Opinion
17-CV-7452 (LGS) (KHP)
03-27-2019
PRAKASH MELWANI, Plaintiff, v. NATURE REPUBLIC INTERNATIONAL LLC, et al., Defendants.
REPORT AND RECOMMENDATION TO: THE HONORABLE LORNA G. SCHOFIELD, UNITED STATES DISTRICT JUDGE
FROM: KATHARINE H. PARKER, UNITED STATES MAGISTRATE JUDGE
This is an action for false advertising, trademark infringement, false designation of origin, trademark dilution, unfair competition, deceptive acts and practices, and unjust enrichment in violation of the Lanham Trademark Act of 1946, as amended ("Lanham Act"), 15 U.S.C. § 1051 et seq. and New York statutory and common law. Before this Court is Plaintiff's motion for entry of a money judgment (Doc. No. 52) against Defendants Nature Republic USA, Inc. ("Nature Republic USA") and Young M. Yoo, both of whom defaulted in this action. For the reasons set forth below, this Court respectfully recommends that Plaintiff's motion be GRANTED and that Plaintiff be awarded (a) damages in the amount of $908,627.67, representing Plaintiff's actual damages, trebled pursuant to 15 U.S.C. § 1117(b); and (b) post-judgment interest on such damages, from the date of entry of judgment, at the interest rate referenced in 28 U.S.C. § 1961.
BACKGROUND
Plaintiff is the individual owner of a family of Royal Silk® trademarks. (Am. Comp. ¶ 4.) The marks include Royal Silk Trademark Registration No. 2338016 (Apr. 4, 2000) for category 25 goods, Royal Silk Trademark Registration No. 3578997 (Feb. 24, 2009) for category 25 goods, Royal Silk Trademark Registration No. 3745470 (Feb. 24, 2009) for category 3 goods, Royal Silk Trademark Registration No. 5076644 (Nov. 8, 2016) for category 24 goods, and Royal Silk Trademark Registration No. 5076644 (Nov. 8, 2016) for category 45 goods. (Id. ¶ 15.) The marks are validly registered, subsisting, unrevoked, and uncancelled. (Id. ¶ 17.)
Plaintiff licenses the Royal Silk marks for the manufacture, distribution, sale, marketing, and promotion in interstate commerce of the Royal Silk brand line of clothing, accessories, personal care products, and services. (Id. ¶ 20.) Plaintiff or his predecessors-in-interest have been continuously using the Royal Silk marks since as early as March 1978. (Id.) Royal Silk, Ltd. and Royal Silk Direct, Inc. ("RSD"), both New York corporations, market, sell, and distribute Royal Silk goods and services. (Id. ¶¶ 21-22.) RSD is an online seller and merchant of Royal Silk products and services at the website address: www.RoyalSilkUSA.com. (Id. ¶ 23.) RSD also sells its products on Amazon. (Id. ¶ 25.) RSD's relationship with Amazon began in 2006. (Id. ¶ 27.)
Defendant Nature Republic USA is a California corporation. (Id. ¶ 5.) Defendant Young M. Yoo is the CEO of Nature Republic USA. (Id. ¶ 8.) According to the Amended Complaint, Yoo has "directly or indirectly participated in the wrongful infringement acts." (Id.) Nature Republic USA owns and operates a U.S. based website www.naturerepublicusa.com. (Id. ¶ 9.) A related website selling the same or similar products with the name www.naturerepublic.com is based in South Korea. (Id. ¶ 10.)
In or about 2017, Plaintiff learned that Nature Republic USA was selling products bearing the Royal Silk name on Amazon, eBay, and its own website. (Id. ¶¶ 29-40.) On September 3, 2017, Plaintiff ordered and received a sample of the infringing goods at a New York address from the Amazon website. The sample was a jar of Ginseng Royal Silk Watery Cream. (Id. ¶¶ 30-32, Exs. A, B.) Plaintiff also observed that Defendant Nature Republic USA sells a product called Ginseng Royal Silk Foam Cleanser as well as other products bearing the Royal Silk name on Amazon. (Id. ¶¶ 33-34, Ex. C.) Plaintiff believes that Nature Republic USA has sold infringing goods through Amazon since at least 2016 to the present. (Id. ¶ 38.) Plaintiff also has learned that Nature Republic USA has sold infringing products to consumers on eBay since at least 2016. (Id. ¶ 39.) Finally, Nature Republic USA sells products through its website www.naturerepublicusa.com. (Id. ¶¶ 35-37, Ex. D.) Plaintiff believes this website has been active since at least 2016. (Id. ¶ 40.)
