subsection (c), which provides for statutory damages, because “Congress appear[ed] to have been motivated by a gap in the law: Plaintiffs who were victorious on their civil counterfeiting claims were often unable to obtain an adequate recovery in actual damages because counterfeiters often maintain sparse business records, if any at all.” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 110 (2d Cir. 2012) (citing S. Rep. No. 104-177, at 10 (1995)).
Under Section 1117(c)(2), if the Court finds that the use of the counterfeit mark was willful, the court may award not less than $1,000 or more than $2,000,000 “per counterfeit mark per type of good or services sold, offered or sale, or distributed, as the court considers just.” Id. § 1117(c)(2). Within these limits, courts have broad discretion to issue an appropriate award. Louis Vuitton Malletier S.A. v. LY USA, Inc., 472 Fed.Appx. 19, 22 (2d Cir. 2012).
To determine an appropriate award, courts rely on seven factors: (1) expenses saved and profits reaped by the infringer/defendant; (2) the plaintiff's lost revenues; (3) the value of the trademark; (4) the need to deter other potential infringers; (5) whether the defendant's conduct was innocent or willful; (6) the cooperativeness of the defendant in providing records relevant to profits and losses; and (7) the need to deter the defendant from future misconduct. Off-White LLC v. ^^Warm House^^Store, 2019 WL 418501, at *4 (citing Fitzgerald Publ'g Co. v. Baylor Publ'g Co., 807 F.2d 1110, 1117 (2d Cir. 1986)); see Spin Master Ltd. v. Alan Yuan's Store, 325 F.Supp.3d 413, 425-26 (S.D.N.Y. 2018) (applying Fitzgerald factors).
Plaintiff seeks heightened statutory damages under the Lanham Act of $50,000.00 against each of the 29 defaulting Defendants, plus post-judgment interest. (ECF No. 33 at 20-26). Among the exhibits attached to the Declaration is a chart detailing Defendants' prohibited use of the Thomas & Friends Marks (the “Wrongful Use Chart”). (ECF No. 32-5; see ECF No. 32 ¶ 27). As detailed in the Wrongful Use Chart, each of the Defendants had at least one infringing use of the Thomas & Friends Marks: Defendants' wrongful uses ranged from one infringing use to infringing uses, with a mean of 4.51 infringing uses, by the Court's calculation. (See ECF No. 325). Notwithstanding the information in the Wrongful Use Chart, given Defendants' default and corresponding failure to participate in discovery, Plaintiffs do not have evidence to quantify Defendants' expenses or sales of Counterfeit Products, and cannot ascertain their profits. (See ECF Nos. 33 at 23; 32 ¶¶ 24-27).
With respect to the first and second factors, although Plaintiff acknowledges that as a result of Defendants' default, its actual damages are “effectively impossible to measure” (ECF No. 33 at 17-18), courts recognize “an inference of a broad scope of operations in cases dealing specifically with websites that ship and sell to a wide geographic range.” Spin Master, 325 F.Supp.3d at 426 (awarding $50,000 per defaulting defendant who sold infringing toys on online marketplaces including Alibaba and AliExpress) (citing Rolex Watch U.S.A., Inc. v. Jones, No. 99 Civ. 2359 (DLC) (FM), 2002 WL 596354, at *5 (S.D.N.Y. Apr. 17, 2002)). Here, Defendants have used Alibaba and AliExpress to advertise, distribute, sell and ship their Counterfeiting Products “worldwide and specifically to consumers residing in the U.S., including New York.” Mattel I, 2021 WL 1159906, at *2. These factors therefore support Plaintiff's requested damages.
The third factor, the value of the trademark, also supports Plaintiff's requested damages. In Mattel I, Judge Nathan concluded that Plaintiff is a leading designer and distributor of well-known toys under “iconic” brands, such as Thomas & Friends, which are sold worldwide through major retailers. Mattel I, 2021 WL 1159906, at *1. In the Complaint, Plaintiff alleges the Thomas & Friends Products have reached approximately $1 billion in global sales. (ECF No. 10 ¶ 14). Based on these facts, the Court concludes that Plaintiff's trademarks are valuable. See Mattel Inc. v. 1622758984, 2020 WL 2832812, at *7 (determining that Mattel's trademark was valuable); see also Spin Master, 325 F.Supp.3d at 426 (finding that the “Flutterbye Fairy” line of toys, commonly consisting of a thin female figure with arms outstretched in a flying pose, with distinctive hair styles, dresses, and wings, were valuable, and awarding $50,000 per defendant).
Likewise, the need to deter other possible infringers (factor 4), and Defendants' willfulness (factor 5) and non-cooperation (factor 6) favor a heightened award, although specific deterrence (factor 7) is not a factor if the recommended permanent injunction is entered. Mattel Inc. v. 1622758984, 2020 WL 2832812, at *7; see Off-White LLC v. 6014350, No. 18 Civ. 5322 (GBD) (GWG), 2020 WL 6478544, at *5 (S.D.N.Y. Nov. 4, 2020) (finding that factors 4, 5, and 6 weighed in plaintiff's favor as there was a compelling interest in deterring other counterfeiters, and by defaulting, defendants were deemed to be willful infringers and thus deprived plaintiff of records with which to assess the value of infringing materials). In cases such as this, “armed with little information as to the scope or consequences of a defendant's infringement, . . . courts in this district have issued awards . . . ranging in amounts from $25,000 to $50,000 for what are generally ‘small-scale counterfeiting operations' to up to $1 million when ‘there was reason to believe that the defendant's sales were substantial'-up to and including ‘millions of infringing goods.'” Mattel Inc. v. 1622758984, 2020 WL 2832812, at *7 (awarding damages in tiers ranging from $25,000 to $250,000) (quoting Tiffany (NJ) LLC v. Dong, No. 11 Civ. 2183 (GBD) (FM), 2013 WL 4046380, at *6 (S.D.N.Y. Aug. 9, 2013)).
