Opinion
21-CV-9352 (LGS) (RWL)
06-29-2022
TANGLE, INC. Plaintiff, v. The Individuals, Corporations, Limited Liability Companies, Partnerships, And Unincorporated Associations Identified On Schedule A Hereto, Defendants.
REPORT AND RECOMMENDATION TO HON. LORNA G. SCHOFIELD: INQUEST AFTER DEFAULT
ROBERT W. LEHRBURGER, UNITED STATES MAGISTRATE JUDGE.
This is a trademark and copyright infringement case in which Plaintiff seeks relief against defendants who have marketed and sold counterfeit versions of Plaintiff's TANGLE branded toy products. By orders dated February 3, 2022, the Honorable Lorna G. Schofield, U.S.D.J., granted a default judgment and permanent injunction against numerous defendants and referred the matter to me to conduct an inquest on damages and issue a recommendation regarding a means for disbursing funds from third parties so that Plaintiff can recoup any damages awarded. For the reasons set forth below, I recommend that the Court award Plaintiff statutory damages in the amount of $50,000 for each of the defaulting defendants against whom Plaintiff currently seeks damages (the “Defaulting Defendants”). I also recommend that the Court order third parties holding Defaulting Defendants' assets to transfer those assets to Plaintiff to satisfy the judgment in its favor.
A list of the Defaulting Defendants appears in the schedule at Attachment A to this Report and Recommendation.
Procedural Background
Plaintiff filed this action on November 11, 2021, alleging willful infringement and counterfeiting of Plaintiff's federally registered trademarks, false designation of origin, copyright infringement, and unfair competition under New York State law. (Dkt. 1.) Plaintiff also moved ex parte for a temporary restraining order (“TRO”) and other relief. (Dkts. 4-7.) The Court granted the TRO on November 15, 2021. (Dkt. 14.) On December 8, 2021, all Defaulting Defendants were served with the summons and complaint, the TRO, and other papers by alternative service as authorized by the TRO. (Dkt. 25.) On December 17, 2021, the Court entered a preliminary injunction order (the “PI Order”) against all Defendants mirroring the terms of the TRO and extending through the pendency of the action. (Dkt. 26.) Later that same day, Plaintiff served the Defaulting Defendants with a copy of the PI Order and an accompanying order setting a telephonic hearing date. (Dkt. 27)
None of the Defaulting Defendants appeared at the hearing or any earlier time in the action. Accordingly, on January 14, 2022, Plaintiff applied for a certificate of default, which the Clerk of Court entered on January 18, 2022. (Dkt. 31-33.) Plaintiff then moved for default judgment against the Defaulting Defendants on January 19, 2022. (Dkt. 3437.) The following day, January 20, 2022, the Court entered an order requiring the Defaulting Defendants to show cause why default judgment and a permanent injunction should not be entered against them. (Dkt. 38.) Plaintiff served the order to show cause on the Defaulting Defendants by the alternative means of service authorized by the Court. (Dkt. 39.) None of the Defaulting Defendants responded to the order to show cause or appeared for the designated hearing. (Dkt. 50 ¶ 10.))
On February 3, 2022, the Court entered default judgment in favor of Plaintiff and a permanent injunction against the Defaulting Defendants (the “Default Judgment”). (Dkt. 40.) The Default Judgment found that the Court has personal jurisdiction over the Defaulting Defendants and that the Defaulting Defendants are liable for willful trademark infringement and counterfeiting, false designation of origin, copyright infringement, and/or violation of unfair competition under New York common law. (Id. at 2.) Additionally, the Default Judgment restrained and enjoined certain third parties, such as Amazon.com, PayPal, Inc., and eBay, Inc., from transferring or disposing of any assets of the Defaulting Defendants, such as balances held in the Defaulting Defendants' accounts. (Id. at ¶¶ 416.)
That same day, the Court referred the matter for an inquest on damages “and a recommendation regarding injunctive relief or other mechanism for disbursement of funds from third parties to recoup the damages.” (Dkt. 41.) On February 4, 2022, this Court entered an order directing Plaintiff to file proposed findings of fact and conclusions of law and supporting documents establishing the legal and factual bases for an award of damages by March 3, 2022 (the “Inquest Scheduling Order”). (Dkt. 42.) Plaintiff timely filed the requisite papers, including proposed findings of fact, a memorandum of law, and a supporting declaration (Dkts. 48-50) and served the papers on the Defaulting Defendants. (Dkt. 51). Pursuant to the Inquest Scheduling Order, any response to Plaintiff's inquest submission was due by March 31, 2022. None of the Defaulting Defendants filed a response.
On May 10, 2022, the Court issued an order scheduling an inquest hearing. (Dkt. 58.) Prior to the hearing, Plaintiff filed Supplemental Proposed Findings of Fact And Conclusions Of Law. (Dkt. 61.) At the hearing, at which none of the Defaulting Defendants appeared, the Court requested a further supplemental submission from Plaintiff, which Plaintiff timely filed on June 21, 2022. (Dkt. 65.) In response to a further inquiry from the Court (Dkt. 66), Plaintiff submitted another supplemental submission on June 24, 2022. (Dkt. 67, 68.) The Court has determined that no further evidentiary hearing is necessary and that this inquest can be resolved on the submissions and prior proceedings.