PROCEDURAL HISTORY
Plaintiff, who is proceeding pro se, filed this action on September 29, 2017 against Nature Republic International, LLC, Nature Republic USA, Inc., Yoon Jo Hong, Young M. Yoo, and Amazon.com, Inc. He filed an amended complaint on October 3, 2017. Counsel for Nature Republic International, LLC, Yoon Jo Hong, and Amazon.com, Inc. subsequently entered appearances, and Plaintiff settled his claims against these defendants, leaving only Defendants Nature Republic USA, Inc. and Young M. Yoo. (See Doc. Nos. 11, 14, 19, 24, 25, 28.)
Plaintiff then filed a motion for entry of a default judgment against Nature Republic USA, Inc. and Young M. Yoo, which the Court granted. (See Doc. Nos. 29, 30, 34, 35, 36, 42.) The matter was then referred to the undersigned for an inquest on damages. (See Doc. No. 43.) Plaintiff seeks damages in the amount of Defendants' profits from sales of infringing goods, punitive/treble damages, and post-judgment interest.
This Court scheduled a telephone conference to discuss a briefing schedule and ordered Plaintiff to serve a copy of the order on the remaining Defendants, which Plaintiff did. (See Doc. Nos. 44, 45.) This Court then set a briefing schedule and directed Plaintiff to serve copies of that order on the Defendants, which Plaintiff did. (See Doc. Nos. 46, 47.) Because Plaintiff required certain information from eBay to demonstrate damages, he requested additional time to submit a brief supporting his damages. This Court granted Plaintiff the additional time, extended the briefing schedule, and set a hearing date. (Doc. No. 51.) Plaintiff served copies of his relevant motion papers requesting damages on Defendants in accordance with this Court's order. (Doc. Nos. 56, 60.) The Court held a hearing on November 29, 2018 to review Plaintiff's request and provide Defendants an opportunity to appear and object. Defendants did not appear or submit any documents to this Court in opposition to Plaintiff's motion for a money judgment. (See Doc. Nos. 61, 63.) At the hearing, this Court requested that Plaintiff provide it with additional documents supporting a summary chart of damages he had included in his briefing materials. Plaintiff provided the supporting documentation on November 30, 2018. (See Doc. No. 62.)
DISCUSSION
I. Liability for Trademark Infringement
Upon a defendant's default, a plaintiff's factual allegations must be accepted as true, except for those relating to damages. Leviton Mfg. Co. v. Fastmac Performance Upgrades, Inc., No. 13-cv-1629 (LGS) (SN), 2014 WL 2653116, at *1 (S.D.N.Y. Feb. 28, 2014); Gucci Am., Inc. v. Tyrrell-Miller, 678 F. Supp. 2d 117, 119 (S.D.N.Y. 2008). A plaintiff bears the burden of establishing its entitlement to recovery and must provide evidence to prove the extent of its damages. Bumble & Bumble, LLC v. Pro's Choice Beauty Care, Inc., No. 14-cv-6911 (VEC) (JLC), 2016 WL 658310, at *2 (S.D.N.Y. Feb. 17, 2016). Here, Plaintiff seeks damages only in connection with his federal trademark claims. Thus, the Court first evaluates whether Plaintiff has established a prima facie case for trademark infringement under the Lanham Act before analyzing any damages awardable under the Lanham Act. See Leviton Mfg. Co., 2014 WL 2653116, at *4.
To establish liability pursuant to the Lanham Act on a trademark infringement claim, a plaintiff "must show that it has a valid mark that is entitled to protection under the Lanham Act and that [the defendant's] actions are likely to cause confusion with [the plaintiff's] mark." Id. (internal quotation marks and citations omitted); see also 15 U.S.C. § 1114(1). A plaintiff can satisfy the first prong of this test by demonstrating that he owns a federally registered trademark, which is "'prima facie evidence of the registrant's exclusive right to use the mark in commerce on the product.'" Leviton Mfg. Co., 2014 WL 2653116, at *4 (quoting Gucci Am., Inc., 678 F. Supp. 2d at 119). Here, Plaintiff has alleged that he owns multiple federally registered trademarks for Royal Silk, and this allegation, accepted as true, is prima facie evidence that Plaintiff has valid marks that are entitled to Lanham Act protection. See id.; see also Gucci Am., Inc., 678 F. Supp. 2d at 119.