After undertaking this analysis and reviewing precedent in this district, the Court recommends that $50,000 in statutory damages per Defendant is appropriate and is consistent with awards in similar cases. See, e.g., Spin Master, 325 F.Supp.3d at 426 (awarding $50,000 per defendant for infringement on Plaintiff's toy marks); Off-White LLC v. 6014350, 2020 WL 6478544, at *6 (awarding $100,000 for each defendant who sold less than 100 counterfeit products); Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *7 (awarding $25,000 to each defendant with fewer than ten counterfeit sales, and $50,000 from remaining first tier defendants); Ontel Prods. Corp. v. Airbrushpainting Makeup Store, No. 17 Civ. 871 (KBF) (ECF No. 40), 2017 U.S. Dist. LEXIS 221489, at *3-4 (S.D.N.Y. June 29, 2017) (awarding $50,000 statutory damages and noting that courts in this circuit “have frequently awarded statutory damages in the range of $20,000 to $50,000 per willfully infringed mark in cases where defendants fail to appear and the Court has limited information as to the scope or circumstances of defendants' infringement.”); WowWee, 2019 WL 1375470, at *10 (approving tiered statutory damages ranging from $50,000 to $500,000 for infringement of plaintiff's robotic toys).
Accordingly, the Court respectfully recommends a statutory damages award of $50,000 per defaulting Defendant, for a total award of $1,450,000.00 under Section 1117(c)(2), as well as an award of statutory post-judgment interest pursuant to 28 U.S.C. § 1961.
3. Section 5222
Plaintiff seeks to continue the asset restraining notices against Defendants, Third Party Service Providers, and Financial Institutions pursuant to Section 5222 after the Court enters final judgment, and notes that, on restraint, it will move for an asset turnover under N.Y. C.P.L.R. § 5225 (“Section 5225”). (ECF No. 33 at 29-30). Although Plaintiff asks to serve asset restraining notices, from the Court's review, Judge Nathan has already imposed the asset restraint in the TRO. Mattel I, 2021 WL 1159906, at *3.
Plaintiff does not appear at this stage to be requesting an asset transfer order. (See ECF No. 33 at 12 (listing requested relief), 30 (stating that Plaintiff will move for an asset turnover “upon restraint”). The Court notes though that orders issued under Section 5225 “are not to be directed toward a defendant's frozen assets generally, but rather to specific pieces of property . . . ‘[B]ecause Plaintiff[] ha[s] not identified the particular property as to which [it] seek[s] a turnover,' its § 5225 motion ‘is denied without prejudice.'” Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *8 (quoting Bernard v. Lombardo, No. 16 Civ. 863 (RMB), 2016 WL 7377240, at *3 (S.D.N.Y. Nov. 23, 2016)).
Section 5222 provides for the issuance of a restraining notice against a judgment debtor prohibiting the disposition or transfer of property until the judgment is satisfied. Mattel, Inc. v. 1622758984, 2020 WL 2832812, at 7 n.3; N.Y.C.P.L.R. § 5222.
Plaintiff's requested relief under Section 5222 is incorporated through Fed.R.Civ.P. 69, and the Court respectfully recommends granting this relief and ordering that Defendants “are forbidden to make or suffer any sale, assignment, transfer or interference with any property in which they have an interest, except as set forth in subsections (h) and (i) of Section 5222 of the C.P.L.R.” Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *7.
Plaintiff also requests that the automatic 30-day stay of the judgment provided by Fed.R.Civ.P. 62(a) be dissolved to allow for immediate enforcement of the judgment and prevent Defendants from hiding any assets. (ECF No. 33 at 29 n.16); Fed.R.Civ.P. 62(a). Rule 62 contemplates this requested relief. Fed.R.Civ.P. 62(a) (staying execution on a judgment “unless the court orders otherwise”); 2018 Advisory Committee Notes (“Amended Rule 62(a) expressly recognizes the court's authority to dissolve the automatic stay or supersede it by a court-ordered stay.”). Accordingly, the Court respectfully recommends “dissolv[ing] the automatic stay imposed by Rule 62 and allow[ing] for immediate enforcement of the judgment.” Mattel, Inc. v. 1622758984, 2020 WL 2832812, at *7.
V. CONCLUSION
For the reasons set forth above, I respectfully recommend that the Motion be GRANTED and (i) judgment be entered in favor of Plaintiff and against Defendants in the amount of $1,450,000.00 ($50,000.00 per Defendant for each of the 29 Defendants), plus post-judgment interest; (ii) a permanent injunction be entered; and (iii) an asset restraining notice be served pursuant to C.P.L.R. § 5222.
The Court also recommends dissolving the automatic stay imposed by Fed.R.Civ.P. 62 and allowing for the immediate enforcement of the judgment, and, as set forth in the Preliminary Injunction Order, returning Plaintiff's $5,000 bond upon the final disposition of this case. (ECF No. 21 at 16).
Plaintiff is directed to serve a copy of this Report and Recommendation on Defendants and to file proof of service on the docket.