An inquest into damages may be conducted “on the papers,” without an evidentiary hearing where there is a sufficient basis on which to make a calculation. See Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 53-54 (2d Cir. 1993); Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40 (2d Cir. 1989); Maldonado v. La Nueva Rampa, Inc., No. 10-CV-8195, 2012 WL 1669341, at *2 (S.D.N.Y. May 14, 2012).
The facts are drawn from the Complaint (Dkt. 1); the Declaration of Richard Zawitz, owner of Tangle, dated November 10, 2021 (Dkt. 7) (“Zawitz Decl.”); the Declaration of Christopher Tom, Plaintiff's counsel, dated March 18, 2022 (Dkt. 50) (“Tom Decl.”); Plaintiff's Findings Of Fact And Conclusions Of Law (Dkt. 54) (“FFCL”); Plaintiff's Supplemental Proposed Findings Of Fact And Conclusions Of Law (Dkt. 61) (“Supp. FFCL”); the Supplemental Declaration of Richard Zawitz, dated June 20, 2022 (Dkt. 65) (“Supp. Zawitz Decl.”); and the Second Supplemental Declaration of Richard Zawitz, dated June 22, 2022 (Dkt. 67) (“Second Supp. Zawitz Decl.”).
A. Tangle's Business And Products
Tangle manufactures and distributes toys and has a favorable international reputation. (Zawitz Decl. ¶ 5.) Tangle owns the TANGLE trademark, which is covered by U.S. Trademark Registration No. 1779055. The registration is valid, subsisting, and in full force and effect. (Id. ¶ 4 and Ex. A.) Tangle also owns various copyright registrations for the sculptural design of the TANGLE products (“the TANGLE Works”). (Id.)
Tangle is the official source of TANGLE products in the United States. (Zawitz Decl. ¶ 5.) Since at least 1993, the TANGLE trademark is and has been the subject of substantial and continuous marketing, advertising, and promotion by Tangle, including in print media, social media sites, and point of sale material. (Id. ¶ 6.) The TANGLE trademark has become widely recognized and exclusively associated by consumers and the trade with Tangle and its products. (Id. ¶ 7.)
B. Defendants' Unlawful Conduct
The success of the TANGLE brand and products has spawned considerable counterfeiting activity. (Zawitz Decl. ¶ 8.) Through investigation, Tangle learned of Defaulting Defendants' marketing and sale of products that appear to be genuine TANGLE products, which are actually inferior, unauthorized imitations (“Counterfeit Products”). (Id. ¶ 9.) Each of the Defaulting Defendants has marketed and sold Counterfeit Products that appear strikingly similar or at least substantially similar to the works protected by Tangle's copyright registrations, and some of the Defaulting Defendants additionally have marketed and sold Counterfeit Products by use of a mark that is virtually identical to the TANGLE trademark. (Id. ¶¶ 9, 14-15 and Ex. B (excerpts from each Defaulting Defendant's internet storefront checkout pages).)
Defaulting Defendants have marketed and sold their Counterfeit Products variously through platforms such as Amazon, Wish, DHgate, eBay, and AliExpress. (Zawitz Decl. ¶ 8.) The Defaulting Defendants are using those platforms to sell Counterfeit Products from China and elsewhere into the United States. (Id. ¶ 12.) None of the Defaulting Defendants are authorized retailers of genuine TANGLE products, and none are authorized to use the TANGLE trademark or copyrights. (Id. ¶¶ 17, 21.) Moreover, the Defaulting Defendants employ a variety of measures to evade intellectual property enforcement efforts, such as concealing their identities by using multiple fictitious names and addresses to register their internet stores. (Id. ¶¶ 23-25.)
C. Tangle's Damages
As a result of the Defaulting Defendants' failure to appear, Plaintiff has not been able to engage in any meaningful discovery with the Defaulting Defendants about the scope of their sales, profits, and other issues. (Tom Decl. ¶ 14.) Plaintiff has obtained limited sales data from Amazon, eBay, and Wish, but far from discovery that would establish the full extent of the Defaulting Defendants' sales and profits. (Id. ¶¶ 15-17.) Indeed, as reflected in Attachment A to this Report and Recommendation, Plaintiff has been able to obtain only partial sales data for only four of the Defaulting Defendants. With such scant data, calculation of Plaintiff's actual damages would be extremely difficult, if not impossible. (Id. ¶ 19.)
Because of the difficulty in ascertaining the full extent of the Defaulting Defendants' sales of and profit from counterfeit products, Plaintiff has elected to receive statutory damages pursuant to the federal Copyright Act and the federal trademark law, known as the Lanham Act.
Legal Standard At Inquest
At an inquest on damages following default judgment, all well-pled factual allegations of the complaint, except those relating to damages, are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (“It is an ‘ancient common law axiom' that a defendant who defaults thereby admits all ‘well-pleaded' factual allegations contained in the complaint”) (quoting Vermont Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)). “A factual allegation will be deemed not well-pled only in ‘very narrow, exceptional circumstances.'” Ideavillage Products Corp. v. Bling Boutique Store, No. 16-CV-9039, 2018 WL 3559085, at *2 (S.D.N.Y. July 24, 2018) (internal quotation marks and citations omitted). That said, a court “must still satisfy itself that the plaintiff has established a sound legal basis upon which liability may be imposed.” Jemine v. Dennis, 901 F.Supp.2d 365, 373 (E.D.N.Y. 2012) (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)); accord Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (“[A district court] is also required to determine whether [plaintiff's] allegations establish [defendant's] liability as a matter of law”).