When determining whether the defendant's actions are likely to cause confusion, courts generally apply the multi-factor test set forth in Polaroid Corp. v. Palarad Elecs. Corp., evaluating the (1) strength of the trademark; (2) similarity of the marks; (3) proximity of the products and their competitiveness with one another; (4) evidence that the senior user may "bridge the gap" by developing a product for sale in the market of the alleged infringer's product; (5) evidence of actual consumer confusion; (6) evidence that the imitative mark was adopted in bad faith; (7) respective quality of the products; and (8) sophistication of consumers in the relevant market. Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 588 F.3d 97, 114-15 (2d Cir. 2009) (citing Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961)). In cases involving counterfeiting, however, it is not necessary for the Court to perform a Polaroid analysis, as "counterfeits, by their very nature, cause confusion." Gucci Am., Inc. v. Duty Free Apparel, Ltd., 286 F. Supp. 2d 284, 287 (S.D.N.Y. 2003); see also Leviton Mfg. Co., 2014 WL 2653116, at *4.
As relevant here, a defendant is deemed to have counterfeited if it uses "'an original mark [of plaintiff's, in a manner] that is likely to deceive the public as to its origin.'" Leviton Mfg. Co., 2014 WL 2653116, at *4 (quoting Cartier v. Aaron Faber, Inc., 512 F. Supp. 2d 165, 169 (S.D.N.Y. 2007)). Plaintiff's allegations are sufficient to establish that Defendants used the Royal Silk mark in connection with the sale of Ginseng Royal Silk beauty products, which fall within the scope of Plaintiff's Trademark Registration No. 3745470 (Feb. 24, 2009) for category 3 goods. Category 3 goods include cosmetics and toiletries, perfumes, and essential oils. Nice Agreement current edition version - general remarks, Class headings and explanatory notes, United States Patent and Trademark Office, https://www.uspto.gov/trademark/trademark-updates-and-announcements/nice-agreement-current-edition-version-general-remarks (last visited Mar. 26, 2019). Ginseng Royal Silk cream and foam cleanser fall within this category and thus fall within the definition of "counterfeit" use, inherently causing confusion. See 1116(d)(1)(B); Leviton Mfg. Co., 2014 WL 2653116, at *4-5. As a result, no Polaroid analysis is necessary here, and Plaintiff is entitled to have the Court proceed to assess its damages under the Act. II. Damages for Trademark Infringement
Under the Lanham Act, a trademark owner may choose to recover either actual or statutory damages. See 15 U.S.C. § 1117(a), (c); Tiffany (NJ) LLC v. Dong, No. 11-cv-2183 (GBD) (FM), 2013 WL 4046380, at *4 (S.D.N.Y. Aug. 9, 2013). In this instance, Plaintiff has opted to request an award based on actual damages under 15 U.S.C. § 1117(a), which provides that a successful plaintiff under the Act is entitled "subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action." See 15 U.S.C. § 1117(a). Plaintiff seeks to recover Defendants' profits for the period beginning from at least 2016 through the date of default.
"The award of profits is justified by three rationales: (1) to deter a willful wrongdoer from doing so again; (2) to prevent the defendant's unjust enrichment; and (3) to compensate the plaintiff for harms caused by the infringement." Sprint Commc'ns Co. L.P. v. Chong, No. 13-cv-3846 (RA), 2014 WL 6611484, at *5 (S.D.N.Y. Nov. 21, 2014) (internal quotations marks and citation omitted); see also Chloe v. Zarafshan, No. 06-cv-3140 (RJH) (MHD), 2009 WL 2956827, at *5 (S.D.N.Y. Sept. 15, 2009) (citing George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir. 1992)). Where a court finds that a defendant has intentionally used a counterfeit mark or designation, "the court shall, unless the court finds extenuating circumstances, enter judgment for three times [the demonstrated] profits or damages, whichever amount is greater . . . ." Malletier v. Artex Creative Int'l Corp., 687 F. Supp. 2d 347, 356 (S.D.N.Y. 2010) (quoting 15 U.S.C. § 1117(b)).
