Exhibit 1

Case: 1:20-cv-02640 Document #: 46-2 Filed: 07/10/20 Page 1 of 78 PageID #:6378
No Shepard’s SignalTM

As of: October 5, 2015 5:12 PM EDT

Monster Energy Co. v. Chen Wensheng

United States District Court for the Northern District of Illinois, Eastern Division

September 29, 2015, Decided; September 29, 2015, Filed

Case No. 15 C 4166

Reporter

2015 U.S. Dist. LEXIS 132283

MONSTER ENERGY COMPANY, Plaintiff, v. CHEN

WENSHENG, et al., Defendants.

Core Terms

counterfeit, Products, Energy, personal jurisdiction, Internet,

residents, forum state, defendants’, shipping, injunction,

offer to sell, interactive, buyers, infringing, minimum contact,

tortious act, activities, contacts, sales, aiming, courts,

trademark infringement, exhibits, Target, online, mqxxc,

traditional notions of fair play, preliminary injunction,

substantial justice, doing business

Counsel: [*1] For Monster Energy Company, Plaintiff:

Kevin W. Guynn, LEAD ATTORNEY, Amy Crout Ziegler,

Jessica Lea Bloodgood, Justin R. Gaudio, Greer, Burns &

Crain, Ltd., Chicago, IL.

For Daimen Liang, doing business as Best Car Wrap Ltd.,

store at aliexpress.com/store/734633 (hits #256,257), Jack

Zhang, doing business as Neon Factory Sales, store at

aliexpress.com/store/1202603(hit#2?), Defendants: John R.

Crossan, Crossan Intellectual Property Law, LLC, Chicago,

IL.

For Legend Trading Co., LTD, Zhang Yuan, Defendants:

Keith A. Vogt, LEAD ATTORNEY, Oak Park, IL.

For Wong Raymond Wai Man, Defendant: Ramon Kumar

Singh, Internal Revenue Service, Chicago, IL.

Judges: Joan Humphrey Lefkow, U.S. District Judge.

Opinion by: Joan Humphrey Lefkow

Opinion

OPINION AND ORDER

On May 12, 2015, Monster Energy Company (MEC) filed

suit against Chinese entities that have offered counterfeit

Monster Energy products for sale online (′′defendants′′)

1

alleging trademark counterfeiting and copyright

infringement. (Dkt. 1.) MEC’s five-count second amended

complaint brings claims for (1) willful trademark

infringement and counterfeiting in violation of section 32 of

the Lanham Act, 15 U.S.C. § 1114; (2) willful false

designation of origin in violation of section 43 of the

Lanham Act, 15 U.S.C. § 1125; (3) willful [*2]

cybersquatting in violation of section 43(d) of the Lanham

Act, 15 U.S.C. § 1125(d); (4) willful violation of the Illinois

Uniform Deceptive Trade Practices Act, 815 ILCS § 510 et

seq.; and (5) deliberate copying of MEC’s copyrighted

designs in violation of the Copyright Act, 17 U.S.C. §

501(a). (Dkt. 53 (Second Am. Compl.) ¶¶ 34-62.) On May

20, 2015, the court entered a temporary restraining order

(TRO) freezing defendants’ PayPal accounts. (Dkt. 22.) The

court converted the TRO to a preliminary injunction on May

27, 2015. (Dkt. 33.) Two defendants, Wu Zou d/b/a the

Internet Store Legend Trading Co., Ltd. (′′Legend Trading′′)

and Zhang Yuan d/b/a Internet Store mqxxc, have moved to

dismiss for lack of personal jurisdiction under Federal Rule

of Civil Procedure 12(b)(2) and to release the frozen funds.

(Dkts. 50, 57.) For the reasons stated below, defendants’

motions are denied.2

1 Defendants are operating the Online Marketplace Accounts and Defendant Domain Names listed in Amended Schedule A to the

Second Amended Complaint. See dkt. 53. After MEC filed its most recent amended complaint, it voluntarily dismissed numerous

defendants (see dkts. 62, 63, 64, 67, 71, 75, 81, 100) and the court ordered the dismissal of those defendants (see dkts. 66, 103).

2

The court has jurisdiction under 28 U.S.C. §§ 1331 and 1367(a). Venue is [*3] proper in this district under 28 U.S.C. § 1391(b).

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BACKGROUND3

In 2002, MEC launched its MONSTER ENERGY® brand

of drinks bearing its now famous MONSTER ENERGY

mark and design. (Second Am. Compl. ¶ 5.) MEC is the

owner of numerous valid trademarks. (Id. at 14-15.) In

addition to its MONSTERTM line of energy drinks, MEC

uses its Claw Icon mark, MONSTERTM mark, MONSTER

ENERGY® mark, and has copyrighted designs in connection

with a large variety of products, including stickers, helmets,

sports gear, clothing items, headgear, and sports bags (the

Monster Energy Products). (Id. ¶ 8; see also dkt. 88

(Kingsland Dec.) ¶ 4.) Due to its substantial and continuous

marketing and promotion, MEC’s MONSTERTM family

products have achieved substantial commercial success,

with estimated retail sales exceeding $5 billion per year

worldwide. (See Second Am. Compl. ¶ 13.) MEC has also

sold millions of dollars’ worth of MEC’s MONSTERTM

family of products to Illinois residents through brick and

mortar accounts such as 7-Eleven, Walmart, Costco, Sam’s

Club, CVS, Target, and Circle K, to [*4] name a few.

(Kingsland Dec. ¶ 7.) The success of the Monster Energy

brand has resulted in its significant counterfeiting, giving

rise to the present claims. (See Second Am. Compl. ¶ 25.)

Legend Trading and mqxxc created and operated

commercial, fully interactive Internet stores on the global

marketplace AliExpress.com (AliExpress). (Id. ¶ 23; see

also dkts. 87 at 3, 89 ¶ 2, 92 at 3, 94 ¶ 2.) AliExpress is an

English language global retail marketplace for Chinese

sellers to target and sell to consumers worldwide. (Dkts. 87

at 3, 92 at 3; see also dkts. 89, 94 (collectively, Martin

Decs.) ¶ 5.) Through AliExpress, Chinese sellers learn

techniques for targeting United States buyers. (Dkt. 90, 95

(collectively, Fu Decs.) ¶¶ 21-22.)

Each defendant through its Internet store targets and offers

to sell counterfeit Monster Energy Products to consumers

within the United States, including Illinois. (Second Am.

Compl. ¶ 23.) Defendants’ offers to sell consist of displaying

photographs of counterfeit Monster Energy Products and

inviting potential buyers to buy products through their

Internet stores. Then, defendants have the ordered items

shipped to the United States. (See id. 35-36; see also Martin

Decs. [*5] ¶ 6.) In creating their online stores, defendants

affirmatively select a shipping template to ship their products,

including counterfeit Monster Energy Products, to the

United States and Illinois. (See id.; see also Martin Decs. ¶¶

7-8; Fu Decs. ¶¶ 3-14.)

ANALYSIS

I. Personal Jurisdiction

A. Legal Standard

Rule 12(b)(2) permits dismissal of a claim based on lack of

personal jurisdiction over the defendant. See Fed. R. Civ. P.

12(b)(2). The party asserting personal jurisdiction bears the

burden of proof. See Purdue Research Found. v. SanofiSynthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). When

the court rules on the motion without a hearing, the plaintiff

need only establish a ′′prima facie case of personal

jurisdiction.′′ Id. (quoting Hyatt Int’l Corp. v. Coco, 302

F.3d 707, 713 (7th Cir. 2002)). The court will ′′read the

complaint liberally, in its entirety, and with every inference

drawn in favor′′ of the plaintiff. Cent. States, 440 F.3d at

878 (quoting Textor, 711 F.2d at 1393). Jurisdictional

allegations pled in the complaint are accepted as true unless

proved otherwise by affidavits or exhibits. See Purdue

Research Found., 338 F.3d at 782. But ′′once the defendant

has submitted affidavits or other evidence in opposition to

the exercise of jurisdiction, the plaintiff must go beyond the

pleadings and submit affirmative evidence supporting the

exercise of jurisdiction.′′ Id. at 783. If any conflicts arise

between the plaintiff’s complaint (or supporting materials)

[*6] and the defendant’s affidavits or evidence, the plaintiff

is entitled to have those conflicts resolved in its favor. Id.

B. Court’s Review of Personal Jurisdiction

Plaintiff asserts claims under the Lanham Act, Copyright

Act, and Illinois statutory law. Because neither the Lanham

Act nor the Copyright Act authorizes nationwide service of

process, a court sitting in Illinois may exercise jurisdiction

over defendants only if authorized both by the United States

Constitution and Illinois law. be2 LLC v. Ivanov, 642 F.3d

555, 558 (7th Cir. 2011) (citing Fed. R. Civ. P 4(k)(1)(A) and

stating that the Lanham Act does not authorize nationwide

service); Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir.

2010) (same); Janmark, Inc. v. Reidy, 132 F.3d 1200, 1201

(7th Cir. 1997) (Copyright Act does not authorize nationwide

service), abrogated on other grounds by Advanced Tactical

Ordnance, LLC v. Real Action Paintball, Inc., 751 F.3d 796

(7th Cir. 2014). The Illinois long-arm statute ′′permits its

courts to exercise personal jurisdiction on any basis permitted

by the constitutions of both Illinois and the United States.′′

Id.; 735 Ill. Comp. Stat. 5/2-209(c). Accordingly, ′′the state

3 Unless otherwise noted, the following facts are taken from the second amended complaint ′′with every inference drawn in favor′′ of

the plaintiff. Cent. States, Se. & Sw. Areas Pension Fund v. Phencorp Reins. Co., 440 F.3d 870, 878 (7th Cir.2006) (quoting Textor v.

Bd. of Regents of N. Ill. Univ., 711 F.2d 1387, 1393 (7th Cir.1993)).

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statutory and federal constitutional inquiries merge.′′ Tamburo, 601 F.3d at 700.

The key constitutional question is whether the defendants

have sufficient ′′minimum contacts′′ with Illinois such that

the suit ′′does not offend traditional notions of fair play and

substantial justice.′′ Int’l Shoe Co. v. Washington, 326 U.S.

310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945) (internal

quotations marks omitted). That is to say, each defendant

[*7] must have purposely established minimum contacts

with the forum state such that he or she ′′should reasonably

anticipate being haled into court′′ there. Burger King Corp.

v. Rudzewicz, 471 U.S. 462, 474, 105 S. Ct. 2174, 85 L. Ed.

2d 528 (1985) (quotation marks omitted). A defendant

cannot avoid jurisdiction ′′merely because the defendant did

not physically enter the forum State.′′ Id. at 476. Indeed, as

the Supreme Court has observed, ′′a substantial amount of

business is transacted solely by mail and wire

communications across state lines, thus obviating the need

for physical presence within a State in which business is

conducted.′′ Id. Nevertheless, ′′[p]otential defendants should

have some control over—and certainly should not be

surprised by—the jurisdictional consequences of their

actions.′′ RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272,

1278 (7th Cir.1997). The Due Process Clause ′′gives some

minimum assurance as to where that conduct will and will

not render them liable to suit.′′ World-Wide Volkswagen v.

Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 62 L. Ed. 2d

490 (1980).

Under the Illinois long-arm statute, personal jurisdiction

may be general or specific. uBid, Inc. v. GoDaddy Grp.,

Inc., 623 F.3d 421, 425 (7th Cir. 2010). MEC does not argue

that the court has general jurisdiction. Accordingly, the

court turns to whether it has specific jurisdiction over

defendants.

1. Specific Jurisdiction

Specific jurisdiction grows out of ′′the relationship among

the defendant, the forum, and the litigation.′′ Walden v.

Fiore, U.S. , 134 S. Ct. 1115, 188 L. Ed. 2d 12 (2014)

(quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770,

775, 104 S. Ct. 1473, 79 L. Ed. 2d 790 (1984)). Specific

jurisdiction [*8] requires that ′′(1) the defendant has

purposefully directed his activities at the forum state or

purposefully availed himself of the privilege of conducting

business in that state, and (2) the alleged injury arises out of

the defendant’s forum-related activities.′′ N. Grain Mktg.,

LLC v. Greving, 743 F.3d 487, 492 (7th Cir. 2014) (quoting

Tamburo, 601 F.3d at 701). ′′The exercise of specific

jurisdiction must also comport with traditional notions of

fair play and substantial justice.′′ Id. (citing Tamburo, 601

F.3d at 702).

a. Minimum Contacts - Whether Defendant’s Activities

Were Purposefully Directed At Illinois

Whether a defendant has purposefully directed activities at

a forum ′′depends in large part on the type of claim at issue.′′

Felland v. Clifton, 682 F.3d 665, 674 (7th Cir.2012). Where

the plaintiff’s claims are for intentional torts, as here,4the

inquiry ′′focuses on whether the conduct underlying the

claims was purposely directed at the forum state.′′ Id. at 674

(quoting Tamburo, 601 F.3d at 702). In this context, courts

apply the ′′express aiming test′′ and look to whether the

defendant engaged in ′′(1) intentional conduct (or ’intentional

and allegedly tortious’ conduct); (2) expressly aimed at the

forum state; (3) with the defendant’s knowledge that the

effects would be felt—that is, the plaintiff would be

injured—in the forum state.′′ Tamburo, 601 F.3d at 703

(citing Calder v. Jones, 465 U.S. 783, 789-90, 104 S. Ct.

