Opinion
21-cv-08108
07-22-2022
MATTEL, INC., Plaintiff, v. WWW.POWER-WHEELS-OUTLET.COM, et al., Defendants.
REPORT AND RECOMMENDATION
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
This trademark infringement action was brought by Mattel, Inc. against a number of websites alleged to have violated trademarks associated with Mattel's “Power Wheels” line of products. Mattel has already been granted a default judgment on liability. See Order, dated Jan. 3, 2022 (Docket # 26) (“Default Judgment”). The matter has been referred to the undersigned for a damages inquest. See Order of Reference, dated Jan. 3, 2022 (Docket # 27). For the following reasons, judgment should be entered for Mattel in the amount of $500,000, plus postjudgment interest.
I. BACKGROUND
On October 15, 2021, Mattel filed a complaint against www.power-wheels-outlet.com, www.powerwheels-sale.com, and www.powerwheel-us.shop, alleging various causes of action relating to defendants' use of Mattel's Power Wheels trademarks. See Complaint, filed Oct. 15, 2021 (Docket # 7) (“Comp.”). Specifically, Mattel alleged that the defendants (1) counterfeited Mattel's federally registered trademarks in violation of 15 U.S.C. §§ 1114(1)(a)-(b), 1116(d), and 1117(b)-(c); (2) infringed Mattel's trademarks in violation of § 32 of the Federal Trademark (Lanham) Act, 15 U.S.C. §§ 1051 et seq.; (3) 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); (4) and cybersquatted in violation of the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d). See Comp. ¶ 1. The complaint alleged that the defendants infringed Mattel's Power Wheels trademark covering Class 9 goods, which include batteries, as well as its trademark covering Class 28 goods, which include children's ride-on toy vehicles. See Comp. at iii, 6-8. On the same date it filed the complaint, Mattel filed an ex parte application for interim relief against defendants, consisting of requests for a temporary restraining order; an order restraining defendants' websites and assets; an order to show cause why a preliminary injunction should not issue; an order authorizing bifurcated and alternative service; and an order authorizing expedited discovery. See Memorandum of Law in Support of Mattel's Ex Parte Application, dated Sept. 30, 2021 (Docket # 14). The court issued an order granting the relief Mattel requested. See Order, dated Oct. 1, 2021 (Docket # 15).
Defendants never responded to the complaint. On November 10, 2021 the Clerk of Court issued a certificate of default as to all defendants. See Clerk's Certificate of Default, filed Nov. 10, 2021 (Docket # 21). On December 15, 2021, Mattel filed a motion for default judgment against defendants. See Motion for Default Judgment, filed Dec. 15, 2021 (Docket # 22). On January 3, 2022, the district court granted default judgment in favor of Mattel as to “all claims properly pled against Defendants.” See Default Judgment at 1.
The case was then referred to the undersigned for an inquest on damages. See Order of Reference. The Court issued a scheduling order directing Mattel to file proposed findings of fact and conclusions of law. See Scheduling Order for Damages Inquest, filed Jan. 4, 2022 (Docket # 30) (“Scheduling Order”). On February 18, 2022, Mattel filed the required proposed findings of fact and conclusions of law. See Proposed Findings of Fact and Conclusions of Law, filed Feb. 18, 2022 (Docket # 32) (“Proposed Findings”); Affidavit of Danielle S. Futterman in Support, filed Feb. 18, 2022 (Docket # 33) (“Futterman Aff.”); Memorandum of Law in Support, filed Feb. 18, 2022 (Docket # 34) (“Pl. Mem.”). Mattel's inquest papers and the scheduling order were served upon defendants. See Certificate of Service, filed Feb. 18, 2022 (Docket # 35). Defendants did not file any submission in response.
II. DAMAGES
In its proposed findings, Mattel seeks damages solely for its claim under the Lanham Act pursuant to 15 U.S.C. § 1117(c). See Proposed Findings ¶ 34. In performing a damages inquest, “[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. Plaintiff bears the burden of establishing its entitlement to the amount of damages it seeks. 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). 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 [the] default judgment,” Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989). 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 might seek an evidentiary hearing. See Scheduling Order ¶ 3. No party has requested an evidentiary hearing. Moreover, the Court finds that a hearing is unnecessary inasmuch as Mattel's submissions are complete and have not been contested.
As an alternative to recovering lost profits under 15 U.S.C. § 1117(a), § 1117(c) provides that a prevailing plaintiff in a trademark counterfeiting action may recover statutory damages in the amount 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,” unless the infringement was willful, in which case the 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.” “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, § 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, 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. Publ'ns Int'l, Ltd., 996 F.2d 1366, 1382 (2d Cir. 1993)).
Section 1117(c) provides that a statutory award should be granted “per counterfeit mark per type of goods or services sold, offered for sale, or distributed.” Mattel argues that there were two counterfeit marks used - its trademark for “POWER WHEELS” as conferred by U.S. Reg. Nos. 1,374,017 and 1,671,657, and its trademark for a Power Wheels logo, conferred by Nos. 5,504, 969 and 5,763,877, see Proposed Findings at 6 n.2 - and two types of goods sold: ride-on vehicles and vehicle batteries, see id. ¶ 33.
