Opinion
19-CV-3452 (LGS) (BCM)
01-10-2022
SPIN MASTER LTD. and SPIN MASTER, INC., Plaintiffs, v. ALVY, AMYUNS, ATRIGGER, BASON888, BOKENUS, CATCHMAIK, CENDA, COLEIFIT, CYMELY, DADIII, DICESNOW, DIYURFEELING, DLUCKY, EASERELAX, ELBEE, FENGHESHUN, FITYLE, FSHGH, G0DBL3SSALL, GLOBAL DISCOUNT WAREHOUSE, GLOBALCAREMARKET, IMIXLOT, KECOOI, LITTIL, LTINTIN, MY ONYX, NOVOTE, OLIOTE, PIEI JKIEWS, PLUSA, PREMIUM SEGMENT, ROSS VARNER INC., RUNFON, SANOHAMI, SEENDOM, SUPERGOGO, TORERO X, TWISTYMAGICALPETZ, UKCG, WOMDEE-DIRECT, XIAOHUOJI, YAOGUAN, YARDOM, YUNCONG.15 and ZHANHONG DIRECT, Defendants.
REPORT AND RECOMMENDATION TO THE HON. LORNA G. SCHOFIELD
BARBARA MOSES, UNITED STATES MAGISTRATE JUDGE.
Spin Master Ltd. and Spin Master, Inc. (collectively, Spin Master) filed this action on April 18, 2019, alleging violations of the Lanham Act, 15 U.S.C. §§ 1114, 1114(1)(b), 1116(d), 1117(b)-(c), and 1125(a), the Copyright Act, 17 U.S.C. § 501(a), and New York law by 45 named defendants, arising from defendants' "manufacturing, importing, exporting, advertising, marketing, promoting, distributing, displaying, offering for sale and/or selling" infringing versions of plaintiffs' bejeweled toy products, called "Twisty Petz," through defendants' Merchant Storefronts on the Amazon.com online marketplace and e-commerce platform (Amazon). See Compl. (Dkt. No. 7) ¶¶ 36, 51-100. On April 24, 2019, the Honorable Lorna G. Schofield, United States District Judge, issued a Temporary Restraining Order (TRO) (Dkt. No. 17), which among other things temporarily restrained defendants' infringing conduct and directed them to show cause why a preliminary injunction should not be issued. TRO at 5-8. On May 28, 2019, Judge Schofield entered a Preliminary Injunction (Prelim. Inj.) (Dkt. No. 30) against all defendants, which she amended on August 2, 2019 (Amend. Prelim. Inj.) (Dkt. No. 90). On October 11, 2019, the district judge issued a Final Default Judgment and Permanent Injunction (Default Judgment) (Dkt. No. 119), and on January 10, 2020, she referred the case to me for a damages inquest. (Dkt. No. 127.) For the reasons that follow, I recommend an award of damages in the amount of fifty thousand dollars ($50,000) against each of the 30 remaining defendants (the Defaulting Defendants).
All capitalized terms in this Report and Recommendation, if not expressly defined herein, are used as defined in the Glossary that plaintiff included in its Proposed Findings of Fact (Prop. Findings) (Dkt. No. 129), filed on January 31, 2020. See Prop. Findings at (i)-(iv).
Before it filed its Proposed Findings of Fact, Spin Master voluntarily dismissed its claims against defendants G0DbL3SSALL, COLEIFIT, Ross Varner Inc., Global Discount Warehouse, My ONYX, fityle, ElBee, Womdee-Direct, Premium Segment, and ALVY (Dkt. Nos. 46, 61, 68, 86, 93, 95, 107, 121, 133), leaving 35 defendants against which it sought damage awards. See Prop. Findings at (i) & Ex. A. Since then, Spin Master has voluntarily dismissed its claims against defendants Amyuns, dicesnow, imixlot, kecooi, and Oliote (Dkt. No. 137), leaving 30 Defaulting Defendants against which damages must now be assessed. Those 30 are Atrigger, bason888, BokenUS, Catchmaik, Cenda, Cymely, Dadiii, DIYurfeeling, DLUCKY, EASERELAX, fengheshun, Fshgh, GlobalCareMarket, LittiL, LTINTIN, NOVOTE, Piei Jkiews, plusA, RUNFON, SANOHAMI, SEENDOM, supergogo, Torero X, twistymagicalpetz, UKCG, Xiaohuoji, Yaoguan, Yardom, Yuncong.15, and Zhanhong Direct.
I. BACKGROUND
A. Factual Allegations
Except where otherwise indicated, the following facts are taken from the well-pleaded allegations in plaintiff's Complaint, which are deemed true for purposes of this inquest. See City of N.Y. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (quoting Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004) ("It is an 'ancient common law axiom' that a defendant who defaults thereby admits all 'well-pleaded' factual allegations contained in the complaint.")); Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (after defendant's default, the "court is required to accept all of [plaintiff's] allegations as true and draw all reasonable inferences in its favor") (internal citation omitted).