The plaintiff also bears the burden of establishing an amount of damages with reasonable certainty. RGI Brands LLC v. Cognac Brisset-Aurige, S.A.R.L., No. 12-CV-1369, 2013 WL 1668206, at *6 (S.D.N.Y. April 18, 2013) (collecting cases), R. & R. adopted, 2013 WL 4505255 (S.D.N.Y. Aug. 23, 2013); see also Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997). In conducting the inquest, the court is charged with “‘determining the proper rule for calculating damages on such a claim, and assessing plaintiff's evidence supporting the damages to be determined under this rule.'” Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 124 (S.D.N.Y. 2003) (quoting Credit Lyonnais Securities (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). Further, the damages award on a default judgment “must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c).
Discussion
I. Jurisdiction Over The Subject Matter And The Defaulting Defendants
The Court has both subject matter jurisdiction over this case and personal jurisdiction over the Defaulting Defendants. Federal subject matter jurisdiction exists over Plaintiff's federal trademark and copyright claims pursuant to 28 U.S.C. §§ 1331 (federal question jurisdiction) and 1338 (jurisdiction over trademark, copyright, and patent claims), 15 U.S.C. § 1121 (jurisdiction over federal trademark claims), and supplemental jurisdiction over related state claims pursuant to 28 U.S.C. § 1367(a). The Court already has determined that it has personal jurisdiction over the Defaulting Defendants. (Default Judgment at 2; see also PI Order at 1-2.)
The Court implicitly already made this determination in entering the earlier TRO and PI Order.
Plaintiff placed orders for infringing products from 23 of the Defaulting Defendants. Twelve of those orders were “cancelled” by the vendor or someone other than Plaintiff. (See Second Supp. Zawitz Decl. ¶ 4.) On inquest, the Court asked Plaintiff to explain the basis for personal jurisdiction over those Defaulting Defendants. (Dkt. 66.) Plaintiff did so, citing to several cases from this District finding personal jurisdiction over defaulting defendant counterfeiters operating interactive websites accessible in New York, regardless of whether a product is actually ordered and delivered to New York. (See Dkt. 68 at 5-7 (citing, e.g., WowWee Group Ltd. v. Meirly, No. 18-CV-706, 2019 WL 1375470, *4 (S.D.N.Y. March 27, 2019) (finding “personal jurisdiction over the Defaulting Defendants who have not been shown to have made sales into New York”).)
II. Legal Basis For Defaulting Defendants' Liability
Plaintiff's Complaint and other submissions establish a sound legal basis for finding the Defaulting Defendants liable for willfully infringing Plaintiff's copyrights and, for ten Defaulting Defendants, also liable for willfully counterfeiting Plaintiff's Tangle trademark (the “Trademark Defaulting Defendants”). For purposes of this inquest, Plaintiff seeks statutory damages under the federal copyright law and, for the ten Trademark Defaulting Defendants, federal trademark law. (Supp. FFCL ¶ 23.)
The ten Trademark Defaulting Defendants are the defendants identified by numbers 10, 14, 18, 30, 33, 35, 45, 57, 63, and 71 in the schedule of Defaulting Defendants attached to this Report and Recommendation. (See Supp. FFCL ¶ 23 and Ex. B.)
A. Liability For Copyright Infringement
To prevail on a claim of copyright infringement, a plaintiff must establish (1) ownership of a valid copyright and (2) infringement of that copyright by the defendant. Feist Publications, Inc. v. Rural Telephone Services Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 1296 (1991). Registered copyrights are presumed to be valid. Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 109 (2d Cir. 2001). To establish infringement, the copyright owner must demonstrate (1) that the defendant has actually copied the owner's work and (2) that the copying is illegal because a substantial similarity exists between the defendant's work and the protectable elements of the owner's work. Id. at 110. Actual copying may be shown by indirect evidence; “[i]f the two works are so strikingly similar as to preclude the possibility of independent creation, copying may be proved without a showing of access.” Lipton v. Nature Co., 71 F.3d 464, 471 (2d Cir. 1995) (internal quotation marks and citation omitted). Substantial similarity, in turn, hinges on “whether an average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work.” Hamil America, Inc. v. GFI, 193 F.3d 92, 100 (2d Cir. 1999).
Both elements of copyright infringement are met here with respect to each of the Defaulting Defendants. Plaintiff alleges it owns, and has submitted copies of, U.S. copyright registrations covering the TANGLE Works. (Zawitz Decl. ¶ 4 and Ex. A.) Those allegations suffice to establish the statutory presumption of validity and are not contradicted by any other allegations or arguments before the Court. And for the same reasons that the allegations in the Complaint establish that the products at issue are counterfeits, Plaintiff has carried its burden of showing actual copying and substantial similarity. Plaintiff's allegations establish that Defaulting Defendants' products are so strikingly similar as to prove that Defaulting Defendants had access to their TANGLE products and created works that are substantially similar to Plaintiff's TANGLE Works and that the average lay observer would recognize Defaulting Defendants' alleged copies as being appropriated from Plaintiffs' work. (Zawitz Decl. ¶ 9.)