1482, 79 L. Ed. 2d 804 (1984)).

5

′′The defendant’s conduct

and [*9] connection with the forum state must be substantial

enough to make it reasonable for the defendant to anticipate

that he could be haled into court there.′′ N. Grain Mktg., 743

F.3d at 492. In other words, ′′the plaintiff cannot be the only

link between the defendant and the forum. Rather, it is the

defendant’s conduct that must form the necessary connection

with the forum State that is the basis for its jurisdiction over

him.′′ Walden, 134 S. Ct. at 1122 (citations omitted).

i. Intentional and Tortious Conduct

4

′′Infringement of a trademark is a tort.′′ Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1388 (8th Cir.1991); see also

Louis Vuitton Malletier, S.A. v. Mosseri, 736 F.3d 1339, 1353 (11th Cir. 2013); Chloé v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158,

171 (2d Cir.2010) (′′Trademark infringement is ... a tort.′′); Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 720 (9th Cir.2004)

(′′[T]rademark infringement generally sounds in tort.′′).

5 Courts have applied the Calder ′′express aiming test′′ in cases involving intentional torts, including trademark infringement. See, e.g.,

Medline Indus., Inc. v. Strategic Commercial Sols., Inc., 553 F. Supp. 2d 979 (N.D. Ill. 2008); Euromarket Designs, Inc. v. Crate & Barrel

Ltd., 96 F. Supp. 2d 824 (N.D. Ill. 2000); see also Virgin Enters. Ltd. v. Jai Mundi, Inc., No.13 C 8339, 2014 U.S. Dist. LEXIS 98437,

2014 WL 3605541, at *5 (N.D. Ill. July 18, 2014) (explaining that it was unnecessary to apply Calder’s express aiming test in this

trademark infringement case because defendant’s ′′actual (as opposed to imputed) contacts with Illinois were sufficient to support the

exercise of specific personal jurisdiction′′).

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Section 32 of the Lanham Act creates a civil right of action

for trademark infringement and counterfeiting. Under the

plain language of 15 U.S.C. § 1114, an offer to sell an

infringing or counterfeit item, even without [*10] any other

activity, establishes liability for trademark infringement and

counterfeiting. Levi Strauss v. Shilon, 121 F.3d 1309, 1312

(9th Cir. 1997); Chloe SAS v. Sawabeh Information Servs.

Co., No. cv 11-04147, 2014 U.S. Dist. LEXIS 124433, 2014

WL 4402218, at *6 (C.D. Cal. Sept. 5, 2014). Displaying

photos of an item for sale and inviting potential purchasers

to place an order and buy the product through an Internet

store is an offer for sale. See Milo & Gabby, LLC v.

Amazon.com, No. C13-1932, 2015 U.S. Dist. LEXIS 92890,

2015 WL 4394673, at *14 (W.D. Wash. July 16, 2015); cf.

MEMC Elec. Materials Inc. v. Mitsubishi Materials Silicon

Corp., 420 F.3d 1369, 1376 (Fed. Cir. 2005) (concluding

that letters that conveyed ′′a description of the allegedly

infringing merchandise and the price at which it can be

purchased′′ could be regarded as an ′′offer to sell′′ under 35

U.S.C. § 271(a)).

Here, one of MEC’s numerous exhibits filed with the court

illustrate that Legend Trading made an offer to sell when it

displayed photos of biker gloves with Monster Energy’s

trademark for sale at $8.99 with 8991 pieces and three

colors available on its Internet store. (See dkt. 27-7.; see

also Martin Decs. ¶ 10.) Similarly, another one of MEC’s

exhibits illustrates that mqxxc made an offer to sell when it

displayed photos of Monster Energy graphic sticker decals

for sale at $39.99 with 999 pieces available on its Internet

store. (See dkt. 27-8; see also Martin Decs. ¶ 10.) Defendants

invite potential purchasers to place orders and buy products

through their Internet stores, and MEC’s [*11] exhibits

show that at least two individuals, Lisa Cho and Gigi Ah,

with Illinois shipping addresses attempted to purchase

counterfeit Monster Energy biker gloves from Legend

Trading, and at least one individual, Tyronn Chen, with an

Illinois shipping address attempted to purchase counterfeit

Monster Energy sticker decals from mqxxc. (See dkts. 27-7,

27-8; see also Martin Decs. ¶¶ 7, 10, 11.) MEC’s Exhibit

2-17 also includes an email conversation between Ah and

Zou in which Zou provides Ah with Legend Trading’s

PayPal account and indicates that she can pay for her order

via PayPal. (See dkts. 27-7; see also Martin Decs. ¶ 11.)

Similarly, MEC’s Exhibit 2-18 includes a conversation

between Chen and Yuan in which Yuan provides Chen with

mqxxc’s PayPal account number and indicates that Chencan

pay for the Monster decal stickers via a specific PayPal

account. (See dkts. 27-8; see also Martin Decs. ¶ 11.) As

such, defendants’ offers to sell counterfeit Monster Energy

Products on their Internet stores constitute tortious activity

committed in Illinois sufficient to establish personal

jurisdiction over both defendants in this court. See Dental

Arts Lab., Inc. v. Studio 360 The Dental Lab, LLC, No. 10

C 4535, 2010 U.S. Dist. LEXIS 124029, 2010 WL 4877708,

at *7 (N.D. Ill. Nov. 23, 2010) (′′As long as one tortious act

is committed in Illinois, [*12] the courts of the state, and

thus this Court, may exercise personal jurisdiction over

Defendant.′′); see also Steuben Foods, Inc. v. Oystar USA,

2012 U.S. Dist. LEXIS 70638, 2012 WL 1854642, at *2

(W.D.N.Y. May 21, 2012) (citing to Houbigant, Inc. v. ACB

Mercantile, Inc., 914 F. Supp. 964, 979-80 (S.D.N.Y 1995)

(′′Offering one copy of an infringing work for sale in New

York, even if there is no actual sale, constitutes commission

of a tortious act within the state sufficient to imbue this

Court with personal jurisdiction.′′).

ii. Express Aiming at the Forum State

′′[A] defendant’s intentional tort creates the requisite

minimum contacts with a state only when the defendant

expressly aims its actions at the state with the knowledge

that they would cause harm to the plaintiff there.′′ Mobile

Anesthesiologists Chicago, LLC v. Anesthesia Associates of

Houston Metroplex, P.A., 623 F.3d 440, 445 (7th Cir. 2010)

(emphasis added). This court has characterized the express

aiming test to require a showing of ′′injury plus.′′ Telemedicine Solutions LLC v. WoundRight Techs., LLC, 27 F. Supp.

3d 883, 895 (N.D. Ill. Mar. 14, 2014). That is, the plaintiff

must demonstrate not only that the defendant’s tortious act

injured him in the forum state, but that the defendant acted

specifically to harm the plaintiff in the forum state. See id.

Citing Alcar Group, Inc. v. Corporate Performance Sys.,

109 F. Supp. 2d 948, 949 (N.D. Ill. 2000), defendants argue

that infringing sales abroad via their websites do not create

the necessary minimum contacts since the Lanham Act has

no extraterritorial reach. Defendants’ contentions wholly

disregard MEC’s claim that defendants offered to sell

counterfeit Monster Energy Products [*13] to individuals

with Illinois shipping addresses, rather than alleging sales

by defendants abroad. In Alcar Group, the issue was

whether the court had jurisdiction over a foreign citizen’s

activity in a foreign country. Alcar Group, 109 F. Supp. 2d

at 951. Here, the issue is whether the court has personal

jurisdiction over a foreign citizen’s activity in the United

States. As such, Alcar Group is inapposite.

Defendants also argue that their interactive websites alone

are not sufficient to establish minimum contacts. (Dkt. 51 at

3 (quoting Advanced Tactical, 751 F.3d at 803 (′′The

operation of an interactive website does not show that the

defendant has formed a contact with the forum state.′′)).)

MEC does not dispute that an interactive website alone

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would be insufficient but argues that defendants created and

operated interactive Internet stores and affirmatively selected

a shipping option to ship counterfeit Monster Energy

Products to the United States, including to Illinois residents.

(Martin Decs. ¶¶ 7-8.) As such, MEC argues that the facts

here are directly analogous to Illinois v. Hemi Group, LLC,

622 F.3d 754 (7th Cir. 2010). (Dkt. 87 at 10.) The court

agrees.

In Hemi Group, the defendant was sued by the State of

Illinois for selling cigarettes to Illinois residents in violation

of federal and state law. [*14] Hemi Grp. LLC, 622 F.3d at

755. The court in Hemi Group found that it had personal

jurisdiction over defendants because they operated a

nationwide business model where they intentionally created

and operated several commercial, interactive websites to

offer products for sale and allow online orders from Illinois

residents. Hemi Grp. LLC, 622 F.3d at 757-58. The Seventh

Circuit explained that, ′′[a]lthough listing all forty-nine

states by name would have made a stronger case for

jurisdiction in this case, . . . the net result is the same—Hemi

stood ready and willing to do business with Illinois

residents.′′ Id. at 758. As such, the court held that specific

jurisdiction is proper where a company ′′h[olds] itself out as

open to do business with every state′′ and is ′′ready and

willing to do business with [that state’s] residents.′′

Similarly, in this case, defendants intentionally created and

operated commercial, fully interactive AliExpress Internet

stores through which consumers can purchase counterfeit

Monster Energy Products. In creating their online stores,

defendants affirmatively selected a shipping template to

ship counterfeit Monster Energy Products to United States

and Illinois residents. (Martin Decs. ¶¶ 7-8; see also Fu

Decs. ¶¶ 3-14.) As a result, defendants expressly [*15]

elected to do business with the residents of all fifty states,

including Illinois. See Hemi Grp. LLC, 622 F.3d at 758; see

also uBid, 623 F.3d at 428 (′′[I]t is easy to infer that

GoDaddy’s national marketing campaign is intended to

reach as large an audience as possible, including the 13

million potential customers in the nation’s fifth most

populous state [(Illinois).]′′)

Defendants also argue that the court lacks personal

jurisdiction because no sale was made to an Illinois resident

(Dkt. 52 ¶ 7; Dkt. 59 ¶ 5), and MEC has presented no

evidence that either Cho or Chen is even located in Illinois.

(Dkt. 51 at 4.) First, as indicated above, an offer to sell

infringing or counterfeit items establishes liability for

trademark infringement, a tortious act, and ′′[a]s long as one

tortious act is committed in Illinois the courts of the state,

and thus this Court, may exercise personal jurisdiction over

Defendant,′′ Dental Arts Lab., 2010 U.S. Dist. LEXIS

124029, 2010 WL 4877708, at *7. As such, defendants did

not need to complete a sale to imbue Illinois courts with

personal jurisdiction. Second, there is no requirement that

MEC or the person placing the order reside in Illinois in

order for this court to have jurisdiction over defendants.

Walden, 134 S. Ct. at 1121-22 (′′The inquiry whether a

forum State may assert specific jurisdiction over [*16] a

nonresident defendant focuses on ’the relationship among

the defendant, the forum, and the litigation.’ . . . [O]ur

’minimum contacts’ analysis looks to the defendant’s

contacts with the forum State itself, not the defendant’s

contacts with persons who reside there.′′) MEC’s claims

against defendants are based on defendants’ offers to sell

counterfeit Monster Energy products through their interactive

Internet store, which allows online orders to be placed and

shipped to Illinois addresses. MEC, through its exhibits and

affidavits, has alleged that at least on one occasion Zou (on

behalf of Legend Trading) communicated with a buyer who

had placed an order to purchase counterfeit Monster Energy

Products, asked the buyer for the order number which

clearly reflected an Illinois shipping address, and provided

his PayPal account number for the buyer to make the

payment for the item. (See Dkt. 27-7; see also Martin Decs.

¶ 11.) Similarly, MEC’s exhibits and affidavits allege that at

least on one occasion Yuan (on behalf of mqxxc)

communicated with a buyer who wished to place an order

on counterfeit Monster sticker decals and provided his

PayPal account number for the buyer to purchase the item.

[*17] (See dkt. 27-8; see also Martin Decs. ¶ 11.) It is these

tortious acts on which MEC basis its argument that Illinois

has specific jurisdiction. See Dental Arts Lab., 2010 U.S.