Mattel holds separate trademarks as to “[b]atteries for children's ride-on toy vehicles” and as to “[children's ride-on toy vehicles and accessories therefor.” See Power Wheels Trademarks, annexed as Ex. B to Comp. (Docket # 7-2), at *4-6. As noted, the complaint alleged violations of Mattel's trademarks applicable to both Class 9 goods (batteries) and Class 28 goods (ride-on vehicles). See Comp. at iii. Mattel's complaint and its supporting exhibits demonstrate that defendants offered ride-on vehicles using Mattel's Power Wheels marks. See, e.g., Checkout Page for Counterfeit Products from Defendant, annexed as Ex. D to Comp. (Docket # 7-4) (screenshots depicting a purchase of a “Barbie Jeep Wrangler”). In a later filing, Mattel provided evidence that defendants offered batteries containing the Power Wheels marks. See Screenshot of Counterfeit Battery, annexed as Ex. A to Letter from Danielle S. Futterman, filed June 16, 2022 (Docket # 37). Accordingly, Mattel suffered violations of two trademarks across two categories of goods, and Mattel is thus entitled to four statutory damages awards under 15 U.S.C. § 1117(c).
To determine an appropriate award of statutory damages under the Lanham Act, “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.” Mattel, Inc. v. Agogo Store, 2022 WL 525698, at *8 (S.D.N.Y. Jan. 31, 2022), adopted, 2022 WL 524057 (S.D.N.Y. Feb. 22, 2022); accord All-Star 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 Mattel is understandably lacking information as to factors one and two. Mattel 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, 325 F.Supp.3d at 426. We therefore resolve factors one and two in Mattel's favor. See Off-White LLC v. Warm House Store, 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).
Mattel has presented only limited evidence as to factor three, the value of the trademarks at issue. Mattel contends that the quality of Power Wheels products has generated “word-of-mouth buzz” and given the brand a valuable reputation, bolstered by Mattel's “marketing and promotional efforts.” Proposed Findings ¶¶ 7-9; see also Declaration of Michael Moore, dated Sept. 23, 2021 (Docket # 13), ¶¶ 14-15. However, Mattel has provided no objective evidence from which we could conclude that the Power Wheels brand has amassed considerable value. When presented with similarly limited evidence as to the value of a trademark, courts have made either neutral findings as to factor three, see Spin Master Ltd. v. ALVY, 2021 WL 5746426, at *8 (S.D.N.Y. Nov. 17, 2021), adopted in relevant part, 2022 WL 103575 (S.D.N.Y. Jan. 10, 2022) (finding that factor three was neutral where “the record does not include any quantifiable information, such as the money that plaintiff spent on promoting the products or the extent of the market that was thereby created”), or have found that the factor weighs against a substantial damages award, see Pearson Educ., Inc. v. Heliosbooks, Inc., 2020 WL 8920616, at *6 (S.D.N.Y. Dec. 8, 2020) (factor three weighed against a maximum statutory award where plaintiffs had merely asserted that its trademarks were valuable without offering evidence that would allow the court to quantify their value), adopted, 2021 WL 1089413 (S.D.N.Y. Mar. 22, 2021). On the other hand, other courts have concluded that Mattel “is a leading designer and distributor of well-known toys under ‘iconic' brands . . . which are sold worldwide through major retailers.” Mattel, Inc. v. Agogo Store, 2022 WL 525698, at *9 (S.D.N.Y. Jan. 31, 2022), adopted, 2022 WL 524057 (S.D.N.Y. Feb. 22, 2022). From this, 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). Based on these conflicting considerations, we conclude that factor three weighs neither for nor against a substantial damages award.
Factors four and seven, which relate to the need to deter the defendants and others, weigh in Mattel's 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). We agree that the flagrant and wanton conduct of the defendants in infringing the trademarks at issue merits both specific and general deterrence.
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). Given the similarity between the registered marks and the defendants' infringing products, see Comp. ¶¶ 29-33, we infer that defendants acted willfully and find that this factor weighs in favor of Mattel.
Factor six, the cooperativeness of the defendants, supports a substantial award of statutory damages, as defendants' failure to appear in this matter has deprived Mattel 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, 2021 WL 5746426, at *9 (same).
Accordingly, the balance of the factors strongly supports Mattel's 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). Mattel seeks an award of $300,000 per counterfeit mark, with each of the defendants to be jointly and severally liable. See Proposed Findings ¶¶ 33-34. Although we find that the factors favor an award significantly higher than the statutory minimum, we believe $300,000 would be excessive in light of the case law within this district. Our review of that case law suggests that $50,000 to $75,000 is a far more common award for infringing products such as toys. See Mattel, Inc. v. Arming, 2021 WL 3683871, at *9 (S.D.N.Y. Aug. 18, 2021) (awarding $50,000 in statutory damages for use of a trademark for a card game); Moose Toys Pty LTD v. Addition, 2020 WL 2832767, at *7 (S.D.N.Y. May 31, 2020) (awarding between $25,000 and $75,000 per defendant for sale of counterfeit toys); Spin Master, 325 F.Supp.3d at 426 (awarding $50,000 per defaulting defendant who sold infringing toys on online marketplaces).