As proof of each Defaulting Defendants' infringement, Plaintiff submitted screenshots of pages from the Defaulting Defendants' internet storefronts depicting the product being marketed and sold and information showing that the product can be purchased by a New York customer. (See Zawitz Decl. Ex. B.) Plaintiff has determined by visual inspection of the products listed for sale on the Defaulting Defendants' storefronts that the products are counterfeit. (Id. ¶ 14.) Moreover, a reasonable inference can be drawn that the products depicted on their storefronts are counterfeit as none of them are authorized Despite differences in the statutory language, the same legal test applies to each claim asserted here. Virgin Enterprises Ltd. v. Nawab, 335 F.3d 141, 146 (2d Cir. 2003). Courts 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.” Cross Commerce Media, customers or dealers of Plaintiff's products. (See id. ¶ 17.) In the unlikely event that any of those products were actually genuine Tangle products, Defaulting Defendants would still be engaged in copyright infringement by displaying images of the products that infringe Plaintiff's copyrighted works.
B. Liability For Trademark Counterfeiting
Plaintiff alleges that the ten Trademark Defaulting Defendants engaged in trademark counterfeiting, infringement, and false designation of origin in violation of the Lanham Act, 15 U.S.C. §§ 1114(1)(a)-(b) and 1125(a). The Lanham Act imposes liability on any person who in connection with the sale, offering for sale, or distribution of a good either uses a counterfeit of a registered mark, or counterfeits such mark in advertising or packaging materials, when such use or counterfeiting is likely to cause confusion. 15 U.S.C. §§ 1114(1)(a)-(b). A “counterfeit” is defined as “a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” 15 U.S.C. § 1127. The Lanham Act also bars as false designation the use in commerce of any word, term, name, symbol, device, or combination thereof, which is likely to cause confusion as to the origin, sponsorship, or approval of a person's goods with those of another person or which misrepresents the nature, characteristics, qualities, or geographic origin of another person's goods. 15 U.S.C. §§ 1125(a)(1)(A)-(B).
Inc. v. Collective, Inc., 841 F.3d 155, 168 (2d Cir. 2016) (internal quotation marks omitted). As to the first element, “[a] certificate of registration with the [Patent and Trademark Office] is prima facie evidence that the mark is registered and valid (i.e., protectible).” Lane Capital Management, Inc. v. Lane Capital Management, Inc., 192 F.3d 337, 345 (2d Cir. 1999). As to the second, the standard for consumer confusion is easily satisfied in the case of counterfeits “because 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) (internal quotation marks omitted).
Both elements are met in this case. Plaintiff owns a certificate of trademark registration for the TANGLE trademark. As demonstrated in the screenshots of the Trademark Defaulting Defendants' internet marketing and sales storefronts, the Trademark Defaulting Defendants each have used a spurious version of the TANGLE Trademark in connection with marketing and selling their Counterfeit Products. (See Supp. FFCL Ex. B.) The TANGLE trademarks deployed by the Defaulting Defendants are counterfeits: the average purchaser would find the allegedly counterfeit mark to be substantially similar to the registered mark as it appears on the actual merchandise. See, e.g., Montres Rolex, S.A. v. Snyder, 718 F.2d 524, 531-32 (2d Cir. 1983) (rejecting “expert” evaluation test in favor of average purchaser test for identifying counterfeits); Horizon Trading USA, 908 F.Supp.2d at 434 (fine distinctions did not distinguish marks as not counterfeit). Accordingly, the Court finds that default judgment on Plaintiff's trademark counterfeiting claims against the Trademark Defaulting Defendants is warranted.
C. Willful Misconduct
The Defaulting Defendants are deemed to have acted willfully, merely by virtue of their default, and consequent failure to controvert the evidence of willful misconduct alleged in the Complaint. North Face Apparel Corp. v. Moler, No. 12-CV-6688, 2015 WL 4385626, at *6 (S.D.N.Y. July 16, 2015) (citing Lane Crawford LLC v. Kelex Trading (CA) Inc., No. 12-CV-9190, 2013 WL 6481354, at *3 (S.D.N.Y. Dec. 3, 2013) (collecting cases), R. & R. adopted, 2014 WL 1338065 (S.D.N.Y. April 3, 2014)), R. & R. adopted, 2015 WL 5472939 (S.D.N.Y. Sept. 16, 2015).
Even putting the fact of default aside, the conduct set forth in the Complaint and evidentiary submissions demonstrate that the Defaulting Defendants engaged in willful counterfeiting and infringement. See, e.g., Coach, Inc. v. Melendez, No. 10-CV-6178, 2011 WL 4542971, at *5 (S.D.N.Y. Sept. 2, 2011) (“Because the marks used by defendants on their products are virtually identical to the [Plaintiff] Registered Trademarks, the conclusion is inescapable that defendants' infringement and counterfeiting is intentional”), R. & R. adopted, 2011 WL 4542717 (S.D.N.Y. Sept. 30, 2011); see generally N.A.S. Import Corp. v. Chenson Enterprises, 968 F.2d 250, 252 (2d Cir. 1992) (holding that “for the purpose of awarding enhanced statutory damages,” the knowledge component of willfulness “need not be proven directly but may be inferred from the defendant's conduct”).
In any event, as already set forth in the Default Judgment, Plaintiff has established the Defaulting Defendants acted willfully. (Default Judgment at 2.)