1. Spin Master's Twisty Petz Products
Spin Master is "part of a large, multinational toy and entertainment company started in 1994 that designs and sells innovative children's lifestyle products and toys[.]" Compl. ¶ 8. Plaintiff sells its products both nationally and internationally through "major retailers, quality toy stores, department stores and online marketplaces," such as "Walmart, Toys R Us, Target, Kohl's and Amazon.com." Id. ¶ 9.
Among plaintiff's more recent and successful toys are the Twisty Petz Products, "which are bejeweled pets that transform into sparkly bracelets, necklaces or backpack accessories" by twisting the product. Compl. ¶ 11. Twisty Petz was named "one of the 'hottest toys for 2018' by the New York Post and was included in Amazon's 2018 Holiday Toy List." Id. ¶ 12. The success of the Twisty Petz Products is largely due to plaintiff's marketing, promotion and distribution efforts, which include, but are not limited to, "the advertising and promotion of the Twisty Petz Products through [plaintiff's] website entirely dedicated to the Twisty Petz Products, http://www.twistypetz.com, nationwide television advertising campaigns for the Twisty Petz Products, placement of the Twisty Petz Products at dozens of authorized major retail outlets, both domestically and abroad[, ] and [plaintiff's] participation in trade shows." Id. ¶ 20. Plaintiff also attributes its success to the use of "high quality materials and processes" in the manufacturing of the Twisty Petz Products. Id. ¶ 21.
"There are over 70 types of Twisty Petz to collect, ranging from Leona Lion to Pearly Puppy to Zaggy Zebra and more." Compl. ¶ 11. The toys "retail from $5.99 (individual) to $14.99 (set of three)." Id. ¶ 13.
As a result of plaintiff's efforts, "[r]etailers . . . consumers and members of the public have become familiar with the Twisty Petz Products and associate them exclusively with [plaintiff]." Compl. ¶ 23. Plaintiff has protected its rights in Twisty Petz by obtaining a federal trademark registration and a registered copyright. Id. ¶¶ 14-18. No one other than plaintiff and its licensees and distributors is authorized to manufacture, import, export, advertise, offer for sale, or sell any goods utilizing the Twisty Petz Mark (U.S. Trademark Registration No. 5, 514, 561 for "TWISTY PETZ" for a variety of goods in Class 28) or the Twisty Petz Work (U.S. Copyright Registration No. VA 1-305-408, covering the "Twisty Petz Packaging Artwork and Collectors' Guides") without plaintiff's express permission. Id. ¶ 25. The defendants sued in this action were not plaintiff's licensees or distributors, nor otherwise authorized "to copy, manufacture, import, export, advertise, distribute, offer for sale or sell the Twisty Petz Products or to use the Twisty Petz Mark and Twisty Petz Work, or any marks or artwork that are confusingly or substantially similar to the Twisty Petz Mark or Twisty Petz Work." Id. ¶ 37.
2. The Defaulting Defendants' Infringement
Amazon allows manufacturers and third-party merchants to advertise, distribute, offer for sale, sell, and ship their retail products directly to consumers worldwide and specifically to consumers in the U.S., including New York. Compl. ¶ 26. As reflected in other litigation involving third-party merchants offering goods through Amazon, counterfeit and infringing products are sold on that platform at a "rampant rate." Id. ¶ 30.
See, e.g., Streamlight, Inc. v. Gindi, 2019 WL 6733022 (E.D.N.Y. Oct. 1, 2019); William Mark Corp. v. 1&CC, 2019 WL 4195365 (S.D.N.Y. May 20, 2019); North Face Apparel Corp. v. Moler, 2015 WL 4385626 (S.D.N.Y. July 16, 2015).
The Defaulting Defendants conduct business in the U.S. and other countries by means of their User Accounts and Merchant Storefronts on Amazon. Compl. ¶¶ 31-32.
B. Procedural History
Plaintiff commenced this action under seal (Dkt. Nos. 1, 6), filing an ex parte application seeking a temporary restraining order, asset restraining order, order to show cause, order authorizing service by electronic means, and expedited discovery. (Dkt. Nos. 13-16.) On April 24, 2019, Judge Schofield granted the application and issued the TRO, which among other things restrained defendants from continuing their infringing conduct, see TRO at 5-7; required defendants to appear on May 23, 2019, for a show-cause hearing, id. at 8; and authorized Spin Master to serve them by alternative electronic means, pursuant to Fed.R.Civ.P. 4(f)(3). Id. at 910. Specifically, Judge Schofield deemed service effective as to all defendants if completed by means of:
delivery of: (i) PDF copies of this Order together with the Summons and Complaint, or (ii) a link to a secure website (including NutStore, a large mail link created through Rmail.com and via website publication through a specific page dedicated to this Lawsuit accessible through ipcounselorslawsuit.com) where each Defendant will be able to download PDF copies of this Order together with the Summons and Complaint, and all papers filed in support of Plaintiffs' Application seeking this Order to Defendants' e-mail addresses to be determined after having been identified by Amazon.com, Inc. pursuant to Paragraph V(C) [of the TRO].TRO at 9 (emphasis in the original). The district judge also restrained defendants' assets, id. at 89; authorized expedited discovery, id. at 10-14; and directed plaintiff to post a bond in the amount of $10,000. Id. at 14.