Dist. LEXIS 124029, 2010 WL 4877708, at *7 (′′As long as

one tortious act is committed in Illinois, the courts of the

state, and thus this Court, may exercise personal jurisdiction

over Defendant.′′)

Defendants also claim that it is insufficient to rely on

defendants’ ′′random, fortuitous, or attenuated contacts′′ or

on the ′′unilateral activity′′ of MEC. (Dkt. 51 at 5.) First,

Legend Trading’s actions are not ′′random, fortuitous, or

attenuated contacts.′′ It is true that in the Internet context,

there is no specific jurisdiction where the defendant’s

contacts with the forum state are ′′entirely fortuitous.′′

Advanced Tactical, 751 F.3d at 803 (no specific personal

jurisdiction over defendant that maintained email list

allowing it to send email to past customers, even though

some happened to be in forum state). But where a company

′′h[olds] itself out as open to do business with every state′′

and is ′′ready and willing to do business with [that state’s]

residents,′′ specific jurisdiction over it is proper. Hemi Grp.

LLC, 622 F.3d at 758 (internet seller of cigarettes subject to

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specific personal jurisdiction in Illinois where Illinois

residents purchase cigarettes [*18] online and seller then

shipped cigarettes to Illinois); see also Valtech, LLC v. 18th

Ave. Toys Ltd., No. 14 C 134, 2015 U.S. Dist. LEXIS 17138,

2015 WL 603854, at *4 (N.D. Ill. Feb. 12, 2015); Payton v.

Kale Realty, No. 13 C 8002, 2014 U.S. Dist. LEXIS 118590,

2014 WL 4214917, at *4 (N.D. Ill. Aug. 26, 2014). Moreover,

in 2011 the court in Deckers Corp. v. Does 1-500 found that

personal jurisdiction existed over China-based defendants

operating commercial, interactive Internet stores to offer to

sell and to sell counterfeit products to the United States,

including Illinois. Deckers Corp. v. Does 1-55, No. 1:11 CV

00010, 2011 U.S. Dist. LEXIS 119448, 2011 WL 4929036, at

*3 (N.D. Ill. Oct. 14, 2011). Since Deckers Corp., numerous

cases, within this district alone, have exercised jurisdiction

over defendants operating commercial, interactive Internet

stores offering to sell counterfeit products to the United

States, including Illinois. (See dkt. 87 at 8; Martin Decs. ¶

14.)

Second, it is misleading to classify the offer to sell as a

′′unilateral activity′′ by the plaintiff. See Hemi Grp. LLC,

622 F.3d at 758. In Hemi Group, the court explained that

[c]haracterizing the sales as unilateral is misleading, . .

. because it ignores several of Hemi’s own actions that

led up to and followed the sales. . . . It is Hemi reaching

out to residents of Illinois, and not the residents

reaching back, that created the sufficient minimum

contacts with Illinois that justify exercising personal

jurisdiction over Hemi in Illinois.

Id. Here, defendants [*19] intentionally created and operated

commercial, fully interactive Internet stores and affirmatively

selected a shipping template to ship counterfeit Monster

Energy Products to United States and Illinois residents.

(Martin Decs. ¶¶ 7-8.) Further, MEC provides exhibits that

include conversations in which defendants provide Illinois

buyers with their PayPal account information in order to

complete their purchase. (Dkts. 27-7, 27-8.) Thus, it was

defendants’ reaching out to Illinois residents that created the

sufficient minimum contacts with Illinois.

Defendants further argue that ′′the alleged offer is invalid

since it was induced by fraud′′ and that the MEC ′′cannot

point to a single valid offer to sell an infringing product into

Illinois.′′ (Dkt. 51 at 5.) Defendants’ argument completely

misses the mark. Here, MEC claims that defendants

committed tortious acts by offering to sell counterfeit

Monster Energy Products and that such offers to sell took

place the moment defendants displayed photographs of

counterfeit Monster Energy Products for sale and invited

potential buyers, including Illinois buyers, to place orders

and buy products through their Internet stores. See Milo &

Gabby, 2015 U.S. Dist. LEXIS 92890, 2015 WL 4394673, at

*14. Defendants do not provide [*20] any evidence to

suggest that they were induced by fraud to post images of

counterfeit Monster Energy Products and invite potential

Illinois buyers to place orders and buy counterfeit products.

Lastly, defendants attempt to analogize this case to Advanced

Tactical. There, the Seventh Circuit found that ′′it [was]

unlikely that those few sales alone, without some evidence

linking them to the allegedly tortious activity, would make

jurisdiction proper.′′ Advanced Tactical, 751 F.3d at 801. In

other words, plaintiff provided ′′no evidence that those sales

had any connection with this litigation.′′ Id. By contrast,

here, MEC provides evidence that defendants offered to sell

counterfeit Monster Energy Products, see dkts. 27-7, 27-8,

and MEC bases its claims on that specific tortious conduct

of ′′offering to sell′′ counterfeit product in violation of the

Lanham Act. Based on MEC’s affidavits and supporting

materials, the court finds Legend Trading expressly aimed

its action at Illinois.

iii. Defendant’s Knowledge That the Effects Would be

Felt in the Forum State

To establish minimum contacts a defendant must not only

′′expressly aim′′ its actions at the state but must do so ′′with

the knowledge that [it] would cause harm to the plaintiff

[*21] there.′′ Mobile Anesthesiologists Chicago, 623 F.3d at

445. Here, the Director of Global Brand Protection &

Corporate Investigations of Monster Energy Company,

Bruce Kingsland, proffers that MEC uses its registered

trademarks and copyrights on and in connection with the

creation and distribution of a large variety of products,

including but not limited to, energy drinks, stickers, clothing

items, helmets, headgear, sports gear, and sports bags.

(Kingsland Dec. ¶ 4.) Kingsland also states that ′′millions of

dollars’ worth of MEC’s MONSTERTM family of products

have been sold to Illinois residents through brick and mortar

accounts such as 7-Eleven, Walmart, Costco, Sam’s Club,

CVS, Target, and Circle K, to name a few.′′ (Id. ¶ 7.) Based

on MEC’s considerably large sales in Illinois, the fact that

Illinois is the fifth most populous state, and the fact that

counterfeit sales lower the market share of the rights holder,

MEC has established by a preponderance of the evidence

that defendants knew that in targeting consumers in the

United States the effects of its tortious acts would likely be

felt in Illinois.

b. Relatedness - Whether MEC’s Claim Arose Out Of

Such Activities

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The court’s conclusion that defendants’ conduct was

′′purposely directed′′ [*22] at Illinois does not end the

jurisdictional inquiry. For the court to exercise specific

jurisdiction over defendants, MEC’s claims must ′′arise out

of′′ or ′′relate to′′ defendants’ contacts with Illinois. RAR,

Inc., 107 F.3d at 1277-78. This requirement is satisfied here.

As in Hemi Group, MEC’s claims arise out of defendants’

forum-related activities and contacts with Illinois residents.

Defendants offered to sell counterfeit Monster Energy

Products on its AliExpress Internet store to individuals with

Illinois addresses. Such actions constitute tortious activity

committed in Illinois, and defendants’ actions surrounding

those offers triggered MEC’s claims against it. Accordingly,

MEC’s claims arise directly out of the defendants’ contacts

with Illinois.

c. Fairness - Whether Specific Jurisdiction is Consistent

with Traditional Notions of Fair Play and Substantial

Justice

Finally, the court must consider whether the exercise of

personal jurisdiction over defendants would offend

traditional notions of fair play and substantial justice. See N.

Grain Mktg., 743 F.3d at 492 (quoting Int’l Shoe, 326 U.S.

at 316). The factors considered are ′′the burden on the

defendant, the forum State’s interest in adjudicating the

dispute, the plaintiff’s interest in obtaining convenient and

effective [*23] relief, the interstate judicial system’s interest

in obtaining the most efficient resolution of controversies,

and the shared interest of the several States in furthering

fundamental substantive social policies.′′ Felland, 682 F.3d

at 677 (quoting Burger King, 471 U.S. at 477). ′′These

factors rarely will justify a determination against personal

jurisdiction.′′ Purdue Research Found., 338 F.3d at 781

n.10.

While defendants may be burdened by having to defend an

action in this state, ′′out-ofstate defendants always face such

a burden.′′ Felland, 682 F.3d at 677 (emphasis in original).

Notably, despite any potential claims of hardship, defendants

have already retained local counsel and engaged in motion

practice in this court. See Jackson v. N’Genuity Enterprises,

Co., 2014 U.S. Dist. LEXIS 119778, 2014 WL 4269448

(2014) (finding, in part, that exercising personal jurisdiction

over the defendant did not run afoul of traditional notions of

fair play and substantial justice where the defendant had

been litigating the related 2009 suit in this forum and had

retained attorneys in the forum). Moreover, modern

transportation and communications have made it much less

burdensome for a party to defend itself in a state where he

derives economic benefits, and it usually will not be unfair

to subject him to the burdens of litigating in another forum.

Burger King, 471 U.S. at 474. Furthermore, Illinois has an

interest in protecting Illinois [*24] consumers from being

deceived into purchasing counterfeit Monster Energy

Products. Thus, exercising personal jurisdiction over

defendants does not run afoul of traditional notions of fair

play and substantial justice.

II. Freezing of Property under Party’s Control

′′Once personal jurisdiction of a party is obtained, the

District Court has authority to order it to ’freeze’ property

under its control, whether the property be within or without

the United States.′′ United States v. First Nat. City Bank,

379 U.S. 378, 384, 85 S. Ct. 528, 13 L. Ed. 2d 365 (1965);

see also Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 129

(2d Cir. 2014); DeWitt, Porter, Huggett, Schumacher &

Morgan, S.C. v. Kovalic, No. 94-2545, 1995 U.S. App.

LEXIS 15636, 1995 WL 375869, at *2 (7th Cir. 1995); Fed.

Trade Comm’n v. Windermere Big Win Int’l, Inc., No. 98 C

8066, 1999 U.S. Dist. LEXIS 12259, 1999 WL 608715, at *4

(N.D. Ill. Aug. 5, 1999). On issuing the TRO and preliminary

injunction in this case, the court found that it had personal

jurisdiction over defendants ′′since the defendants directly

target their business activities towards consumers in the

United States, including Illinois.′′ (See dkts. 22, 33.) On

reviewing defendants’ motion to dismiss for lack of personal

jurisdiction, this court once again has concluded that it has

personal jurisdiction over defendants. As such, the funds

contained in defendants’ PayPal accounts will remain frozen.

See Lorillard Tobacco Co. v. Montrose Wholesale Candies,

2005 U.S. Dist. LEXIS 28917, 2005 WL 3115892, at *13

(N.D. Ill. Nov. 8, 2005) (citing Grupo Mexicano de Desarrollo S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 325,

119 S. Ct. 1961, 144 L. Ed. 2d 319 (1999)).

A. Dissolving the Injunction and Funds Unrelated to

Infringement

Defendants argue that even if this court has personal

jurisdiction to freeze its assets, the court should dissolve the

injunction [*25] because MEC cannot show likelihood of

success on the merits or irreparable harm. (Dkts. 51 at 7, 58

at 6-7.) This court, however, already found that MEC

showed a likelihood of success on the merits and irreparable

harm. (Dkt. 33 at 5.) Defendants have not provided evidence

to counter such a finding, and thus, this court will not

dissolve the injunction.

Defendants also argue that the court should modify the

injunction to limit the seizure to an amount corresponding to

the products alleged to have been offered for sale, rather

than the seizure of their entire PayPal account. (Dkts. 51 at

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10, 58 at 9-10.) The court declines to modify the injunction

at this time. To exempt assets from an asset freeze, ′′[t]he

burden is on the party seeking relief to present documentary

proof that particular assets [are] not the proceeds of

counterfeiting activities.′′ Luxottica USA LLC v. The Partnerships, et al., No. 1:14-cv-09061, 2015 U.S. Dist. LEXIS

78961, 2015 WL 3818622 (N.D. Ill. June 18, 2015) (citing

N. Face Apparel Corp. v. TC Fashions, Inc., No. 05 CIV.

9083(RMB), 2006 U.S. Dist. LEXIS 14226, 2006 WL

838993, at *3 (S.D.N.Y. Mar. 30, 2006)). Defendants have

not submitted any evidence regarding their PayPal account

transactions to show that these funds are not the proceeds of

counterfeiting activities.

B. Increasing Bond Amount

Defendants also argue that even if the court does not

dissolve the injunction, it should [*26] require MEC to post

a larger bond in the amount of at least $5,000 per defendant.