II. Damages
Plaintiff seeks statutory damages under the Copyright Act and, for the Trademark Defaulting Defendants, the Lanham Act. (FFCL ¶ 46.)
A. Law Applicable To Statutory Damages
The Copyright Act permits plaintiffs to elect as a remedy statutory damages in lieu of actual damages or profits. 17 U.S.C. § 504(c). The range of available statutory damages is determined by whether or not the defendant's conduct was willful. The statutory range for basic copyright infringement is “not less than $750 or more than $30,000, as the court considers just.” 17 U.S.C. § 504(c)(1). If the infringer can show that it was not “was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages to a sum of not less than $200.” Id. If, however, the plaintiff can establish that “infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.” Id.
The Lanham Act similarly permits plaintiffs to elect as a remedy either actual or statutory damages for the marketing, sale, and distribution of goods with counterfeit marks. 15 U.S.C. § 1117. As with the Copyright Act, the range of available statutory damages is determined by whether or not the defendant's conduct was willful. Thus, statutory damages may be awarded in the amount of: (1) 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; or (2) if the court finds that the use of the counterfeit mark was willful, not more than $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).
The Lanham Act does not provide for statutory damages for infringement of a registered trademark where the infringement does not involve use of a counterfeit mark.
Statutory damages against a defendant who acted willfully are intended to serve the dual role of compensating a plaintiff for injuries and deterring wrongful conduct by the defendant and others. Yurman Design, 262 F.3d at 113-14; Malletier v. Carducci Leather Fashions, Inc., 648 F.Supp.2d 501, 504 (S.D.N.Y. 2009) (“where ... a defendant is shown to have acted willfully, a statutory award should incorporate not only a compensatory, but also a punitive component to discourage further wrongdoing by the defendants and others”).
Statutory damages are intended to address the type of scenario presented here -the difficulty of calculating actual damages caused by counterfeiters. See, e.g., Rodgers v. Anderson, No. 04-CV-1149, 2005 WL 950021, at *2 (S.D.N.Y. April 26, 2005) (“The rationale for [the statutory damages] section is the practical inability to determine profits or sales made by counterfeiters”); Gucci America, Inc. v. Duty Free Apparel, Ltd., 315 F.Supp.2d 511, 520 (S.D.N.Y. 2004) (“Congress added the statutory damages provision of the Lanham Act in 1995 because ‘counterfeiters' records are frequently nonexistent, inadequate, or deceptively kept ., making proving actual damages in these cases extremely difficult if not impossible'”) (omission in original) (quoting S. Rep. No. 104-177, at 10 (1995)), amended by 328 F.Supp.2d 439 (S.D.N.Y. 2004); accord Luban, 282 F.Supp.2d at 124.
Neither the Lanham Act nor the Copyright Act provides “guidelines for courts to use in determining an appropriate award, as it is only limited by what the court considers just.” Duty Free Apparel, 315 F.Supp.2d at 520 (internal quotation marks and citation omitted). The courts, however, have identified relevant factors in determining statutory damage awards under both statutes. Those factors, first set forth by the Second Circuit in Fitzgerald Publishing Co., Inc. v. Baylor Publishing Co., 807 F.2d 1110, 1117 (2d Cir. 1986), are: “(1) the expenses saved and the profits reaped; (2) the revenues lost by the plaintiff; (3) the value of the copyright [or 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.” Philip Morris USA Inc. v. A & V Minimarket, Inc., 592 F.Supp.2d 669, 673 (S.D.N.Y. 2009) (internal quotation marks and citations omitted) (applying the same factors in the trademark context); accord Sream, Inc. v. West Village Grocery Inc., No. 16-CV-2090, 2018 WL 4735706, at *3 (S.D.N.Y. Sept. 14, 2018), R. & R. adopted, No. 16-CV-2090, Dkt. 40 (S.D.N.Y. Oct. 1., 2018) (same). The Court thus applies those factors here.
B. Analysis Of The Relevant Factors
Here, the factors relevant to determining statutory damages collectively point to a substantial award of statutory damages.
With respect to the first, second, and sixth factors, the Defaulting Defendants' conduct - including their failure to appear, answer, or otherwise respond to the Complaint, or comply with the expedited discovery ordered in the TRO and PI Order - have made it impossible to determine the Defaulting Defendants' profits, quantify any expenses that the Defaulting Defendants may have saved by infringing Plaintiff's TANGLE trademark, or assess revenues lost by Plaintiff as a result of the Defaulting Defendants' unlawful conduct. As such, the Court may, and does, infer that the Defaulting Defendants financially benefitted to a significant degree by marketing and selling counterfeit TANGLE products. See AW Licensing, LLC v. Bao, No. 15-CV-1373, 2016 WL 4137453, at *3 (S.D.N.Y. Aug. 2, 2016) (“courts have supported an inference of a broad scope of operations in cases dealing specifically with websites that ship and sell to a wide geographic range”).
The third factor - the value of the TANGLE trademark and Plaintiff's copyrights in the Tangle Works - also weighs in favor of increased statutory damages. Again taking the allegations of the Complaint as true, together with the affidavit evidence, Plaintiff has established that TANGLE products have achieved international recognition and success as a result of Plaintiff's efforts in building up and developing consumer recognition, awareness, and goodwill in those products. By virtue of the foregoing, both the Tangle copyrights and the TANGLE trademark are of substantial value to Plaintiff.