In accordance with the TRO, on May 8, 2019, plaintiff served defendants with the Complaint, the Summons, the TRO, and all of the papers filed in support of plaintiff's TRO application, "pursuant to the methods of alternative service authorized by the TRO[.]" (Dkt. No. 35.) On May 23, 2019, plaintiff appeared at the show-cause hearing, as did two defendants -Yardom and COLEIFIT - and on May 28, 2019, Judge Schofield issued the Preliminary Injunction against all defendants, providing that the relief granted in the TRO (including the asset restraints and the alternative service authorization) would remain in place throughout the pendency of this litigation. See Prelim. Inj. at 4-12. On May 31, 2019, plaintiff served defendants with the Preliminary Injunction "in accordance with the alternative methods of service authorized by both the TRO and [the Preliminary Injunction.]" (Dkt. No. 37.)
Yardom, unlike the other defendants, was permitted to "continue to operate its Merchant Storefront" on Amazon so long as it ceased adverting, marketing, promoting, distributing, displaying, offering for sale, selling and/or otherwise dealing in Counterfeit Products. Prelim. Inj. ¶ 1(c)(i)(a).
On July 16, 2019, Judge Schofield held a pretrial conference, at which two defendants appeared - ALVY and ElBee - after which she issued an order directing plaintiff to move for default judgment by September 17, 2019, with respect to any defendants that had defaulted. (Dkt. No. 77.) On August 2, 2019, the district judge issued the Amended Preliminary Injunction.
In the Amended Preliminary Injunction, both Yardom and ALVY were permitted to continue to operate their Merchant Storefronts on Amazon so long as they ceased adverting, marketing, promoting, distributing, displaying, offering for sale, selling and/or otherwise dealing in Counterfeit Products. Amend. Prelim. Inj. ¶ 1(c)(i)(a).
On September 11, 2019, at Spin Master's request, the Clerk of Court issued a Certificate of Default as to 37 defendants. (Dkt. No. 105.) On September 17, 2019, plaintiff moved by proposed order to show cause for a default judgment against 36 defendants. (Dkt. No. 108.) On September 18, 2019, Judge Schofield issued the requested Order to Show Cause, directing the defendants named therein to show cause on October 3, 2019 (later adjourned to October 10, 2019), why a default judgment and permanent injunction should not be entered against them. (Dkt. Nos. 112, 114.) On October 10, 2019, plaintiff appeared for the show-cause hearing, but no defendant appeared.
On October 11, 2019, Judge Schofield issued the Default Judgment against 36 defendants, including a permanent injunction prohibiting any further infringing conduct. (Dkt. No. 119.) On January 17, 2020, after the case was referred to me for a damages inquest, I issued a Scheduling Order (Dkt. No. 128) directing plaintiff to file proposed findings of fact and conclusions of law with respect to damages, supported by admissible evidence "sufficient to permit the Court to 'ascertain the amount of damages with reasonable certainty, '" no later than January 31, 2020. Scheduling Order ¶ 2 (quoting Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). Responses, if any, were due February 14, 2020. Id. ¶ 8. Plaintiff was directed to serve the Scheduling Order on the relevant defendants, along with its proposed findings and other inquest papers, and to file "proof of such service" on the docket. Id. ¶ 7.
On January 31, 2020, Spin Master submitted its Proposed Findings of Fact, listing 35 defendants against which it sought damages, see Prop. Findings Ex. A, supported by a memorandum of law (Pl. Mem.) (Dkt. No. 131) and the Affidavit of Brieanne Scully (Scully Aff.) (Dkt. No. 130), with exhibits. Plaintiff seeks "individual statutory damages awards" pursuant to the Lanham Act, 15 U.S.C. § 1117(c), and/or the Copyright Act, 17 U.S.C. § 504(c), in amounts ranging from $50,000 to $150,000 against each defendant named therein. Prop. Findings at 9-10; Pl. Mem. at 11-12. Plaintiff does not seek any damages pursuant to its state law claims.