Furthermore, as noted, Mattel has not presented evidence regarding the value of the trademarks at issue or the extent of the defendants' business, a fact other courts have cited in rejecting large damage awards. See Pearson Educ., 2020 WL 8920616, at *6 (rejecting request for $150,000 in damages per infringement where “no evidence exists in the record here that the defendants have gained high revenues or profits through infringement, and no evidence exists of the value of the copyrights and marks”); Memorandum Decision & Order in Ontel Prods. Corp. v. Airbrushpainting Makeup Store, No. 17 Civ. 871 (Docket # 40), at 3 (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.”). “While defendants certainly should not benefit from their failure to provide information about their profits or otherwise participate in this action, neither should [Mattel] reap a windfall in the absence of any information about the potential amount of [Mattel's] lost revenues or the scale of its operation in comparison to the market.” Lane Crawford LLC v. Kelex Trading (CA) Inc., 2013 WL 6481354, at *5 (S.D.N.Y. Dec. 3, 2013), adopted, 2014 WL 1338065 (S.D.N.Y. Apr. 3, 2014); accord Coach, Inc. v. O'Brien, 2012 WL 1255276, at *3 (S.D.N.Y. Apr. 13, 2012).
Mattel notes that the maximum damages award is $2,000,000 for each infringement pursuant to 15 U.S.C. § 1117(c)(2), and cites instances of courts awarding $250,000 or more in statutory damages. See Pl. Mem. at 8. However, considerable damage awards are often obtained only after showing that “the defendant's sales were substantial.” Tiffany (NJ) LLC v. Dong, 2013 WL 4046380, at *6 (S.D.N.Y. Aug. 9, 2013); see Off-White LLC v. 6014350, 2020 WL 6478544, at *6 (awarding between $100,000 and $2,000,000 per defendant based on number of sales, and imposing the maximum penalty for a defendant who sold 8,422 counterfeit products); Nike, Inc. v. Top Brand Co., 2006 WL 2946472, at *2 (S.D.N.Y. Feb. 27, 2006) (recommending award of $1,000,000 per mark where there were “millions” of infringing goods produced), adopted, 2006 WL 2884437 (S.D.N.Y. Oct. 6, 2006). In other instances, a sizeable statutory damages award was imposed for violations of multiple trademarks, “but without multiplying that amount by the number of trademarks infringed.” Tiffany (NJ), 2013 WL 4046380, at *6. For example, Mattel cites All-Star Mktg. Grp., 775 F.Supp.2d at 620, which awarded a total of $300,000 in statutory damages where seven trademarks were infringed. See Pl. Mem. at 8.
Nonetheless, Mattel does identify several decisions where $250,000 or more per mark was awarded even without evidence of a significant number of sales. See Pl. Mem. at 8-9; Pitbull Prods., Inc. v. Universal Netmedia, Inc., 2007 WL 3287368, at *4 (S.D.N.Y. Nov. 7, 2007) (awarding $250,000 per mark for a total of $500,000 in statutory damages although there was “no record whatsoever regarding the nature of the defendants' infringement, estimates of the defendants' earnings, or possible losses to [plaintiff]”); Rodgers v. Anderson, 2005 WL 950021, at *3 (S.D.N.Y. Apr. 26, 2005) (awarding $250,000 for trademark violation by defaulting defendants, without evidence as to the extent of the defendants' business); Rolex Watch U.S.A., Inc. v. Brown, 2002 WL 1226863, at *2 (S.D.N.Y. June 5, 2002) (awarding $1,000,000 despite absence of “evidence in the record as to the scope of” the defendant's business).
Considering all the foregoing, we conclude that an appropriate award of damages is $125,000 per infringed mark per type of good, for a total statutory damages award of $500,000. This figure balances the facts favoring a larger award, such as the willfulness of the violation and the defendants' default, with facts counseling against a substantial award, such as the lack of evidence as to the value of the trademarks at issue.
III. POST-JUDGMENT INTEREST
Mattel also seeks post-judgment interest. See Proposed Findings ¶ 34.
28 U.S.C § 1961(a) provides that “interest shall be calculated . . . at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding[ ] the date of the judgment.” “[A]n award of postjudgment interest is mandatory.” Schipani v. McLeod, 541 F.3d 158, 165 (2d Cir. 2008); 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, 2022 WL 819152 (E.D.N.Y. Mar. 18, 2022). Accordingly, Mattel should be awarded post-judgment interest at the statutory rate from the date final judgment is entered to the date the judgment is satisfied.
IV. CONCLUSION
For the foregoing reasons, Mattel should be awarded damages in the amount of $500,000.00 as well as post-judgment interest pursuant to 28 U.S.C. § 1961. While we recognize that service on defendants is not legally required, Mattel 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 # 15) 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 Engelmayer. 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).