The remaining factors - willfulness and deterrence - further support significant statutory damages awards against the Defaulting Defendants. The Defaulting Defendants are hardly innocent infringers; to the contrary, their conduct was willful as set forth above. Statutory damages thus should be substantial enough to deter both the Defaulting Defendants and others who may be inclined to engage in similar conduct. “The need to deter other counterfeiters is particularly compelling given the apparent extent of counterfeit activity” committed by the Defaulting Defendants. Bumble and Bumble, LLC v. Pro's Choice Beauty Care, Inc., No. 14-CV-6911, 2016 WL 658310, at *5 (S.D.N.Y. Feb. 17, 2016), R. & R. adopted, 2016 WL 1717215 (S.D.N.Y. April 27, 2016); see also Carducci Leather Fashions, 648 F.Supp.2d at 504 (“a statutory award should incorporate not only a compensatory, but also a punitive component to discourage further wrongdoing by the defendants and others”).
C. The Amount Awarded
Plaintiff has requested statutory damages in the amount of $50,000 against each Defaulting Defendant. That amount is the same or otherwise within the range of other similar cases involving claims of counterfeit consumer goods. See, e.g., William Mark Corp. v. 1&CC, No. 18-CV-3889, 2019 WL 4195365, at *10 (S.D.N.Y. May 20, 2019) ($50,000 per defaulting defendant was a reasonable amount for statutory damages where plaintiffs alleged trademark and copyright infringement by forty-four defaulting defendants of a line of plush animal toys), R. & R. adopted, 2019 WL 4194536 (S.D.N.Y. Sept. 3, 2019); Spin Master, Inc. v. Amy & Benton Toys & Gifts Co., No. 17-CV-5845, 2019 WL 464583, at *6 (S.D.N.Y. Feb. 6, 2019) ($50,000 per defaulting defendant was reasonable where plaintiffs alleged trademark and copyright infringement by 30 China-based businesses of a children's toy, particularly “considering that the maximum damages for willful infringement under the Copyright Act are $150,000 per infringement and $2,000,000 under the Lanham Act”); Spin Master Ltd. v. Alan Yuan's Store, 325 F.Supp.3d 413, 426 (S.D.N.Y. 2018) (where plaintiffs alleged trademark and copyright infringement of a line of children's toys by 32 defaulting businesses or individuals in China, the court held that “[a]n award of $50,000 per [defaulting] defendant is appropriate and just, given that each defendant sold at least one infringing product”); Ideavillage v. Bling Boutique Store, 2018 WL 3559085, at *6 (where plaintiffs alleged trademark and copyright infringement against ten defaulting defendants of a line of As Seen On TV products, the court awarded $50,000 per defaulting defendant in statutory damages).
The Court similarly finds here that an amount of $50,000 per Defaulting Defendant is a reasonable and appropriate amount for statutory damages in light of the requisite factors discussed above and as a commensurate deterrent to future violations by both the Defaulting Defendants and others. Accordingly, the Court recommends an award of $50,000 against each Defaulting Defendant.
III. Attorneys' Fees And Costs
A prevailing trademark plaintiff may recover costs, and, in “exceptional cases,” reasonable attorneys' fees. 15 U.S.C. § 1117(a); see Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247, 265-66 (2d Cir. 2014). In the Second Circuit, attorneys' fee awards under § 1117(a) are available to plaintiffs who opt to receive statutory damages under § 1117(c). Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 111 (2d Cir. 2012). The Inquest Scheduling Order providing instructions for what the parties needed to file in connection with this inquest expressly addressed attorneys' fees and directed that if Plaintiff sought attorneys' fees, it must submit both supporting factual material, such as time records, and conclusions of law addressing the legal basis for fees. Plaintiff did not include any such content or supporting materials, and its submissions do not otherwise suggest that Plaintiff is requesting an award of attorneys' fees. Accordingly, no attorneys' fees should be awarded. That said, the Court's statutory damages award sufficiently compensates Plaintiff, including for its expenditure of attorneys' fees. See Malletier v. WhenU.Com, Inc., No. 05-CV-1325, 2007 WL 257717, at *6 (S.D.N.Y. Jan. 26, 2007) (award of statutory damages suffices to make plaintiff whole); Rodgers, 2005 WL 950021 at *3-4 (same).
IV. Securing Payment Of Damages From Assets Held By Third Parties
The Default Judgment already entered by the Court froze the account balances and other assets of the Defaulting Defendants or their online storefront accounts or websites held by (i) ContextLogic, Inc. (Wish), (ii) PayPal, Inc., (iii) Payoneer, Inc., (iv) Amazon, Inc., (v) Wish, (vi) DHgate, (vii) Alibaba, (viii) eBay, Inc. (ix) LianLian, Global t//as LL Pay U.S., LLC (x) AllPay Limited, (xi) Ping Pong Global Solutions, Inc., (xii) Coinbase Global, Inc., (xiii) Union Mobile Financial Technology Co., Ltd., and (xiv) and of their related companies and affiliates (collectively, “Asset Holders”). (Default Judgment ¶¶ 4-16; see also TRO ¶¶ 3-4; PI Order ¶¶ 8-9.) Plaintiff now seeks an order that the Asset Holders transfer those assets to Plaintiff to satisfy the judgment against the Defaulting Defendants. Such relief is warranted.