On February 10, 2020, Spin Master filed a Certificate of Service attesting that it served the Scheduling Order and its Proposed Findings of Fact, "pursuant to the alternative methods of service authorized in the TRO and [the Preliminary Injunction]," on "each and every Defaulting Defendant." (Dkt. No. 135.) Thereafter, plaintiff voluntarily dismissed its claims against five of those defendants, leaving 30 against which damages must be assessed. None of the Defaulted Defendants filed any response to plaintiff's inquest papers.
II. JURISDICTION AND VENUE
This Court has subject matter jurisdiction over Spin Master's claims pursuant to 15 U.S.C. § 1121(a), 28 U.S.C. § 1331, 28 U.S.C. § 1338(a), and 28 U.S.C. § 1367(a), because the Complaint alleges violations of two federal statutes, the Lanham Act and the Copyright Act, along with related state law claims. See Tiffany (NJ) LLC v. Dong, 2013 WL 4046380, at *4 (S.D.N.Y. Aug. 9, 2013); Lombardi v. Suares, 923 F.Supp. 51, 54 (S.D.N.Y. 1996).
I am also satisfied that this Court has personal jurisdiction over the Defaulting Defendants, which is "a necessary prerequisite to entry of a default judgment." Reilly v. Plot Commerce, 2016 WL 6837895, at *2 (S.D.N.Y. Oct. 31, 2016) (quoting Sheldon v. Plot Commerce, 2016 WL 5107072, at *6 (E.D.N.Y. Aug. 26, 2016), report and recommendation adopted, 2016 WL 5107058 (E.D.N.Y. Sept. 19, 2016)). Because the Lanham Act and the Copyright Act do not contain their own personal jurisdiction or service provisions, the questions are (i) "whether the defendants] [are] subject to jurisdiction under the law of the forum state - here, New York," and (ii) "whether the exercise of personal jurisdiction over the defendant[s] comports with the Due Process Clause of the United States Constitution." Sonera Holding B.V. v. Cukurova Holding A.S., 750 F.3d 221, 224 (2d Cir. 2014).
Here, the Defaulting Defendants are subject to personal jurisdiction pursuant to N.Y. C.P.L.R. (CPLR) § 302(a)(1), because they have transacted business within New York through Amazon, see Compl. ¶¶ 3, 32, 36, 39 (by, among other things, shipping 45 counterfeit Twisty Petz Products to plaintiff's address in New York City, id. ¶ 3(e)), and the claims asserted in this action arose from those business transactions. See Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 168 (2d Cir. 2013) (quoting Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC, 450 F.3d 100, 103 (2d Cir. 2006)) ("To establish personal jurisdiction under section 302(a)(1), two requirements must be met: (1) The defendant must have transacted business within the state; and (2) the claim asserted must arise from that business activity."); Chanel, Inc. v. Doubinine, 2008 WL 4449631, at *2 (E.D.N.Y. Oct. 2, 2008) (finding personal jurisdiction over out-of-state defendants who allegedly "operate[d] and maintain[ed] business operations through various internet sites which advertise and offer for sale counterfeit merchandise to consumers within this district"). Further, the exercise of personal jurisdiction over the Defaulting Defendants comports with the Due Process Clause of the U.S. Constitution, given that they intentionally directed their business activities towards New York, see Compl. ¶¶ 3, 32, 36, 39, thereby availing themselves of the "[']privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). Additionally, plaintiffs properly effected service of process on the Defaulting Defendants pursuant to this Court's TRO, which authorized alternative service by electronic means.
Lastly, venue in the Southern District of New York is proper because plaintiffs have adequately alleged that a substantial part of the events giving rise to this suit occurred here. Compl. ¶¶ 3, 32, 36, 39. See 28 U.S.C. § 1391(b)(2); Tiffany, 2013 WL 4046380, at *4 (finding venue proper under § 1391(b)(2) because substantial part of events giving rise to suit occurred in the judicial district).
III. LIABILITY
Following a default, the district court must accept all well-pleaded factual allegations in the Complaint as true, except those relating to damages. Finkel, 577 F.3d at 84. However, 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 therefore determine "whether the allegations in a complaint establish the defendants' liability as a matter of law." Id. (citing Finkel, 577 F.3d at 84). If the well-pleaded allegations establish the defaulting parties' liability, the only remaining issue is "whether plaintiff has provided adequate support for the relief it seeks." Gucci Am., Inc., 678 F.Supp.2d at 119 (citing Credit Lyonnais Sec. (USA), Inc., 183 F.3d at 155).