Defendants argue that the court should increase the bond

because they are one of hundreds of defendants whose

businesses grounded to a halt the moment their PayPal

accounts were frozen, and thus, the $10,000 bond the court

previously ordered MEC to pay is insufficient. MEC

responds that the court properly required MEC to post a

bond of $10,000 because of the strong and unequivocal

nature of MEC’s evidence.

Under Federal Rule of Civil Procedure 65(c), a court may

issue a preliminary injunction ′′only if the movant gives

security in an amount that the court considers proper to pay

the costs and damages sustained by any party found to have

been wrongfully enjoined or restrained.′′ Fed. R. Civ. P.

65(c). The purpose of an injunction bond is to compensate

the defendant, in the event he prevails on the merits, for the

harm that an injunction entered before the final decision

caused him. Ty, Inc. v. Publications Intern. Ltd., 292 F.3d

512, 516 (7th Cir. 2002). The appropriate amount of the

bond is subject to the court’s discretion. Fed. R. Civ. P.

65(c); Gateway E. Ry. Co. v. Terminal R.R. Ass’n of St.

Louis, 35 F.3d 1134, 1141 (7th Cir.1994). But, because the

damages caused by an erroneous preliminary injunction

cannot exceed the amount of the bond posted as security,

and because an error in setting the bond too high is not

serious, the court of [*27] appeals has stated that district

courts should err on the high side when setting a bond. See

Habitat Educ. Center v. U.S. Forest Serv., 607 F.3d 453, 456

(7th Cir.2010). On granting the TRO and preliminary

injunction, the court ordered MEC to deposit $10,000 as

security, an amount consistent with bonds required in

similar cases. See, e.g., Burberry Limited, et al. v. Su Sheng,

et al., No. 1:15-cv-02851 (N.D. Ill. May 27, 2015) ($10,000

bond); Beats Electronics, LLC v. The Partnerships, et al.,

No. 1:14-cv-05209 (N.D. Ill. Oct. 7, 2014) ($10,000 bond);

Calvin Klein Trademark Trust, et al. v. The Partnerships, et

al., No. 1:13-cv-08186 (N.D. Ill. Jan. 14, 2014) ($10,000

bond); True Religion Apparel, Inc. v. Does 1-100, No.

12-cv-9894 (N.D. Ill. Dec. 20, 2012) ($10,000 bond); Tory

Burch LLC v. Zhong Feng, et al., No. 1:12-cv-09066 (N.D.

Ill. Nov. 15, 2012) ($10,000 bond); Deckers Outdoor Corp.

v. Does 1-1,281, No. 1:12-cv-01973 (N.D. Ill. Apr. 4, 2012)

($10,000 bond). Now, Legend Trading seeks to persuade the

court that the bond amount should be increased.

′′A party may move the court to increase or decrease the

amount of security so long as the restraint or injunction is in

effect.′′ 13 Moore’s Federal Practice—Civil § 65.50; see

also Gateway, 35 F.3d at 1142 (noting ′′that it is within the

district court’s discretion to [*28] increase or decrease the

amount as necessary to comport with its findings, or to

account for changed circumstances′′); Laboratory Corp. of

America Holdings v. Kearns, 84 F. Supp. 3d 447, 2015 WL

413788, at *16 (M.D.N.C. 2015) (explaining that ′′should

either party conclude that a different figure would be proper,

it may move for adjustment of the bond amount while the

preliminary injunction is still in effect′′). The burden of

establishing the bond amount rests with the party to be

restrained, who is in the best position to determine the harm

it will suffer from a wrongful restraint. In re President

Casinos, Inc., 360 B.R. 262, 266 (B.A.P. 8th Cir. 2007); APR

Energy, LLC v. First Inv. Grp. Corp., No. 3:14-CV-575-J34JBT, 2015 U.S. Dist. LEXIS 20524, 2015 WL 736275, at

*17 (M.D. Fla. Feb. 20, 2015); Philips Electronics N. Am.

Corp. v. Hope, 631 F.Supp.2d 705, 724 n. 14

(M.D.N.C.2009); Int’l Equity Investments, Inc. v. Opportunity Equity Partners Ltd., 441 F. Supp. 2d 552, 566

(S.D.N.Y. 2006), aff’d, 246 Fed. App’x 73 (2d Cir. 2007).

Here, defendants allege that the injunction seized its PayPal

funds in the amount of $14,278 (Legend Trading) and

$11,744.89 (mqxxc), and that the ten-thousand dollar

$10,000 bond is insufficient to compensate all defendants

where possibly millions of dollars have been frozen. But, in

their request to increase the bond, defendants present

nothing more than self-serving affidavits with no supporting

evidence to justify such an increase. Given their better

position to assess the damage that might result from having

their PayPal accounts frozen, defendants should have

provided [*29] affidavits or other evidence to establish the

financial damage it would suffer from the injunction during

the pendency of the case. See Manpower Inc. v. Mason, 377

F. Supp. 2d 672, 681 (E.D. Wis. 2005) (declining to require

a $20 million bond where the restrained party provided no

evidence to support that this amount was a reasonable

expectation of the pecuniary harm it would suffer due to the

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injunction). It has not done so. As such, the court will not

increase the bond amount. Defendants, however, may apply

for a bond increase in the future if they can produce

competent evidence of the pecuniary harm they may

reasonably expect to suffer on account of this injunction.

CONCLUSION AND ORDER

For these reasons, defendants’ motions to dismiss and to

release frozen funds (dkts. 50, 57) are denied.

Date: September 29, 2015

/s/ Joan Humphrey Lefkow

U.S. District Judge

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Positive

As of: June 26, 2013 11:35 AM EDT

Lorillard Tobacco Co. v. Montrose Wholesale Candies & Sundries, Inc.

United States District Court for the Northern District of Illinois, Eastern Division

April 17, 2008, Decided; April 17, 2008, Filed

No. 03 C 5311 Consolidated with No. 03 C 4844

Reporter: 2008 U.S. Dist. LEXIS 31761

LORILLARD TOBACCO COMPANY, a Delaware Corporation, Plaintiff, v. MONTROSE WHOLESALE CANDIES AND SUNDRIES, INC., et al., Defendant.

Subsequent History: Motion granted by Lorillard Tobacco Co. v. Montrose Wholesale Candies & Sundries,

Inc., 2008 U.S. Dist. LEXIS 40369 (N.D. Ill., Apr. 30,

2008)

Prior History: Lorillard Tobacco Co. v. Montrose Wholesale Candies & Sundries, Inc., 2008 U.S. Dist. LEXIS

29229 (N.D. Ill., Apr. 8, 2008)

Core Terms

statutory damages, evidentiary hearing, the Lanham Act,

recommendation, counterfeit, trademarks

Counsel: [*1] For Lorillard Tobacco Company, a Delaware corporation (1:03-cv-05311), Plaintiff: John S. Pacocha, LEAD ATTORNEY, Cameron Matthew Nelson,

Herbert H. Finn, Howard Kevin Jeruchimowitz, Jeffrey G. Mote, Paul A. Haskins, Greenberg Traurig, LLP.,

Chicago, IL; Jason B. Elster, Greenberg Traurig, Chicago, IL.

For Kirk D Kiryakos (1:03-cv-05311), Defendant, Counter Claimant: Robert A. Egan, LEAD ATTORNEY, Robert A. Egan P.C., Chicago, IL.

For Ameen Enterprises, Inc (1:03-cv-05311), Defendant:

Michael J. Boxerman, Marcus Boxerman & Chatman

LLP, Chicago, IL.

For Montrose Wholesale Candies and Sundries Inc, (Defendant in 03cv4844), Ray Hazemi, (Defendant in

03cv4844) (1:03-cv-05311), Defendants: Robert A. Habib,

LEAD ATTORNEY, Attorney at Law, Chicago, IL.

For Allied Tobacco Consulting and Distribution, Inc.,

Big Ash Fine Cigars and Tobacco Inc, Peter Karfias (1:03

-cv-05311), Respondents: David Michael Kroeger,

LEAD ATTORNEY, Jenner & Block LLP, Chicago, IL.

For S&D Pantry Inc., Citation Respondent, Harwood

Heights Gas Mart, Inc., Formont Corp. (1:03-cv-05311),

Respondents: Robert R. Benjamin, LEAD ATTORNEY, Francisco E. Connell, Querrey & Harrow, Ltd., Chicago, IL.

For Giti Azari (1:03-cv-05311), [*2] deponent: Robert

R. Benjamin, LEAD ATTORNEY, Francisco E. Connell,

Querrey & Harrow, Ltd., Chicago, IL.

For Lorillard Tobacco Company (1:03-cv-05311), Counter Defendant: John S. Pacocha, LEAD ATTORNEY,

Cameron Matthew Nelson, Jeffrey G. Mote, Paul A.

Haskins, Greenberg Traurig, LLP., Chicago, IL.

For Lorillard Tobacco Company, a Delaware corporation

(1:03-cv-04844), Plaintiff: John S. Pacocha, LEAD ATTORNEY, Cameron Matthew Nelson, Herbert H. Finn,

Howard Kevin Jeruchimowitz, Jeffrey G. Mote, Kevin

D. Finger, Greenberg Traurig, LLP., Chicago, IL; Jason B.

Elster, Greenberg Traurig, Chicago, IL.

For Allied Tobacco Consulting and Distribution Inc (1:03

-cv-04844), Plaintiff: David Michael Kroeger, LEAD ATTORNEY, Jenner & Block LLP, Chicago, IL.

For Montrose Wholesale Candies and Sundries Inc, Ray

Hazemi (1:03-cv-04844), Defendants: Robert A.

Habib, Attorney at Law, Chicago, IL.

Ray Hazemi, Sandra Hazemi (1:03-cv-04844), Defendants, Pro se, Lombard, IL.

For Discount Tobacco Distributors Inc, an Illinois corporation, Samina Haq, Syed Haq (1:03-cv-04844), Defendants: William H. Hrabak, LEAD ATTORNEY, Gregory

Lawrence Shugar, Sara Louise Spitler, Goldstine, Skrodzki, Russian, Nemec & Hoff, Ltd., [*3] Burr Ridge,

IL.

For Sandra Hazemi (1:03-cv-04844), Defendant: Jeffrey

H. Bunn, LEAD ATTORNEY, Horwood Marcus &

Berk Chartered, Chicago, IL; Robert A. Habib, Attorney

at Law, Chicago, IL.

Jessica Bloodgood

Case: 1:20-cv-02640 Document #: 46-2 Filed: 07/10/20 Page 25 of 78 PageID #:6402
For Karfias, Big Ash Fine Cigars and Tobacco Inc (1:03-

cv-04844), Respondents: David Michael Kroeger,

LEAD ATTORNEY, Jenner & Block LLP, Chicago, IL.

For Formont Corp. (1:03-cv-04844), Respondent: Francisco E. Connell, Robert R. Benjamin, Querrey & Harrow, Ltd., Chicago, IL.

Judges: MARVIN E. ASPEN, United States District

Judge.

Opinion by: MARVIN E. ASPEN

Opinion

MEMORANDUM ORDER AND OPINION

MARVIN E. ASPEN, District Judge:

On November 18, 2007, we issued a judgment awarding

Lorillard Tobacco Company (′′Plaintiff′′) $ 2.5 million

in statutory damages under the Lanham Act. 1

Subsequently, Montrose Wholesale Candies and Sundries, Inc.,

Ray Hazemi, and Sandra Hazemi (collectively referred

to as the ′′Defendants′′) filed a Rule 59(e) motion to alter or amend that judgment. We referred Defendants’

motion to Magistrate Judge Cole, and he issued a Report and Recommendation on February 25, 2008 (′′Report′′) recommending that we deny Defendants’ motion.

Presently before us is Defendants’ 2

objections to Magistrate Judge Cole’s Report. For the reasons [*4] set forth

below, we overrule Defendants’ objections and adopt

the Report.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 72(b) sets forth the procedure for objecting to a magistrate judge’s report and

recommendation on dispositive matters: ′′Within 10 days

after being served with a copy of the recommended disposition, a party may serve and file specific, written objections to the proposed findings and [*5] recommendations.′′ Fed. R. Civ. P. 72(b). To comply with the rule in

the Seventh Circuit, a party must ′′specify each issue

for which review is sought[, but need] not [include] the

factual or legal basis of the objection.′′ Johnson v. Zema

Sys. Corp., 170 F.3d 734, 741 (7th Cir. 1999). Generally, a district court reviews a magistrate’s report and recommendation for clear error. Fed. R. Civ. P. 72(a); see

Hartford Accident & Indemnity v. Beede, No. 76 C 3319,

1987 U.S. Dist. LEXIS 3216, 1987 WL 9977, at *2

(N.D. Ill. Apr. 20, 1987). However, the district court undertakes a de novo review of those portions of the Report to which a party specifically objected. Johnson, 170

F.3d at 741; Fed. R. Civ. P. 72(b).