Courts in this district “routinely order transfers of infringing defendant's frozen assets to plaintiffs in counterfeit cases.” Ideavillage v. Aarhus, No. 18-CV-2739, 2019 WL 2290514, at *6 (S.D.N.Y. May 7, 2019) (quoting Gucci America, Inc. v. Curveal Fashion, No. 09-CV-8458, 2010 WL 308303, at *5-6 (S.D.N.Y. Jan. 20, 2010)), R. & R adopted, 2019 WL 2287726 (S.D.N.Y. May 28, 2019); see also Off-White LLC v. Warm House Store, No. 17-CV-8872, 2019 WL 418501, at *6 (S.D.N.Y. Jan. 17, 2019) (“courts in this district routinely order transfers of infringing defendant's frozen assets to plaintiffs in similar cases”). The bases for doing so are found in Fed.R.Civ.P. 64 and 69, New York law, and the “'inherent equitable power to issue remedies ancillary to its authority to provide final relief.'” Ideavillage Products Corp. v. Shenzen City Poly Hui Foreign Trade Co., Ltd., No. 17-CV-8704, 2019 WL 12339638, at *7 (S.D.N.Y. Dec. 12, 2019) (quoting Ideavillage v. Aarhus, 2019 WL 2290514 at *6), R&R adopted, No. 17-CV-8704 (S.D.N.Y. Jan. 31, 2020) (Dkt. 83).
In executing or aiding execution of judgments, federal courts must use procedures that accord with those of the state in which the court sits. Fed.R.Civ.P. 69(a)(1) (“The procedure on execution - and in proceedings supplementary to and in aid of judgment or execution - must accord with the procedure of the state where the court is located”). Similarly, pursuant to Fed.R.Civ.P. 64(a), “[a]t the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment.” In turn, N.Y. CPLR § 5225(b) “authorizes courts to compel non-parties to surrender a judgment debtor's property under certain circumstances.” Ideavillage v. Shenzen, 2019 WL 12339638 at *7.
Accordingly, as Plaintiff has established Defaulting Defendants' liability, and the
Court having previously frozen the Defaulting Defendants' assets held by the Asset Holders, Plaintiff is now entitled to an order directing that those assets be transferred to Plaintiff subject to limitation by the damages amount awarded per each Defaulting Defendant.
Conclusion
For the foregoing reasons, I recommend that the Court award Plaintiff statutory damages in the amount of $50,000 against each Defaulting Defendant. So that Plaintiff may collect the damages awarded, I also recommend that the Court order the Asset Holders to transfer to Plaintiff any assets of the Defaulting Defendants, subject to the condition that Plaintiff not collect more than $50,000 in total for each Defaulting Defendant. In the event the Court adopts this recommendation, Plaintiff should be directed to submit a proposed form order.
Service On Defaulting Defendants
Plaintiff shall effect service of this Report and Recommendation on the Defaulting Defendants through the same means of service provided for under the TRO and PI Order. Service shall be made no later than three days after entry of this Report and Recommendation, and Plaintiff shall file proof of service no later than three days after service is made.
Procedure For Filing Objections
Pursuant to 28 U.S.C. § 636(b)(1) and Rules 72, 6(a), and 6(d) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of Court, with extra copies delivered to the Chambers of the Honorable Lorna G. Schofield, United States Courthouse, 40 Foley Square, New York, New York 10007, and to the Chambers of the undersigned, United States Courthouse, 500 Pearl Street, New York, New York 10007. FAILURE TO FILE TIMELY OBJECTIONS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW.
Respectfully submitted, Copies transmitted this date to all counsel of record.
21-CV-9352 (LGS) (RWL)
ATTACHMENT A: DEFAULTING DEFENDANTS
(This schedule is derived from Exhibit A to Plaintiff's Supplemental Proposed Findings Of Fact And Conclusions Of Law at Dkt. 61. Plaintiff initially named 85 defendants. For various reasons (dismissal, satisfaction of judgment, etc.), Plaintiff did not include a number of initially-named defendants in the schedule of Defaulting Defendants. Entries of “INTENTIONALLY BLANK” below refer to those excluded defendants and one additional defendant for whom Plaintiff filed a satisfaction of judgment after filing its inquest submission. See Dkt. 63.)