A. Lanham Act
"To establish a valid claim for trademark infringement under the Lanham Act, a plaintiff must demonstrate: (1) that it has a valid mark that is entitled to protection under the [Lanham] Act and (2) that [the defendant's] actions are likely to cause confusion as to the origin of the mark." Laboratorios Rivas, SRL v. Ugly & Beauty, Inc., 2013 WL 5977440, at *7 (S.D.N.Y. Nov. 12, 2013) (citation and internal quotation marks omitted) (collecting cases), report and recommendation adopted, 2014 WL 112397 (S.D.N.Y. Jan. 8, 2014). The well-pleaded allegations in Spin Master's Complaint satisfy both elements. First, Spin Master adequately alleges that it owns the Twisty Petz Mark, which is entitled to protection under the Lanham Act. Compl. ¶¶ 14- 16 & Ex. B. Second, it adequately alleges that the Defaulting Defendants offered for sale and/or sold products that were either identical to or substantially similar to the Twisty Petz Products, and that "feature[d] and/or incorporate[d]" the Twisty Petz Mark, which the Defaulting Defendants "intentionally reproduced, copied, and/or intentionally imitated." Id. ¶¶ 36-47, 54 & Ex. D. "Such use of the trademarks constitutes trademark infringement." Coach, Inc. v. O'Brien, 2011 WL 6122265, at *7 (S.D.N.Y. Nov. 28, 2011), report and recommendation adopted as modified, 2012 WL 1255276 (S.D.N.Y. Apr. 13, 2012); see also Fendi Adele S.R.L. v. Burlington Coat Factory Warehouse Corp., 689 F.Supp.2d 585, 597 (S.D.N.Y. 2010) (noting that "counterfeit marks are inherently confusing") (citation and internal quotation marks omitted), amended on reconsideration (Mar. 23, 2010).
Plaintiff has also established that the Defaulting Defendants' trademark infringement was willful. Not only does its pleading so allege, see Compl. ¶¶ 53-58, 64-72, 77-80; the default itself establishes willfulness. See Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 124 (S.D.N.Y. 2003) (infringement is deemed willful "[b]y virtue of the default"); Off-White LLC v. ''Warm House''Store, 2019 WL 418501, at *5 (S.D.N.Y. Jan. 17, 2019) (observing that "in this district a defaulting defendant is considered per se a willful infringer") (internal citation omitted).
B. Copyright Act
"'To establish a claim of copyright infringement, a plaintiff must establish (1) ownership of a valid copyright and (2) unauthorized copying or a violation of one of the other exclusive rights afforded copyright owners pursuant to the Copyright Act.'" Arista Records LLC v. Usenet.com, Inc., 633 F.Supp.2d 124, 146 (S.D.N.Y. 2009) (quoting Byrne v. British Broad. Corp., 132 F.Supp.2d 229, 232 (S.D.N.Y. 2001)). More specifically, a plaintiff must allege "(1) which specific original works are the subject of the copyright claim, (2) that plaintiff owns the copyrights in those works, (3) that the copyrights have been registered in accordance with the statute, and (4) by what acts during what time the defendant infringed the copyright." Hartmann v. Amazon.com, Inc., 2021 WL 3683510 (S.D.N.Y. Aug. 19, 2021) (citations omitted). "Like trademark infringement, copyright infringement is a strict liability offense, meaning 'intent or knowledge is not an element of infringement, '" though it may be relevant to damages. Spin Master Ltd. v. Alan Yuan's Store, 325 F.Supp.3d 413, 422 (S.D.N.Y. 2018) (quoting Fitzgerald Publ'g. Co. v. Baylor Publ'g Co., 807 F.2d 1110, 1113 (2d Cir. 1986)).
Among the exclusive rights afforded copyright owners under the Copyright Act are the rights to "authorize . . . reproduc[tion of] the copyrighted work in copies" and to "distribute copies . . . of the copyrighted work to the public by sale[.]" 17 U.S.C. §§ 106(1), (3). Unauthorized copying is "prima facie infringement of a copyright owner's rights." Byrne, 132 F.Supp.2d at 233 (citations omitted).
The allegations in Spin Master's Complaint satisfy three of the four elements of copyright infringement. First, Spin Master adequately alleges that the original work that is the subject of the copyright claim is the Twisty Petz Work, entitled "Twisty Petz Packaging Artwork & Collector's Guide." Compl. ¶ 18 & Ex. C. Second, plaintiff adequately alleges that it owns the copyright in the Twisty Petz Work. Id. ¶¶ 17-18. Third, it adequately alleges that the copyright was registered in accordance with the Copyright Act as U.S. Copyright Registration No. VA 1-305-408, with an effective date of February 13, 2018. Id. ¶ 18 & Ex. C. However, as to the fourth element, the Complaint's core allegation - that the Defaulting Defendants infringed the copyright in the Twisty Petz Work by "manufacturing, importing, exporting, advertising, marketing, promoting, distributing, displaying, offering for sale and/or selling infringing products which bear such Twisty Petz Work, or artwork that is, at a minimum, substantially similar to the Twisty Petz Work," id. ¶ 87 - is conclusory, and lacks factual support elsewhere in the Complaint. I note in particular that while the Complaint includes multiple images of the Defaulting Defendants' counterfeit products, as well as their Amazon Storefronts, see id. ¶¶ 41-45 & Ex. D, it nowhere shows - or describes -the Defaulting Defendants' allegedly infringing packaging, collector's guides, or other artwork covered by plaintiff's registered copyright. I am therefore unable to conclude that plaintiff's allegations as to copyright infringement "are sufficient to state a cause of action" against the Defaulting Defendants. Gesualdi, 629 Fed.Appx. at 113.