ANALYSIS

On February 25, 2008, Magistrate Judge Cole issued a Report recommending that we deny Defendants’ Rule

59(e) motion. As the Report correctly indicated, ′′’[a]

court may grant a Rule 59(e) motion to alter or amend

the judgment if the movant presents newly discovered evidence that was not available at the time of trial or if

the movant points to evidence in the record that clearly establishes a manifest error of law or fact.’′′ County of

McHenry v. Ins. Co. of the W., 438 F.3d 813, 819 (7th

Cir. 2006) (quoting [*6] Matter of Prince, 85 F.3d 314,

324 (7th Cir. 1996)). However, a party may not use a

Rule 59(e) motion ′′to advance arguments or theories that

could and should have been made before the district

court rendered a judgment.’′′ Id. (quoting LB Credit Corp.

v. Resolution Trust Corp., 49 F.3d 1263 (7th Cir.

1995)).

Contrary to Defendants’ arguments, Magistrate Judge

Cole’s Report found that: (1) we need not conduct an evidentiary hearing to determine statutory damages in this

case; (2) the Lanham Act authorizes $ 2.5 million in statutory damages in this case; and (3) Mrs. Hazemi’s arguments were insufficient to show that the court erred in

holding her jointly and severally liable.

Defendants now object to the Report and argue that we

should grant their Rule 59(e) motion because: (1) the court

failed to make specific findings and conduct an evidentiary hearing regarding the amount of statutory damages;

(2) the maximum statutory damages recoverable under

the Lanham Act is $ 1 million based on the facts of this

case; and (3) Plaintiff’s Second Amended Complaint

did not request statutory damages under the Lanham Act.

We address each of these objections in turn below.

A. Objections to the Statutory [*7] Damages Calculation

Defendants argue that Magistrate Judge Cole erred in de1 Magistrate Judge Cole provided an in-depth description of the history and background of this case in Lorillard Tobacco Co. v.

Montrose Wholesale Candies & Sundries, Inc., Nos. 03 C 5311 and 03 C 4844, 2005 U.S. Dist. LEXIS 28917, 2005 WL

311582, at *1-13 (N.D. Ill. Nov. 8, 2005), adopted by Docket No. 229 (N.D. Ill. Jan. 30, 2006). Therefore, we will assume familiarity with the facts and only restate them as necessary to examine the issues below.

2 While we acknowledge that Sandra Hazemi filed a separate response on March 3, 2008 (and a virtually identical reply on

March 24, 2008), for the purpose of this opinion we will assume that Mrs. Hazemi would join in Montrose’s and Ray Hazemi’s arguments. As relevant, we will indicate where Mrs. Hazemi has asserted objections that differ from those of the other Defendants.

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nying its Rule 59(e) motion because Plaintiff never produced evidence sufficient to justify the statutory damage award in this case. Specifically, Defendants now argue

for the first time that we were required to weigh the

seven factors listed in the Copyright Act in order to award

statutory damages in this case. 3

(See Def. Objection at

2-4).

While courts have held that the seven factors under the

Copyright Act offer some guidance in Lanham Act cases,

see, e.g., Gucci v. Am., Inc. v. Duty Free Apparel, Ltd.,

315 F. Supp. 2d 511, 520 (S.D.N.Y. 2004), [*8] courts are

′′not required to follow any rigid formula′′ when applying these factors. See Chi-Boy Music v. Charlie Club, 930

F.2d 1224, 1229 (7th Cir. 1991). In addition, Magistrate Judge Cole acknowledged these factors in his September 10, 2007 Report and found that they weighed

against Defendants not only because they are deemed to

have acted willfully by virtue of the default judgment,

but also because their repeated discovery abuses prevented actual damages from being proven. (See 9/10/07

Report at 5, 6, 9 (Case No. 03-5311, Docket No.

197)). Thus, we find that Defendants’ objection lacks

merit.

To the extent that Defendants repeat their request for an

evidentiary hearing and/or trial in this case to determine willfulness, we again find that this argument is without merit. 4 As we have previously indicated, because

we entered a default judgment in this case, all allegations of the Plaintiff’s complaint are taken as true. See

Cass County Music Co. v. Muedini, 55 F.3d 263, 266 (7th

Cir. 1955).

5 By virtue of this rule, Defendants are

deemed to have acted willfully. (See Second Am. Compl.

P 20 (alleging that Defendants acted ′′with the intent to

confuse and mislead the public′′)). 6

In addition to the above factors, Defendants also argue

that we were required to conduct an evidentiary hearing on

statutory damages. Defendants rely upon Dundee Cement Co. v. Howard Piper Concrete Products, Inc., for

the proposition that even after a default judgment, a hearing on damages is required unless ′′the amount claimed

is liquidated or capable of ascertainment from definite figures contained in the documentary evidence or in detailed affidavits.′′ [*11] 722 F.2d 1319, 1323 (7th Cir.

1983).

7 Magistrate Judge Cole distinguished Dundee Cement, however, because it did not involve statutory damages. (See Report at 2; see also 9/10/07 Report at 6 (explaining that no evidentiary hearing is necessary because

′′cases like this, where the information needed to prove

actual damages is in the infringer’s control, are the very

reason for the provision allowing statutory damages

awards; no prove-up is necessary′′)).

We agree with Magistrate Judge Cole that the statutory

damage award here may be determined without an evidentiary hearing. First, requiring an evidentiary hearing for

3

These Copyright Act factors include:

′′(1) the expenses saved and the profits reaped; (2) the revenues lost by the plaintiff; (3) the value of the copyright;

(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; (7) the potential for discouraging the defendant.′′

Gucci v. Am., Inc. v. Duty Free Apparel, Ltd., 315 F. Supp. 2d 511, 520 (S.D.N.Y. 2004) (internal citations omitted).

4 Mrs. [*9] Hazemi’s objections focus on this argument and emphasize, as she has in the past, that no evidence has been

proven against her and that thus she should be afforded a trial to determine the extent of her involvement in the business.

5 Defendants also argue that Top Brand and Gucci support this argument because they require solid evidence of willfulness not present here. (Def. Objection P 6). These cases are distinguishable, however, because neither involved a default judgment. See Nike,

Inc. v. Top Brand, No. 00 Civ. 8179, 2006 U.S. Dist. LEXIS 76543, 2006 WL 2946472, at *1 (S.D.N.Y. Feb. 27, 2006) (explaining that the decision is limited to the defendants whose liability was determined on summary judgment); Gucci Am.,, 315 F.

Supp. at 513 (noting that a two-day bench trial was conducted to determine willfulness).

6

In addition, we agree with Magistrate Judge Cole that Mrs. Hazemi has failed to provide any legal reason why our judgment

should be vacated against her. In her objections, Mrs. Hazemi insinuates that Magistrate Judge Cole is somehow biased against her.

Mrs. Hazemi also argues that she is being found guilty by association merely as the wife of Ray Hazemi and that she was

never given the opportunity to speak [*10] at depositions. (See Sandra Hazemi’s Objections at 1, 3). However, Plaintiff’s Second Amended Complaint includes allegations regarding Mrs. Hazemi’s involvement, which are taken as true upon default judgment. (See Second Am. Compl. P 4); see also Cass County Music Co., 55 F.3d at 266. In addition, while Mrs. Hazemi may not have

had the opportunity to say what she wished during depositions, we find that she had ample time before we entered judgment to

put forth any arguments because this case has been pending for five years and she has attended numerous court appearances. (Report at 6). Thus, we do not find that we committed ′′a manifest error of law or fact′′ by finding her jointly and severally liable

in our November 18, 2007 judgment.

7 We note that Defendants only mentioned this argument in one sentence at the end of their brief. (See Def. Objections P 13). However, because Defendants’ original Rule 59(e) motion had a more lengthy discussion of this case, we will address its arguments

here. (See Def. Rule 59(e) Motion 4-5).

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statutory damages here would defeat the purpose of 15

U.S.C. § 1117(c)(2), which recognized that damages in

trademark cases may be difficult to prove due to defendant conduct. See S. Rep. No. 104-177, at *10 (′′The committee recognizes that under current law, a civil litigant

may not [*12] be able to prove actual damages if a sophisticated, large-scale counterfeiter has hidden or destroyed information about his counterfeiting.′′). This purpose is particularly relevant here given Defendants’

repeated discovery abuses. (See 11/8/05 Report (Case

No. 03-4844, Docket No. 197)). In addition, other courts

have awarded statutory damages after default judgment

without conducting evidentiary hearings. 8

Given these considerations and our [*13] discretion in determining statutory damages awards, we agree with Magistrate Judge Cole that our award of $ 2.5 million in

statutory damages without an evidentiary hearing was

not an error of law. 9

C. ′′Type of Goods′′ Objection

Defendants also argue that the judgment should be

amended because the maximum statutory damages award

recoverable in this case is $ 1 million because only one

type of goods (cigarettes) are at issue. (Def. Objection at

4). The Lanham Act states that ′′if the court finds that

the use of the counterfeit mark was willful,′′ then the court

may award [*15] ′′not more than $ 1,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed.′′ 15 U.S.C. § 1117(c)(2) (emphasis added).

Magistrate Judge Cole rejected this argument because

not only had Defendants failed to cite any case law in support of its proffered statutory interpretation, but also because other cases indicate that a plaintiff may recover

$ 1 million in statutory damages for each trademark violated even if only one product is involved. (Report at

3); see also Top Brand Co., No. 00 Civ. 8179, 2006 U.S.

Dist. LEXIS 76543, 2006 WL 2946472, at *3 (awarding $ 12 million in statutory damages for three counterfeit goods each bearing four trademarks and $ 5 million for one counterfeit good bearing five trademarks);

Gucci Am., Inc., 315 F. Supp. 2d at 521 n.8; Variety Wholesalers, Inc., 274 F. Supp. 2d at 1374. Thus, because Plaintiff alleged that five of its trademarks were violated,

Magistrate Judge Cole found that we have discretion to

award up to $ 5 million in statutory damages. (Report at 6;

see also Second Amended Compl. P 16).

Defendants now claim that Magistrate Judge Cole’s interpretation of the statute defies commonsense and that

none of the above cases are controlling [*16] in this district. Regardless, Defendants still have not cited one

case that supports their interpretation, and we agree with

Magistrate Judge Cole’s interpretation of the statutory

language.

C. Dispute regarding Second Amended Complaint

Defendants finally argue that Plaintiff’s Second Amended

Complaint never requested statutory damages under the

Lanham Act specifically, and thus that Magistrate Judge

Cole Report incorrectly awarded them. Defendants’ argument appears to be essentially that because Plaintiff’s

statutory damage request is at the end of its complaint, this means that Plaintiff is only claiming statutory

damages under the last count of its complaint, Inducement to Commit Fraud. (Def. Objection at 5). We dis8

See, e.g., Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 63-64 (1st Cir. 2002) (finding that no evidentiary hearing on statutory

damages was required after default judgment since was within district judge’s discretion to award within an amount within the statutory range); Microsoft Corp. v. Nop, No. CIV S-07-1276, 549 F. Supp. 2d 1235, 2008 U.S. Dist. LEXIS 18727, 2008 WL

686584, at *4 (E.D. Cal. Mar. 11, 2008) (determining amount of statutory damages without an evidentiary hearing and noting

that ′′statutory damages are appropriate in default judgment cases because the information needed to prove actual damages is within

the infringers’ control and is not disclosed′′ (internal citations omitted)); Warner Bros. Records, Inc. v. Hentz, No. 06-cv-686-

JPG, 2007 U.S. Dist. LEXIS 63716, 2007 WL 2481289, at *4 (S.D. Ill. Aug. 29, 2007).

9 Defendants also attempt to distinguish the statutory damage awards in the cases cited in Magistrate Judge Cole’s Report. For example, Defendants argue that: Top Brand is distinguishable because the defendant’s infringing operations in that case led to the production of millions of infringing goods; Gucci is distinguishable because the defendants continued to sell counterfeit goods after the lawsuit was filed; and Variety Wholesalers, Inc. is distinguishable because the court awarded less than $ 2 million in damages

even though defendants was a company with over 450 stores and $ 600 million in gross annual sales. (Def. Objections at 3-4).

However, we find these distinctions irrelevant because these courts also focused upon the defendants’ willfulness and abusive conduct during the litigation, as has been repeatedly emphasized in this case. See Top Brand, No. 00 Civ. 8179, 2006 U.S. Dist.

LEXIS 76543, 2006 WL 2946472, at *2 (examining the extent of the defendants’ operation as only one factors in determining

the statutory [*14] damage amount and also stressing that ′′the willfulness of their conduct, and their behavior in this litigation all

weigh towards a grant of the maximum in statutory damages′′); Gucci Am., Inc., 315 F. Supp. 2d at 521 (determining that defendant acted willfully not only because defendant continued to sell counterfeit goods after the suit was filed, but also due to defendant’s ′′bold contempt for the law′′ exhibited both during the two-year period it sold the counterfeit goods and during the course

of the litigation).