As already noted, Plaintiff, in this case, has adequately established, by his well-pleaded allegations, that Defendants engaged in the counterfeit use of Plaintiff's Royal Silk marks. Further, this Court agrees with Plaintiff that Defendants' default in this action sufficiently establishes that Defendants' conduct was intentional. See Leviton Mfg. Co., 2014 WL 2653116, at *7; All-Star Mktg. Group, LLC v. Media Brands Co., 775 F. Supp. 2d 613, 621-22 (S.D.N.Y. 2011) ("[B]y virtue of their default, [Defendants] are deemed to be willful infringers."). Accordingly, the Court finds that trebling of damages is warranted in this case. The Court notes that "damages awarded upon a defendant's default 'must not differ in kind from, or exceed in amount, what is demanded in the pleadings.'" Microban Prods. Co. v. Iskin Inc., No. 14-cv-5980 (RA) (DF), 2016 WL 4411349, at *4 (S.D.N.Y. Feb. 23, 2016) (citing Fed. R. Civ. P. 54(c)), report and recommendation adopted, No. 14-cv-5980 (RA), 2016 WL 4411414 (S.D.N.Y. Aug. 18, 2016). Here, Plaintiff's Amended Complaint expressly requests all compensatory and punitive damages permitted under 15 U.S.C. § 1117. (See Am. Comp., at 19.) Such demands are sufficient to have placed Defendants on notice that they could be held liable for any measure of actual damages permitted under 15 U.S.C. § 1117. The Court turns next to the assessment of profits.
A plaintiff seeking damages following a default bears the burden to "introduce sufficient evidence to establish the amount of damages with reasonable certainty." RGI Brands LLC v. Cognac Brisset-Aurige, S.A.R.L., No. 12-cv-1369 (LGS) (AJP), 2013 WL 1668206, at *6 (S.D.N.Y. Apr. 18, 2013), report and recommendation adopted, No. 12-cv-1369 (LGS), 2013 WL 4505255 (S.D.N.Y. Aug. 23, 2013). In connection with an award of profits under 15 U.S.C. § 1117(a), "the plaintiff shall be required to prove defendant's sales only; defendant must prove all elements of cost or deduction claimed." 15 U.S.C. § 1117(a); accord, e.g., Am. Honda Motor Co. v. Two Wheel Corp., 918 F.2d 1060, 1063 (2d Cir. 1990); Louis Vuitton S.A. v. Spencer Handbags Corp., 765 F.2d 966, 973 (2d Cir. 1985). If "the actual sales cannot be precisely determined, the court may resolve any doubts against the defendant in calculating profits, particularly if the uncertainty is due to the defendant's inadequate record-keeping or failure to produce documentary evidence." Chloe, 2009 WL 2956827, at *5 (internal quotations marks and citation omitted). "It bears noting, however, that some reasonable basis for computation has to be used, even though the calculation may only be approximate." Id. (internal citation omitted); see also GAKM Resources LLC v. Jaylyn Sales Inc., No. 08-cv-6030 (GEL), 2009 WL 2150891, at *6 (S.D.N.Y. July 20, 2009) (finding estimates of Defendants' profits "are reasonable and have some evidentiary support. Any imprecision in calculating Defendants' profits is the fault of Defendants, who failed to participate in this litigation."); AW Indus., Inc. v. Sleep Well Mattress, Inc., No. 07-cv-3969 (SLT) (JMA), 2009 WL 485186, at *4 (E.D.N.Y. Feb. 26, 2009) ("The amount requested is not excessive and, moreover, it is defendant who is to blame for the inability to calculate an exact figure."); Century 21 Real Estate LLC v. Paramount Home Sales, Inc., No. 06-cv-2861 (FB) (JMA), 2007 WL 2403397, at *4 (E.D.N.Y. Aug. 20, 2007) (finding plaintiff's "speculative" method of calculating an award pursuant to 15 U.S.C. § 1117(b) "reasonable and appropriate" because "[t]he amount requested is not excessive and it is defendants who are to blame for the inability to calculate an exact figure"); Phat Fashions LLC v. Blue Max Corp., 01-cv-3933 (KMW) (RLE), 2005 WL 1221838, at *2 (S.D.N.Y. May 2, 2005) ("In the absence of any information from [defendant] on costs, and because [defendant] has not cooperated in discovery, the Court finds that these estimated sales are a fair indicator of profits.").