According to plaintiff's registration certificate, the Twisty Petz Work includes the Twisty Petz "Collector's Guide," "Single Pack," "3 Pack," "Baby Collector's Guide," and "Baby 4 Pack." Compl. Ex. C. Plaintiff does not further describe the copyrighted material.
V. DAMAGES
Since no party has requested a hearing on the issue of damages, and since the Defaulting Defendants have not submitted any written materials, I have conducted the inquest based solely upon the materials submitted by Spin Master. See Cement & Concrete Workers Dist. Council Welfare Fund v. Metro Found. Contractors Inc., 699 F.3d 230, 234 (2d Cir. 2012) ("[A] district court may determine there is sufficient evidence either based upon evidence presented at a hearing or upon a review of detailed affidavits and documentary evidence.") (citations omitted); Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 53 (2d Cir. 1993) (quoting Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 508 (2d Cir. 1991)) ("Rule 55(b)(2) of the Federal Rules of Civil Procedure . . . 'allows but does not require the district judge to conduct a hearing.'"). As noted above, plaintiff seeks statutory damages under both the Lanham Act and Copyright Act. Prop. Findings at 9; Pl. Mem. at 1, 12. However, because the Complaint fails to establish the Defaulting Defendants' copyright liability "as a matter of law," Gesualdi, 629 Fed.Appx. at 113, I confine my analysis to statutory damages under the Lanham Act.
Even if the Complaint adequately alleged claims against the Defaulting Defendants for copyright infringement, my damages analysis would be unaffected. "The Second Circuit has repeatedly cautioned that '[a] plaintiff seeking compensation for the same injury under different legal theories is of course only entitled to one recovery.'" Alan Yuan's Store, 325 F.Supp.3d at 425 (quoting Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 497 (2d Cir. 1995)); see also Computer Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 720 (2d Cir. 1992) (a party "may not obtain a double recovery where the damages for copyright infringement and trade secret misappropriation are coextensive"). In this case, plaintiff makes no effort to demonstrate that the alleged infringement of its copyright has caused any damage separate from that caused by the counterfeiting of its products. Moreover, given that the consumers who purchased the Defaulting Defendants' products "may have well thought that they were buying plaintiffs' genuine products," this case is, "at its core, a trademark case." Alan Yuan's Store, 325 F.Supp.3d at 425 (declining to authorize "duplicative awards of statutory damages" after determining, on summary judgment, that defendants violated both the Lanham Act and the Copyright Act by selling counterfeit toys through digital marketplaces and replicating the "look" of plaintiff's copyrighted packaging materials).
The Lanham Act permits a trademark owner to elect - at any time before the entry of judgment - an award of statutory rather than actual damages in a case involving the use of a counterfeit mark. 15 U.S.C. § 1117(c). "Subsection 1117(c) provides trademark holders an alternative remedy to actual damages because 'counterfeiters' records are frequently nonexistent, inadequate, or deceptively kept[, ] . . . making proving actual damages in these cases extremely difficult if not impossible.'" Union of Orthodox Jewish Congregations of America v. American Food & Beverage Inc., 704 F.Supp.2d 288, 290 (S.D.N.Y. Jan. 12, 2010) (quoting S. Rep. No. 104-177, at 10 (1995)). Statutory damages may be awarded 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." 15 U.S.C. § 1117(c).