In addition, Defendants’ reliance upon Nike Inc. v. Variety Wholesalers, Inc. as evidence that the award here was excessive is misplaced because the award in that case was based upon actual damages determined after a trial, and did not involve a willful defendant. See 274 F. Supp. 2d 1352, 1374 (S.D. Ga. 2003).

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agree. Reviewing Plaintiff’s Second Amended Complaint, Plaintiff specifically asked for ′′statutory damages

in lieu of actual damages, as provided in 15 U.S.C. §

1117(c).′′ (Second Amended Compl. P F). While this request was at the end of the complaint and not specifically under Counts I, II, and III, this is of no consequence since Plaintiff is clearly is requesting relief for all

of its counts at the end of its complaint and Plaintiff

clearly cites to the Lanham Act in [*17] Paragraph F.

Thus, we agree with Magistrate Judge Cole that this argument is without merit.

CONCLUSION

For the reasons set forth below, we overrule Defendants’

objections and adopt Magistrate Judge Cole’s Report.

Accordingly, Defendant’s Rule 59(e) motion is denied.

It is so ordered.

/s/ Marvin E. Aspen

MARVIN E. ASPEN

United States District Judge

Date: April 17, 2008

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2008 U.S. Dist. LEXIS 31761, *16

Jessica Bloodgood

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Positive

As of: June 26, 2013 1:24 PM EDT

Lorillard Tobacco Co. v. S&M Cent. Serv. Corp.

United States District Court for the Northern District of Illinois, Eastern Division

November 5, 2004, Decided ; November 8, 2004, Docketed

No. 03 C 4986

Reporter: 2004 U.S. Dist. LEXIS 22563; 2004 WL 2534378

LORILLARD TOBACCO COMPANY, Plaintiff, v. S&M

CENTRAL SERVICE CORPORATION, Defendant.

Disposition: Judgment entered for plaintiff. Plaintiff’s

request for a permanent injunction granted; Plaintiff’s Motion to Amend the Pleadings to Conform to the Evidence and Motion to Strike S&M’s Brief on Damages denied.

Core Terms

infringement, counterfeit, cigarettes, statutory damages,

trademark, attorney’s fees, tax return, actual damage,

motion to strike, award damages, packaging, brand,

reproduction, imitation, dollar, deter, personal liability,

likely to cause, injunction, cartons, genuine, corporate

officer, consumer product, destroying, registered,

deceive

Case Summary

Procedural Posture

Plaintiff the owner of five trademarks related to its cigarette products, brought post trial motions, seeking: an

award of statutory damages of $ 500,000, pursuant to 15

U.S.C.S. § 1117(c); an award of its costs and reasonable attorneys’ fees pursuant to 15 U.S.C.S. § 1117(b); a

permanent injunction barring defendant infringer from

selling, offering for sale or distributing counterfeit cigarettes, and, amendment of to add individual defendants.

Overview

The complaint alleged that the infringers violated the

Trademark Act of 1946, 15 U.S.C.S. § 1051 et seq., by

willfully offering for sale, selling, and distributing counterfeit versions of the owner’s Newport cigarettes. A

jury found that consumers would likely confuse the counterfeits with genuine Newports, and the infringing corporation had acted willfully or with willful blindness. The

owner also challenged financial data in the form of tax

returns submitted by the infringing corporation as improper. The tax forms were not a pleading, and actually showed real profits for the tax years, and so were

not prejudicial to the owner, so the motion to strike was

denied. The court noted that the five trademarks infringed were of considerable value. Since part of the purpose of statutory damages was to deter the current violator and other potential future violators, actual damages

were less relevant and statutory damages were appropriate. The court found that a $ 250,000 award was fully supported by its concurrence with the jury’s determination.

The owner also sought to add, after the fact, two individual officers of the infringer as defendants to conform to the evidence.

Outcome

The court awarded statutory damages of $ 50,000 per infringed mark, reasonable costs and attorneys’ fees, and

a permanent injunction. The motion to amend the pleadings to conform to the evidence adding two individuals as defendants was denied.

LexisNexis® Headnotes

Civil Procedure > ... > Defenses, Demurrers & Objections > Motions to Strike > General Overview

HN1 See Fed. R. Civ. P. 12(f).

Civil Procedure > Pleading & Practice > General Overview

Civil Procedure > Pleading & Practice > Pleadings > Answers

Civil Procedure > Pleading & Practice > Pleadings > Rule Application & Interpretation

HN2 A memorandum submitted in support of a court’s determination of damages is not a pleading under Fed. R.

Civ. P. 7(a)

Civil Procedure > ... > Defenses, Demurrers & Objections > Motions to Strike > General Overview

Civil Procedure > ... > Standards of Review > Harmless & Invited Errors > General Overview

HN3 The language of Fed. R. Civ. P. 37(c) allows a

court to consider evidence that otherwise would be excluded, when the result of its consideration is harmless.

Tax Law > Federal Income Tax Computation > General Overview

Tax Law > Federal Income Tax Computation > Losses > General

Overview

Tax Law > ... > Losses > Net Operating Losses > General Overview

Jessica Bloodgood

Case: 1:20-cv-02640 Document #: 46-2 Filed: 07/10/20 Page 30 of 78 PageID #:6407
Torts > Remedies > Damages > Taxation

HN4 A net operating loss is a non cash deduction that allows a company to ′′carry-forward′′ and/or ′′carry-back′′

prior year losses and recognize them as current year tax

deductions. 26 U.S.C.S. § 172.

Copyright Law > ... > Damages > Types of Damages > Statutory

Damages

Trademark Law > Causes of Action Involving Trademarks > Infringement Actions > General Overview

Trademark Law > ... > Infringement Actions > Remedies > General

Overview

Trademark Law > ... > Remedies > Damages > General Overview

Trademark Law > ... > Damages > Types of Damages > Statutory

Damages

Trademark Law > ... > Trademark Counterfeiting Act > Civil Actions > General Overview

HN5 15 U.S.C.S. § 1117 allows a plaintiff to elect, at

any time before final judgment is rendered, one of two alternative recovery options for trademark infringement:

(1) the actual damages caused by the infringement, 15

U.S.C.S. § 1117(a); or (2) statutory damages. 15 U.S.C.S.

§ 1117(c). Congress provided the statutory damages option of 15 U.S.C.S. § 1117(c) through the Anticounterfeiting Consumer Protection Act of 1996, Pub. L. No. 104-

153, § 7, 110 Stat. 1368. That option was added due

to the concern that a counterfeiter might hide, alter, or destroy records, thus making it impossible for a plaintiff

to determine the scope of, or be able to prove, actual damages.

Trademark Law > ... > Remedies > Damages > General Overview

Trademark Law > ... > Trademark Counterfeiting Act > Civil Actions > General Overview

Trademark Law > ... > Civil Actions > Remedies > General Overview

Trademark Law > ... > Civil Actions > Remedies > Damages

HN6 See 15 U.S.C.S. § 1117(c)(1).

Trademark Law > ... > Remedies > Damages > General Overview

Trademark Law > ... > Trademark Counterfeiting Act > Civil Actions > General Overview

HN7 15 U.S.C.S. § 1117(c)(2) allows a statutory award

of up to $ 1,000,000 per counterfeit mark if the court finds

that the use of the counterfeit mark was willful.

Copyright Law > ... > Remedies > Damages > General Overview

Copyright Law > ... > Damages > Types of Damages > Compensatory Damages

Copyright Law > ... > Damages > Types of Damages > Statutory

Damages

Trademark Law > ... > Remedies > Damages > General Overview

HN8 A court awarding statutory damages is not required

to follow any rigid formula but instead enjoys wide discretion. In computing the award amount, a court may consider factors such as the difficulty or impossibility of

proving actual damages, the circumstances of the infringement, and the efficacy of the damages as a deterrent. Additionally, statutory damages are appropriate to penalize the infringer and deter future violations when the

infringement was willful.

Trademark Law > Conveyances > General Overview

Trademark Law > ... > Remedies > Damages > General Overview

Trademark Law > ... > Counterfeiting > Trademark Counterfeiting

Act > General Overview

HN9 A counterfeiter must fear more than just having to

turn over his ill gotten gains to the rightful owners. Instead, the counterfeit must understand that he risks his financial future by engaging in his illegal practice.

Trademark Law > ... > Factors for Determining Confusion > Intent

of Defendant to Confuse > General Overview

HN10 Willful infringement may be attributed to a defendant’s actions where that party had knowledge that it’s

conduct constituted infringement or where it showed a

reckless disregard for the owner’s rights. Thus, knowledge need not be proved directly, but can be inferred from

a defendant’s conduct. Willful infringement may be

shown by the fact that the defendant ignored the plaintiff’s notices, did not seek advice of an attorney, and

passed the matter off as a nuisance.

Civil Procedure > ... > Attorney Fees & Expenses > Basis of Recovery > Statutory Awards

Civil Procedure > ... > Costs & Attorney Fees > Costs > General Overview

HN11 A prevailing party is entitled to its costs other

than attorneys’ fees as a matter of course pursuant to Fed.

R. Civ. P. 54(d)(1).

Antitrust & Trade Law > ... > Private Actions > Costs & Attorney

Fees > Clayton Act

Civil Procedure > Remedies > Costs & Attorney Fees > General Overview

Civil Procedure > ... > Attorney Fees & Expenses > Basis of Recovery > Statutory Awards

Trademark Law > ... > Remedies > Damages > General Overview

HN12 A court in exceptional cases of infringement may

award reasonable attorney fees to the prevailing party,

pursuant to 15 U.S.C.S. § 1117(a). Exceptional cases allowing for an award of attorneys’ fees include acts of infringement that are malicious, fraudulent, deliberate or

willful.

Civil Procedure > ... > Pleadings > Amendment of Pleadings > Conforming Pleadings to Evidence

Patent Law > Remedies > Equitable Relief > Injunctions

Trademark Law > Conveyances > General Overview

Trademark Law > ... > Remedies > Damages > General Overview

Trademark Law > ... > Remedies > Equitable Relief > General

Overview

Trademark Law > ... > Civil Actions > Remedies > General Overview

Trademark Law > ... > Civil Actions > Remedies > Injunctions

HN13 A court has power to enter an injunction against future infringement, according to the principles of equity

and upon such terms as the court may deem reasonable,

to prevent the violation of any right of the registrant

of a mark registered in the Patent and Trademark Office.

Page 2 of 9

2004 U.S. Dist. LEXIS 22563, *22563

Jessica Bloodgood

Case: 1:20-cv-02640 Document #: 46-2 Filed: 07/10/20 Page 31 of 78 PageID #:6408
15 U.S.C.S. § 1116 (a).

Business & Corporate Law > ... > Management Duties & Liabilities > Causes of Action > General Overview

Trademark Law > Causes of Action Involving Trademarks > Infringement Actions > General Overview

Trademark Law > ... > Parties > Defendants > Personal Liability of

Corporate Directors, Employees & Shareholders

Trademark Law > ... > Remedies > Damages > General Overview

HN14 As a general rule, corporate officers cannot be held

personally liable for infringing actions taken by the corporation. However, an individual may be held liable

for a corporation’s infringement under the theory of vicarious liability or contributory liability. Personal liability for trademark infringement is established if a corporate officer is a moving, active, conscious force behind the

defendant corporation’s infringement.

Civil Procedure > ... > Pleadings > Amendment of Pleadings > General Overview

HN15 A district court has the ability, under Fed. R. Civ.

P. 15, to add new defendants after trial and judgment

has been entered. However, if the court adds a new party

to the litigation, due process requires that the new

party is given an opportunity to respond and contest that

personal liability.

Civil Procedure > ... > Pleadings > Amendment of Pleadings > General Overview

HN16 Although Fed. R. Civ. P. 15 provides a liberal

policy for amending pleadings, the right to amend is not

absolute.

Counsel: [*1] For LORILLARD TOBACCO COMPANY, A DELAWARE CORPORATION, Plaintiff: John

S. Pacocha, Jeffrey G. Mote, Daniel T Fahner, Cameron Matthew Nelson, Greenberg Traurig, LLP., Chicago, IL.

For S&M CENTRAL SERVICE CORPORATION, AN

ILLINOIS CORPORATION, Defendant: Alexander

Sotirios Michalakos, Zanayed & Michalakos, Ltd., Chicago, IL.

Judges: JAMES F. HOLDERMAN, District Judge.