No. Defaulting Defendant Counterfeit Sales Per Limited 3dParty Data Defaulting Defendant's Wrongful Use of Plaintiff's Intellectual Property Requested Statutory Damages 1. INTENTIONALLY BLANK 2. INTENTIONALLY BLANK 3. Bestwin Used at least one (1) of Plaintiff's registered copyrights $50,000 4. BiAiBiYi Used at least one (1) of Plaintiff's registered copyrights $50,000 5. cataleya Used at least one (1) of Plaintiff's registered copyrights $50,000 6. Ct-Children's Used at least one (1) of Plaintiff's registered copyrights $50,000 7. DGFC TOY Used at least one (1) of Plaintiff's registered copyrights $50,000 8. INTENTIONALLY BLANK 9. Genvue Used at least one (1) of Plaintiff's registered copyrights $50,000 10. Goldtoy Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 11. Grapefruit flavour Used at least one (1) of Plaintiff's registered copyrights $50,000 12. GULU Used at least one (1) of Plaintiff's registered copyrights $50,000 13. INTENTIONALLY BLANK 14. Huang Neeky Used Plaintiff's registered trademark and at least one (1) of $50,000 25 Plaintiff's registered copyrights 15. INTENTIONALLY BLANK 16. INTENTIONALLY BLANK 17. Kidsmoon Used at least one (1) of Plaintiff's registered copyrights $50,000 18. Leconi Toy Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 19. INTENTIONALLY BLANK 20. Lovelybabymoon Factory Used at least one (1) of Plaintiff's registered copyrights $50,000 21. MadeInChinaYGF Used at least one (1) of Plaintiff's registered copyrights $50,000 22. INTENTIONALLY BLANK 23. Mommy's Flavour Mother and Baby Used at least one (1) of Plaintiff's registered copyrights $50,000 24. INTENTIONALLY BLANK 25. Muxin ToyBox Used at least one (1) of Plaintiff's registered copyrights $50,000 26. INTENTIONALLY BLANK 27. RZC kids Toy Used at least one (1) of Plaintiff's registered copyrights $50,000 28. sahdjfghj Used at least one (1) of Plaintiff's registered copyrights $50,000 29. Shop4046058 Used at least one (1) of Plaintiff's registered copyrights $50,000 30. Shop4873033 Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 31. Shop911257425 Used at least one (1) of Plaintiff's registered copyrights $50,000 26 32. INTENTIONALLY BLANK 33. Shop911416625 Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 34. Shop911418068 Used at least one (1) of Plaintiff's registered copyrights $50,000 35. Shop911464053 Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 36. Shop911536135 Used at least one (1) of Plaintiff's registered copyrights $50,000 37. Shop911573018 Used at least one (1) of Plaintiff's registered copyrights $50,000 38. Tasteful Party Used at least one (1) of Plaintiff's registered copyrights $50,000 39. The first Children Toy Used at least one (1) of Plaintiff's registered copyrights $50,000 40. TOBEFU Used at least one (1) of Plaintiff's registered copyrights $50,000 41. wild kid Used at least one (1) of Plaintiff's registered copyrights $50,000 42. wuzun Used at least one (1) of Plaintiff's registered copyrights $50,000 43. INTENTIONALLY BLANK 44. INTENTIONALLY BLANK 45. Overvloedi 1088 Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 46. INTENTIONALLY BLANK 47. INTENTIONALLY BLANK 48. andrewho Used at least one (1) of Plaintiff's registered copyrights $50,000 49. INTENTIONALLY BLANK 27 50. INTENTIONALLY BLANK 51. cwmsports Used at least one (1) of Plaintiff's registered copyrights $50,000 52. dribehance Used at least one (1) of Plaintiff's registered copyrights $50,000 53. hirohome Used at least one (1) of Plaintiff's registered copyrights $50,000 54. INTENTIONALLY BLANK 55. INTENTIONALLY BLANK 56. jubaopen08 Used at least one (1) of Plaintiff's registered copyrights $50,000 57. jubaopen09 Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 58. INTENTIONALLY BLANK 59. newtoywholesale Used at least one (1) of Plaintiff's registered copyrights $50,000 60. octopus_wholesale Used at least one (1) of Plaintiff's registered copyrights $50,000 61. one-stopos Wedding Dress manufacturer Used at least one (1) of Plaintiff's registered copyrights $50,000 62. INTENTIONALLY BLANK 63. tangchao11 Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 64. INTENTIONALLY BLANK 65. INTENTIONALLY BLANK 66. INTENTIONALLY BLANK 67. toyspro Used at least one (1) of Plaintiff's registered copyrights $50,000 28 68. wf245347 Used at least one (1) of Plaintiff's registered copyrights $50,000 69. INTENTIONALLY BLANK 70. yunhai_wholesale_toy Used at least one (1) of Plaintiff's registered copyrights $50,000 71. cmltdbartz71_2 69 Used Plaintiff's registered trademark and at least one (1) of Plaintiff's registered copyrights $50,000 72. Dibibi Used at least one (1) of Plaintiff's registered copyrights $50,000 73. eThrif Used at least one (1) of Plaintiff's registered copyrights $50,000 74. FYMZ Used at least one (1) of Plaintiff's registered copyrights $50,000 75. JiangJiangO Used at least one (1) of Plaintiff's registered copyrights $50,000 76. jiquanchengmmla Used at least one (1) of Plaintiff's registered copyrights $50,000 77. Kevin cat 2 Used at least one (1) of Plaintiff's registered copyrights $50,000 78. LifestyleDepartment Used at least one (1) of Plaintiff's registered copyrights $50,000 79. liushihang73734 14 Used at least one (1) of Plaintiff's registered copyrights $50,000 80. Mustay Used at least one (1) of Plaintiff's registered copyrights $50,000 81. the spray is all washed out Used at least one (1) of Plaintiff's registered copyrights $50,000 82. Weirongyu Used at least one (1) of Plaintiff's registered copyrights $50,000 83. Yolie Used at least one (1) of Plaintiff's registered copyrights $50,000 84. Young world of Kailin Used at least one (1) of Plaintiff's registered copyrights $50,000 85. zhanghuarongpoos Used at least one (1) of Plaintiff's registered copyrights $50,000