"District courts have wide discretion in awarding statutory damages[.]" Louis Vuitton Malletier v. Artex Creative Int'l Corp., 687 F.Supp.2d 347, 355 (S.D.N.Y. 2010) (citations omitted). Section 1117(c)(2) directs courts to award a "just" amount - subject to the statutory cap per "type" of goods or services sold, offered for sale, or distributed - but offers no further guidance beyond setting a cap of $2 million per mark per type of good. All-Star Mktg Grp., LLC v. Media Brands Co., Ltd., 775 F.Supp.2d 613, 622 (S.D.N.Y. 2011). Consequently, courts within our Circuit look to the seven-factor Fitzgerald test, originally used to assess damages under the Copyright Act, see Fitzgerald, 807 F.2d at 1116-17, for guidance in determining what is just under the Lanham Act. See, e.g., BBK, 2020 WL 2833666, at *8; Alan Yuan's Store, 325 F.Supp.3d at 425; Stark Carpet Corp. v. Stark Carpet & Flooring Installations, Corp., 954 F.Supp.2d 145, 154 (E.D.N.Y. 2013); All-Star Mktg Grp., 775 F.Supp.2d at 622. The seven factors, as applied in trademark cases, are:
Courts in this district have interpreted "types" to be based on the "functional purpose of the product." Gucci Am., Inc. v. MyReplicaHandbag.com, 2008 WL 512789, at *4 (S.D.N.Y. Feb. 26, 2008). Gucci held that "handbags" and "wallets" were different "types" of goods, as were "eyeglasses," "watches," and "belts," but that within these categories it would be "unduly artificial to categorize the merchandise into separate 'types' for each subtle difference in a particular product's size, shape, color, pattern or fabric." Id.; see also BBK Tobacco & Foods, LLP v. Galaxy VI Corp., 2020 WL 2833666, at *12-13 (S.D.N.Y. May 31, 2020) (cigarette rolling papers and rolling tray were two different "types" of goods). Here, although plaintiff has learned from Amazon that some of the Defaulting Defendants sold more counterfeit products than others on that platform, see Scully Aff. ¶¶ 21-23 & Ex. D, all of the Defaulting Defendants sold the same "type of goods," namely, the Twisty Petz Products, and infringed the same mark, namely, the Twisty Petz Mark.
(1) the expenses saved and the profits reaped; (2) the revenues lost by the plaintiff; (3) the value of the [trademark]; (4) the deterrent effect on others besides the defendant; (5) whether the defendant's conduct was innocent or willful; (6) whether a defendant has cooperated in providing particular records from which to assess the value of the infringing material produced; and (7) the potential for discouraging the defendant.All-Star Mktg. Grp., 775 F.Supp.2d at 622 (quoting Kenneth Jay Lane, Inc. v. Heavenly Apparel, Inc., 2006 WL 728407, at *6 (S.D.N.Y. Mar. 21, 2006)); see also 7-Eleven, Inc. v. Z-Eleven Convenience Store Inc., 2018 WL 1521859, at *6 (citing Fitzgerald, 807 F.2d at 1116-17).
In this case, the first and second factors - the "expenses saved and the profits reaped by the Defaulting Defendants as a result of their infringement and the revenues lost by Plaintiff," Ideavillage Prods. Corp. v. Aarhus, 2019 WL 2290514, at *7 (S.D.N.Y. May 7, 2019) - are unknown due to the Defaulting Defendants' default, and therefore must be resolved in plaintiff's favor. Off-White, 2019 WL 418501, at *5 ("The first two factors weigh in favor of an award of damages because [plaintiffs] should not be deprived of [their] right to recover statutory damages simply because it is impossible to discern the expenses saved and profits reaped by the Defaulting Defendants.").
The third factor - the value of the trademark - is neutral, because Spin Master has not quantified the value of the Twisty Petz Mark. Although it has submitted evidence that the Twisty Petz Products are popular among consumers, and that both the products and the associated mark "have acquired a valuable reputation and goodwill among the public," see Declaration of Christopher Harrs (Harrs Decl.) (Dkt. No. 16) ¶ 18, 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. Cf. Coach, Inc. v. Horizon Trading USA Inc., 908 F.Supp.2d 426, 437 (S.D.N.Y. 2012) (concluding, after analyzing the third factor, that plaintiff's brand and trademarks were valuable, as illustrated by the fact that "in 2011, Coach spent $224.4 million in developing, advertising, and promoting the Coach marks"). Here, as in All-Star Mktg. Grp., 775 F.Supp.2d at 623, "the record includes no specific information indicating the monetary value of plaintiffs' brands[.]" Therefore, the third factor does not weigh one way or the other as to whether plaintiff is entitled to a substantial award.
As noted above, plaintiff's Twisty Petz Products were named one of the "hottest toys for 2018" by the New York Post. Compl. ¶ 12; Harrs Decl. ¶ 7. The success of the product "is due in large part to [p]laintiff's marketing, promotion, and distribution efforts," which include promotion on a website devoted to Twisty Petz, "nationwide television advertising campaigns," "print and internet-based advertising and publicity," placement of the toys "at dozens of authorized major retail outlets," and trade shows. Harrs Decl. ¶ 14. These efforts, together with the "quality of [the] Twisty Petz Products" and "word-of-mouth buzz generated by their consumers have made the Twisty Petz Products, Twisty Petz Work and Twisty Petz Mark prominently placed in the minds of the public." Id. ¶ 17. The public associates the Twisty Petz Products with Spin Master and, "[a]s a result of such associations," the products and the mark "have acquired a valuable reputation and goodwill among the public." Id. ¶ 18.