Opinion by: JAMES F. HOLDERMAN

Opinion

MEMORANDUM OPINION AND ORDER

JAMES F. HOLDERMAN, District Judge:

Plaintiff Lorillard Tobacco Co., (′′Lorillard′′), filed suit

against defendant S&M Central Service Corporation,

(′′S&M′′), alleging that S&M infringed of five of Lorillard’s registered trademarks in violation of the Trademark Act of 1946, 15 U.S.C. § 1051 et seq., (′′Lanham

Act′′), by willfully, or with willful blindness, offering for

sale, selling and distributing counterfeit versions of Lorillard’s Newport cigarettes. At the conclusion of a two

day trial on the merits, a jury returned a verdict in favor

of Lorillard and stated: (1) yes, consumers would

likely confuse the cigarette packs bearing the counterfeit

marks sold by S&M with genuine Newport cigarette

packs; and (2) yes, S&M’s actions were [*2] taken willfully or committed with willful blindness. (Dkt. No.

49.)

Lorillard’s August 4, 2004 post-trial motions request this

court to (1) award Lorillard statutory damages of five

hundred thousand dollars, ($ 500,000) 1

, pursuant to 15

U.S.C. § 1117(c); (2) award Lorillard costs and reasonable attorneys’ fees pursuant to 15 U.S.C. § 1117(b);

(3) enter a permanent injunction barring S&M from selling, offering for sale or distributing counterfeit cigarettes, and, (4) amend the pleadings to add Safwan Alkhawan (′′Alkhawan′′) and Marwan Khawam (′′Khawam′′)

as individually liable defendants in order to conform the

pleadings to the evidence presented at trial. Lorillard

also submitted a motion on August 16, 2004 to Strike the

Defendant’s Brief on Damages pursuant to Rules 12,

26 and 37 of the Federal Rules of Civil Procedure,

(′′Rules′′).

[*3] S&M, in its Brief Regarding Damages of August

6, 2004, requests that if any damages are awarded, the

court should award 15 U.S.C. § 1117(c)’s minimum

amount of $ 500 per infringed mark for a total award of

$ 2,500. S&M also argues that an award of attorneys’

fees and costs is not appropriate in this case.

For the reasons set forth below, this court awards to Lorillard, pursuant to 15 U.S.C. § 1117(c), statutory damages of Fifty Thousand Dollars ($ 50,000) per infringed

mark for a total statutory damage award of Two Hundred Fifty Thousand Dollars ($ 250,000). This court also

finds that Lorillard is entitled to receive reasonable

costs and attorneys’ fees pursuant to 15 U.S.C. § 1117(b)

but the parties must comply with the requirements of Local Rule 54.3 before this court can calculate a figure

for reasonable costs and attorneys’ fees. In addition, this

court grants Lorillard’s request for a permanent injunction, but denies Lorillard’s Motion to Amend the Pleadings to Conform to the Evidence and denies Lorillard’s August 16, 2004 Motion to Strike S&M’s Brief

on Damages.

BACKGROUND

1

Lorillard arrived at the $ 500,000 figure by requesting damages of one hundred thousand dollars, ($ 100,000), for each of the

five infringed trademarks.

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2004 U.S. Dist. LEXIS 22563, *22563

Jessica Bloodgood

Case: 1:20-cv-02640 Document #: 46-2 Filed: 07/10/20 Page 32 of 78 PageID #:6409
A. Lorillard Tobacco Company

[*4] Lorillard is the fourth largest tobacco company in

the United States. (Stipulation and Statement of Uncontested Facts P 4, Ex. 1 to the Pre-Trial Order, [hereinafter Uncontested Facts].) First introduced into the market in 1956, Newport is a Lorillard cigarette brand. (Id.

at P 6.) Newport is the leading brand of menthol cigarettes sold in the United States, and it is the second leading cigarette brand overall with an eight percent market

share. (Id. at P 6-7.)

Lorillard has protected the value of the Newport brand

by registering the five following trademarks with the

United States Patent and Trademark Office: Reg. No.

1,108,876; Reg. No. 1,178,413; Reg. No. 1,191,816; Reg.

No. 1,920,066; and Reg. No. 2,600,870. (Id. at P 10.)

Four of the marks, Nos. 1,108,876; 1,178,417; 1,191,816;

and 1,920,666, have attained incontestable status under

15 U.S.C. § 1115(b). (Id.)

B. S&M Central Service Corporation and its interaction

with Lorillard

S&M operates a gas station in Chicago, Illinois. (Trial

Tr. pg. 59.) The station sells gasoline, operates maintenance bays, and sells consumer products including food,

magazines and cigarettes. (Uncontested [*5] Facts at P

3.) Lorillard became aware of counterfeit Newport cigarettes at S&M when one of Lorillard’s sales representatives made a sales call to S&M. (Id. at 16.) The sales representative purchased two cartons of the counterfeit

cigarettes. (Trial Tr. at 42.) On July 18, 2003, Lorillard obtained an Ex Parte Seizure Order from this court authorizing a seizure of counterfeit cigarettes at S&M. The

executed search of S&M resulted in a seizure of 83 cartons and 9 packages of counterfeit Newport cigarettes

and associated business records.

ANALYSIS

A. Lorillard’s Motion to Strike S&M’s Brief on Damages

On August 16, 2004, Lorillard filed a motion to strike

S&M’s August 6, 2004 brief on damages under Rules 12,

26, and 37. Lorillard’s motion asserts two separate concerns. First, Lorillard argues that S&M’s brief contains misstatement of facts unsupported by citation to

the record. Second, Lorillard argues that S&M improperly included its 2001, 2002, and 2003 tax returns as an exhibit to S&M’s brief on damages. Lorillard argues that

it had requested financial information included tax returns from S&M during discovery, that S&M had

failed to disclose these items, and therefore [*6] S&M

should be prohibited from using these documents under

Rule 37. Lorillard requests the court to strike S&M’s

brief in whole, or in the alternative strike specific offending portions of the brief, and the impose sanctions

against S&M.

S&M counters that the documents provided with its

brief were specifically requested by the court at the end

of the trial, that these documents were not disclosed during discovery because they were not relevant and the information contained in the brief is appropriate since

S&M is making arguments to the court. S&M further argues that Lorillard should be sanctioned for bringing

its motion to strike.

Lorillard is unable to bring a motion to strike under

Rule 12(f). Rule 12(f) provides thatHN1 ′′the court may

strike from any pleading any insufficient defense or

any redundant, immaterial, impertinent, or scandalous

matter.′′ Fed. R. Civ. P. 12(f). The plain language of Rule

12(f) states that the Rule applies to ′′pleadings.′′

HN2 A memorandum submitted in support of a court’s determination of damages is not a pleading under the

Rules. See Fed. R. Civ. P. 7(a) (Defining pleadings as either a complaint, answer, reply to a counterclaim, an answer to a cross-claim, [*7] a third-party complaint,

or third-party answer); see, e.g., E.E.O.C. v. Admiral

Maint. Serv., L.P., 174 F.R.D. 643, 645-47 (N.D. Ill. 1997).

Consequently, by the plain language of Rules, Rule

12(f) is not applicable. The court notes, however, that

any evaluation of the facts must be based on the record

presented to the court and the court will provide proper citations to the record were appropriate.

Furthermore, this court concludes that it will consider

the tax returns provided by S&M in its brief on damages. HN3 The language of Rule 37(c) allows a court to

consider evidence that otherwise would be excluded

when the result is harmless. Fed. R. Civ. P. 37(c). In this

case, the court concludes that S&M’s decision to provide its 2001, 2003 and 2003 tax returns was harmless to

Lorillard and actually undercuts certain of S&M’s arguments due to the way that S&M uses the tax returns

in its brief on damages.

S&M provides its tax returns as support for its statement

that ′′S&M has not been a profitable enterprise. The attached tax returns of 2001, 2002, and 2003 show that there

was no taxable income to the company. As a result,

any award of damages would cause a hardship to the

[*8] Defendant.′′ (Def. Br. Regarding Damages of August 6, 2004 at 3.) However, the information contained in the tax returns contradict the statement that

any award of damages would be a hardship. It is true that

S&M reported zero taxable income on its 2001, 2002

and 2003 federal tax returns. However, the zero taxable

figure was the result of a Net Operating Loss deduction,

(′′NOL′′), that S&M was able to take during those

three years.HN4 A NOL is a non cash deduction that allows a company to ′′carry-forward′′ and/or ′′carry-back′′

prior year losses and recognize them as current year deductions. See 26 U.S.C. § 172. Consequently, S&M’s

statement that it ′′has not been a profitable enterprise′′ may

be technically correct for tax purposes since S&M reported no taxable income. However, the tax returns actually undermine S&M’s statement that ′′any award of

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damages would cause a hardship for the Defendant′′ because S&M recognized a profit before the NOL deduction. S&M’s creditability as to its statement of financial

condition is further undermined by the millions of dollars of wire transfers uncovered by Lorillard. (Pls. Brief on

Damages and Att’ys Fees of August 6, 2004 at Ex.

[*9] I.) Since the tax returns submitted by S&M are actually harmful to S&M and helpful to Lorillard, the

court concludes there is no harm as to Lorillard and will

deny Lorillard’s motion to strike. In light of this decision, S&M’s motion to sanction Lorillard for bringing its

motion to strike is denied.

B. Lorillard’s Motion for Statutory Damages under 15

U.S.C. § 1117(c)

HN5 Title 15, Section 1117 allows a plaintiff to elect, at

any time before final judgment is rendered, one of two

alternative recovery options for trademark infringement:

(1) the actual damages caused by the infringement, 15

U.S.C. § 1117(a); or (2) statutory damages. 15 U.S.C. §

1117(c). Congress provided the statutory damages option

of 15 U.S.C. § 1117(c) through the Anticounterfeiting

Consumer Protection Act of 1996, Pub. L. No. 104-153,

§ 7, 110 Stat. 1386. This option was added due to the

concern that a counterfeiter might hide, alter or destroy records, thus making it impossible for a plaintiff to determine the scope of, or be able to prove, actual damages.

Louis Vuitton v. Veit, 211 F. Supp. 2d 567, 583 (E.D.

Pa. 2002) [*10] (citing S. Rep. No. 177, 104 Cong.

(1995)).

Section 1117(c)(1) allows HN6 statutory damages of

′′not less than $ 500 and no more than $ 100,000 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)(1). In addition, HN7 Section 1117(c)(2)

allows a statutory award of up to $ 1,000,000 per counterfeit mark ′′if the court finds that the use of the counterfeit mark was willful.′′ 15 U.S.C. § 1117(c)(2).

Although section 1117(c) contains the dollar ranges for

possible statutory damage awards, the statute does not provides guidance on how to select a damage figure

within statutory dollar range. Courts interpreting section

1117(c) have looked by analogy to case law applying

the statutory damage provision of the Copyright Act contained in 17 U.S.C. § 504(c). Sara Lee v. Bags of New

York, Inc., 36 F. Supp. 2d 161, 166 (S.D.N.Y. 1999)

(′′Cases decided under the Copyright Act, which deals

with a similar problem and a similar legislative grant

to discretion, afford guidance here.′′). Accord, Tommy Hilfiger Licensing, Inc. v. Goody’s [*11] Family Clothing, Inc., 2003 U.S. Dist. LEXIS 8788, No. 1:00-CV-1934

-BBM, 2003 WL 22331254, at *28(N.D. Ga. May 9,

2003); Louis Vuitton, 211 F. Supp. 2d at 583; Microsoft

Corp. v. Logical Choice Computers, Inc., 2001 U.S. Dist.

LEXIS 479, No. 99 C 1300, 2001 WL 58950 at * 11

(N.D. Ill. Jan. 22, 2001); , Microsoft Corp. v. Software

Wholesale Club, Inc., 129 F. Supp. 2d 995, 1008 (S.D.

Tex. 2000).

The Seventh Circuit’s standard for awarding copyright

statutory damages under 17 U.S.C § 504(c), and thus the

standard this court will use for awarding trademark statutory damages under 15 U.S.C. § 1117(c), is enumerated in

Chi-Boy Music v. Charlie Club. 930 F.2d 1224, 1229

(7th Cir. 1991). Under the Chi-Boy standard, HN8 a court

awarding statutory damages is ′′not required to follow

any rigid formula but instead enjoys wide discretion.′′ Id.

In computing the award amount, a court may consider

factors such as ′′the difficulty or impossibility of proving

actual damages, the circumstances of the infringement,

and the efficacy of the damages as a deterrent.′′ Id. Additionally, statutory damages are appropriate to ′′penalize [*12] the infringer and deter future violations′′ when

the infringement was willful. Id. at 1230.