Plaintiff obtained three sets of sales figures concerning the sales of Defendants' Royal Silk products. Amazon provided Defendants' sales totals for the years 2016-2017 equaling $184,176.14. (Doc. No. 55, Declaration of Prakash Melwani ("Melwani Decl."), Ex. A.) Counsel for Nature Republic International, LLC and Yoon Jo Hong provided Defendants' sales totals for the years 2015-2017 for sales of Ginseng Royal Silk products totaling $76,301. (Melwani Decl., Ex. B.) And finally, eBay, Inc. provided Defendants' sales totals of Ginseng Royal Silk products for the period from March 19, 2015 to February 19, 2018 totaling $42,398.75. (Melwani Decl., Ex. C; Doc. No. 62.) The sum total of these sales is $302,875.89.
Plaintiff states that the sales totals are insufficient to compensate him in this case because Defendants continue to sell their infringing products and Plaintiff cannot be sure that he has recovered all documentation of gross sales. Because Defendants' conduct was willful and deliberate, Plaintiff has had to and might continue to play a game of "whack a mole" to stop the infringing sales. For example, Plaintiff states that eBay removed more than 120 listings and product pages featuring infringing products but, within a short time thereafter, 165 new listings were posted on eBay. Similarly, Amazon removed more than 100 listings of infringing products but, soon thereafter, 11 new listings appeared. Additionally, the sales information obtained from Amazon and Nature Republic International, LLC shows gaps from some years. This suggests that the total of $302,875.89 does not represent all of Defendants' sales.
If the Court finds that the amount of recovery based on profits is inadequate or excessive, it may enter judgment for such sum as is just. 15 U.S.C. § 1117(a); Microban Prods. Co., 2016 WL 4411349, at *5. At the same time, Plaintiff's proof of damages here arguably spans a period of time greater than that specified in the Amended Complaint insofar as it includes sales from 2015. See New York City Dist. Council of Carpenters Pension Fund v. Quantum Constr., No. 06-cv-13150 (GEL) (JCF), 2008 WL 5159777, at *4, *11 (S.D.N.Y. Dec. 9, 2008) (holding that the plaintiffs' "damages should be limited to the time period set forth in the [c]omplaint"). On balance, this Court finds that $302,875.89 is a fair approximation of Defendants' profits for the period specified in the Amended Complaint and recommends an assessment of profits in this amount.
For the reasons set forth above, the undersigned recommends that Plaintiff's actual damages of $302,875.89 be trebled to $908,627.67, under 15 U.S.C. § 1117(b). III. Post-Judgment Interest on Damages
Plaintiff seeks post-judgment interest. Under 28 U.S.C. § 1961, Plaintiff is entitled to post-judgment interest, at the rate referenced in that statute, on any money judgment obtained in this case. See Schipani v. McLeod, 541 F.3d 158, 165 (2d Cir. 2008) (noting that post-judgment interest is mandatory under 28 U.S.C. § 1961(a)). Accordingly, this Court recommends an award of post-judgment interest.
CONCLUSION
Based on the foregoing, this Court respectfully recommends that Plaintiff be awarded, upon Defendants' default: (a) damages in the amount of $908,627.67, representing Plaintiff's actual damages, trebled pursuant to 15 U.S.C. § 1117(b); and (b) post-judgment interest on such damages, from the date of entry of judgment, at the interest rate referenced in 28 U.S.C. § 1961. DATED: March 27, 2019
New York, New York
Respectfully submitted,
/s/_________
KATHARINE H. PARKER
United States Magistrate Judge
NOTICE
The parties shall have fourteen days from the service of this Report and Recommendation to file written objections to the Report and Recommendation, pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed. R. Civ. P. 6(a) , (d) (adding three additional days only when service is made under Fed. R. Civ. P. 5(b)(2)(C) (mail) , (D) (leaving with the clerk), or (F) (other means consented to by the parties)). If any party files written objections to this Report and Recommendation, the opposing party may respond to the objections within fourteen days after being served with a copy. Fed. R. Civ. P. 72(b)(2). Such objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Lorna G. Schofield at the United States Courthouse, 40 Foley Square, New York, New York 10007, and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a) , 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Schofield. The failure to file these timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a) , 6(d), 72(b); Thomas v. Arn , 474 U.S. 140 (1985).