The fourth and seventh factors, however - deterrent effect and potential for discouraging the Defaulting Defendants from further infringement - weigh in favor of a substantial damages award, because the Defaulting Defendants' "unauthorized use of the Twisty Petz Mark on or in connection with the Counterfeit Products was done with notice and full knowledge that such use was not authorized or licensed by [plaintiff] or [its] authorized agents and with deliberate intent to unfairly benefit from the incalculable goodwill inherent in the Twisty Petz Mark." Compl. ¶ 57. Moreover, the sheer number of infringers underscores the need for both deterrence and discouragement of others. See Off-White, 2019 WL 418501, at *5 ("[D]eterrence is imperative in this case, where there are already ninety-five Defaulting Defendants counterfeiting Plaintiff's trademarks.... In addition, the Defaulting Defendants' unwillingness to appear in this litigation further underscores the value of a hefty damages award in curbing their otherwise brazen trademark infringement.") (citation omitted).
The fifth and sixth factors - willfulness and lack of cooperation in providing records - also weigh in favor of a substantial damages award, due to the Defaulting Defendants' "failure to appear, answer or otherwise respond to the Complaint or comply with the expedited discovery ordered in the TRO and PI Order[.]" Pl. Mem. at 10; see also Lane Crawford LLC v. Kelex Trading (CA) Inc., 2013 WL 6481354, at *4 (S.D.N.Y. Dec. 3, 2013) ("As to the fifth factor, this Court has already found that defendants' conduct was willful.... As to the sixth factor, defendants have not provided records to assess the value of the infringing material."), report and recommendation adopted, 2014 WL 1338065 (S.D.N.Y. Apr. 3, 2014).
After weighing all of the relevant factors, I conclude that Spin Master is entitled to an award of fifty thousand dollars ($50,000) against each Defaulting Defendant pursuant to 17 U.S.C. § 1117(c), for a total of one million five hundred thousand dollars ($1,500,000) in damages. Spin Master requested an award of $100,000 in statutory damages for eight of the Defaulting Defendants, and an award of $150,000 for three of the Defaulting Defendants, see Pl. Mem. at 12, based upon "the currently known numbers of sales of Counterfeit Products by [these] Defaulting Defendants[.]" Id. at 12; see also Scully Aff. Ex. D (reporting, based upon records received from Amazon, that most of the Defaulting Defendants made less than 200 sales of infringing products, but that the eight in the middle tier made between 223 and 591 infringing sales, while the three in the top tier made between 920 and 2, 355 infringing sales).
As plaintiff points out, however, Amazon is only one online marketplace; the Defaulting Defendants "probably utilize other e-commerce platforms, such as eBay.com and Alibaba.com," as well. Pl. Mem. at 3. While this may mean that the actual sales by the Defaulting Defendants exceeded the figures obtained from Amazon, id., it may also mean that the Amazon figures do not accurately reflect the Defaulting Defendants' relative culpability. Given the paucity of the evidence before the Court concerning the differences between the various Defaulting Defendants, I conclude that a uniform award of $50,000 against each of them is appropriate and just, in that (among other things) it is enough to serve as an effective deterrent against future infringement by that Defaulting Defendant and by other potential infringers. See Alan Yuan's Store, 325 F.Supp.3d at 427 (concluding that "an award of $50,000 per defendant is appropriate and just, given that each defendant sold at least one infringing product," where the products retailed between $25 and $50); cf. Horizon Trading, 908 F.Supp.2d at 430, 437-38 (finding "an award of $100,000 per mark per type of good" to be "appropriate and just" where the infringed products retailed at approximately $185 and the mark was deemed valuable).
III. CONCLUSION
For the reasons set forth above, I respectfully recommend that plaintiff be awarded damages in the amount of $50,000 against each of the following Defaulting Defendants:
Atrigger
bason888
BokenUS
Catchmaik
Cenda
Cymely
Dadiii
DIYurfeeling
DLUCKY
EASERELAX
fengheshun
Fshgh
GlobalCareMarket
LittiL
LTINTIN
NOVOTE
Piei
Jkiews
plusA
RUNFON
SANOHAMI
SEENDOM
supergogo
Torero X
twistymagicalpetz
UKCG
Xiaohuoji
Yaoguan
Yardom
Yungcong.15
Zanhong Direct
Plaintiff is directed promptly to serve a copy of this Report and Recommendation on the Defaulting Defendants and to file proof of such service on the docket.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen days from this date to file written objections to this Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b). See also Fed.R.Civ.P. 6(a) and (d). Any such objections shall be filed with the Clerk of the Court, addressed to the Hon. Lorna G. Schofield, United States District Judge. Any request for an extension of time to file objections must be directed to Judge Schofield. Failure to file timely objections will result in a waiver of such objections and will preclude appellate review. See Thomas v. Arn, 474 U.S. 140 (1985); Frydman v. Experian Info. Sols., Inc., 743 Fed.Appx. 486, 487 (2d Cir. 2018) (summary order); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).