Lorillard argues for a damages award of at least $

100,000 per each of the five infringed marks for a minimum damage award of $ 500,000. Lorillard argues

that the $ 500,000 is appropriate in light of (1) S&M’s annual total gross sales of approximately $ 1.35 million,

(2) S&M’s annual total gross sales of cigarettes of $

300,000, (3) the ′′immeasurable value′′ of Lorillard’s

trademarks and the risk that customers using inferior

counterfeit cigarettes will stop buying Newport products,

and, (4) will serve to deter both S&M and other potential infringers. (Pls. Brief on Damages and Att’ys Fees of

August 6, 2004 at pg 12-13, 18.) In addition, Lorillard argues that the court should reject any of the S&M’s arguments about inability to pay a damages award. According to Lorillard, S&M’s financial information should

be ′′viewed with a healthy degree of skepticism,′′ since

they have failed to provide supporting documentation and

Lorillard uncovered ′′millions of dollars worth of foreign wire transfers′′ made by S&M. (Id. at 13.)

Lorillard also argues for the court to find that S&M was

[*13] willful in its infringement. A finding of willful infringement would allow for a damages award of up to $

1,000,000 per counterfeit mark, 15 U.S.C. § 1117(c)(2),

for a total potential award of $ 5,000,000. According to

Lorillard, evidence of S&M’s willfulness include (1)

the purchase of larger than usual quantities of purported

Newport cigarettes from Cam-Kat at a price well below market value and in unusual packaging that differed

significantly from the genuine Newport packaging,

and, (2) the jury’s verdict finding willful infringement.

(Id. at 15.) Additionally, Lorillard argues that S&M’s attempts to rebut the question of willfulness merely highlight their own guilt,′′ (Id.), and they have exacerbated

their willful purchases of counterfeit Newports by ′′lying throughout this case - from the day of the ex parte seizure to the last day of trial.′′ (Id. at 16.)

S&M argues the court should impose no damages or at

the most the minimum statutory penalty of $ 500 per infringed mark for a total award of $ 2,500. S&M argues

that (1) the conduct of defendants in other reported inPage 5 of 9

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fringement cases is more willful and done with more disdain than in this [*14] case, and therefore warranted

higher damages, (Defs. Brief Regarding Damages of August 6, 2004 at pg 2); (2) S&M has not been a profitable enterprise and therefore any damage award would

cause a hardship, (Id.); (3) the actual damage to Lorillard was very small due to the small number of cartons of counterfeit product purchased, (Id. at 4.); (4) despite the jury’s finding of willfulness, the evidence for

willfulness was not overwhelming, (Id.); (5) Lorillard

shares some level of responsibility since it possessed

specialized and sophisticated knowledge about how to

identify counterfeit packages and never shared this information with S&M, (Id. at 5); and, (6) the court should

not be bound by the jury’s findings. (Id. at 6)

This court concludes that the appropriate damage award

in this case is $ 50,000 per infringed mark for a total

statutory damages award of $ 250,000. This amount is appropriate due to the value of the trademarks, the conduct by S&M, and the need to deter future conduct by

S&M and other potential counterfeiters. Furthermore, this

court notes that an award of $ 250,000 is reasonable

and fair in light of the range of awards provided by other

courts [*15] awarding damages under 15 U.S.C. §

1117(c) 2, and that the total potential award could have

been as high as $ 5,000,000 due to the maximum statutory award of $ 1,000,000 for each willfully infringed

trademark.

[*16] The five trademarks infringed by S&M are of considerable worth and value. Lorillard has taken considerable action to cultivate, maintain and strengthen these

trademarks including: (1) registering the trademarks

with the United States Patent and Trademark Office, (Uncontested Facts at P 8); (2) manufacturing the Newport

product through strict quality control standards, (Id. at P

5); (3) investing substantial time, energy and money in

advertising and promoting the Newport product (Id. at P

6); (4) training its sales personnel to be aware of counterfeit products so, like in this case, they can identify and

report suspicious items, (Trial Tr. at pg 33.); and, (5) protecting the value of its trademarks by litigating against

trademark infringers.

Congress has provided the option of statutory damages under 15 U.S.C. § 1117(c) and Lorillard has elected to pursue that remedy. Consequently, the significant value

of Lorillard’s brand and the efforts taken to protect, promote and enhance that brand should be considered by

the court in the determination of the appropriate dollar figure for the award. Furthermore, the actual damages incurred by Lorillard are of [*17] lesser concern in determining a proper damage award because Congress’

decision to allow statutory damages under 15 U.S.C. §

1117(c) was in direct recognition of the fact that the calculation of the actual damages may be difficult, if not

impossible, to determine. Louis Vuitton v. Veit, 211 F.

Supp. 2d 567, 583 (E.D. Pa. 2002) (citing S. Rep. No. 177,

104 Cong. (1995)).

The actual damages figure is also less relevant since

part of the purpose of statutory damages is to deter the current violator and other potential future violators. Thus,

the court believes that a damage award limited to Lorillard’s lost profits would have little to no deterrent effect on future violations. HN9 A counterfeiter must fear

more than just having to turn over his ill gotten gains

to the rightful owners. Instead, the counterfeit must understand that he risks his financial future by engaging in

his illegal practice. As the Seventh Circuit has held,

′′one who undertakes a course of infringing conduct may

neither sneer in the face of the [trademark] owner nor

hide its head in the sand like an ostrich.′′ Wildlife Express Corp. v. Carol Wright Sales, Inc., 18 F.3d 502, 514

(7th Cir. 1994) [*18] (citations omitted).

Furthermore, deterring S&M along with potential future

trademark infringers is an important consideration in

light of the fact that counterfeiters often times produces

lower quality products than the original. Lorillard properly notes that infringement deprives the rightful owner

of profits and reduces the value of its brands. But an additional concern, above and beyond the financial harm,

is that counterfeit consumer products can also potentially pose the risk of being more harmful or dangerous then the real product. The House of Representatives

in its report on the Anticounterfeiting Consumer Protection Act of 1996, Pub. L. No. 104-153, § 7, 110 Stat. 1386,

noted, ′′even more grievous than the enormous economic losses suffered by American companies are the serious health and safety hazards caused by criminal counterfeiting.′′ H. Rep. No. 556, 104 Cong. (1996).

The court is not entering into a discussion of the general

health effects of cigarettes or whether the counterfeit

2 A figure of $ 50,000 per infringed mark for a total award of $ 250,000 is within the range of statutory awards made by other

courts under 15 U.S.C. § 1117(c). See Philip Morris USA, Inc. v. Felizardo, 2004 U.S. Dist. LEXIS 11154, No. 03 Civ. 5891,

2004 WL 1375277, at *7 n.16 (S.D.N.Y. June 18, 2004) ($ 62,500 statutory damage award for two infringed trademarks when defendant attempted to sell 7500 counterfeit cartons of cigarettes); Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D.

494, 501 (C.D. Cal. 2003) ($ 2,000,000 statutory damage award for two infringed trademarks when defendant imported 8,000,000

counterfeit cigarettes); see e.g., Silhouette Int’l Schmied v. Chakhbazian, No. 04 Civ. 3613, at *2 (S.D.N.Y Oct. 4, 2004) ($

250,000 statutory damage award for infringement of multiple eyewear trademarks); Microsoft Corp v. V3 Solutions, Inc., 2003

U.S. Dist. LEXIS 15008, No. 01 C 4693, 2003 WL 22038593, at *16 (N.D. Ill. Aug. 28, 2003) ($ 35,000 statutory damage award

for seven infringed Microsoft software trademarks); Microsoft Corp. v. Logical Choice Computers, Inc., 2001 U.S. Dist. LEXIS

479, No. 99 C 1300, 2001 WL 58950, at *11 (N.D. Ill. Jan. 22, 2001) ($ 1,400,000 statutory damage for the infringement of seven

Microsoft software trademarks).

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cigarettes sold by S&M were more harmful than the authentic Newport product. Instead, the court is noting

that there was no proof presented by the parties that the

counterfeit Newport products [*19] are subject to any

type of safety review or quality control process when

manufactured by someone other than Lorillard. Cigarettes are consumer products and the retail establishments that sell cigarettes often sell other consumer products such as food, beverages, over-the-counter medicines

and cosmetics. S&M sells food and beverages as well as

cigarettes. (Uncontested Facts at P 3.) The statutory damage award will deter S&M and other retail establishments from purchasing counterfeit consumer products,

and this in turn will help to reduce the probability that consumers will purchase counterfeit products that may be

more dangerous than the authentic items.

The court’s belief that a $ 250,000 award is fully supported by its concurrence with the jury’s determination of

S&M’s willful infringement. A finding of willful infringement allows the court to award the maximum statutory damage amount, if appropriate under the circumstances of the case, of $ 1,000,000 per infringed mark, 15

U.S.C. § 1117(c), for a total potential award in this

case of $ 5,000,000.

HN10 ′′Willful infringement may be attributed to the defendant’s actions where he had knowledge that his conduct constituted [*20] infringement or where he showed

a reckless disregard for the owner’s rights. Thus, knowledge need not be proved directly, but can be inferred from

a defendant’s conduct.′′ Logical Choice Computers,

Inc., 2001 U.S. Dist. LEXIS 479, No. 99 C 1300, 2001

WL 58950, at *11 (citing Wildlife Express Corp., 18 F.3d

at 511). Willful infringement may be shown by the fact

that the ′′defendant ignored the plaintiff’s notices ..., did

not seek advice of an attorney, and passed the matter

off as a nuisance.′′ Wildlife Express Corp., 18 F.3d at 511.

Several facts support the jury’s determination of willfulness. S&M purchased the counterfeit cigarettes at a

price below the market price. Khawam testified that S&M

obtained the counterfeit cigarettes at a price of $ 34

per carton instead of the normal rate of $ 40 per carton.

(Trial Tr. 155, 161.) Khawam admitted during his testimony that price was low enough to make him inspect the

tax stamps and the name brands on a sample of the cartons he purchased for Cam-Kat. (Trial Tr. 160.)

Additionally evidence is that packaging for the counterfeit cigarettes, including the outer boxes, was different

from the packaging used for authentic [*21] Newport

cigarettes. (Trial Ex. 30 - 32c.) Alkawham, when questioned about the differences in the packaging during

his testimony, responded, ′′it’s not my business to find

out if they’re counterfeit or not.′′ (Trial Tr. 91.)

In light of the reasons set forth above, this court awards

to Lorillard, pursuant to 15 U.S.C. § 1117(c), statutory

damages of Fifty Thousand Dollars ($ 50,000) per infringed mark for a total statutory damage award of Two

Hundred Fifty Thousand Dollars ($ 250,000). This

amount is within the range authorized by Congress under the statute and is appropriate in light of the evidence

presented at trial.

C. Award of costs and reasonable attorneys’ fees pursuant to 15 U.S.C. § 1117(b) and Rule 54(d)(1)

Lorillard seeks an award of $ 140,000 for costs and reasonable attorneys’ fees. HN11 As the prevailing party,

Lorillard is entitled to its costs other than attorneys’ fees

as a matter of course pursuant to Rule 54(d)(1). Fed.

R. Civ. P. 54(d)(1). HN12 ′′The court in exceptional cases

may award reasonable attorney fees to the prevailing

party.′′ 15 U.S.C. § 1117(a). Exceptional cases allowing

for an award of [*22] attorneys’ fees include ′′acts of infringement [that] are ’malicious, fraudulent, deliberate

or willful.’′′ BASF Corp. v. Old World Trading Co., Inc.,

41 F.3d 1081, 1099 (7th Cir. 1994) (quoting Roulo v.

Russ Berrie & Co., Inc., 886 F.2d 931, 942 (7th Cir.

1989)).

An award of reasonable attorneys’s fees under 15 U.S.C.

§ 1117(a) is appropriate in light of the jury’s determination, and the court’s concurrence in that determination, of

willful infringement by S&M. The parties must comply

with the Local Rule 54.3, before the court can determine

the amount of fees and costs which reasonably should

be awarded.

D. Permanent Injunction Barring S&M from Selling, Offering for Sale or Distributing Counterfeit Cigarettes

Lorillard seeks a permanent injunction to bar S&M from

selling, offering for sale or distributing counterfeit cigarettes. HN13 This court has power to enter such an injunction, ′′according to the principles of equity and

upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a

mark registered in the Patent and Trademark Office.′′ 15

U.S.C. § 1116 [*23] (a). This court grants the injunction, as detailed below, in the ′′Conclusion′′ section of this

opinion.

E. Lorillard’s Motion to Amend the Pleadings to Conform to the Evidence Presented at Trial

Lorillard moves to amend the pleadings to add Safwan

Alkhawan, (′′Alkhawam′′), and Marwan Khawam (′′Khawam′′) as individually liable defendants in order to conform the pleadings to the evidence presented at trial pursuant to Rule 15(b). Alkhawan is the owner of S&M.

(Trial at pg. 58.) Alkhawan handles S&M’s financial activities including its bank accounts, the paying of bills

and the writing of checks. (Trial Tr.pg 60.) Alkhawan has

employed his brother Khawam to run the gas station

on a daily basis for the past ten years. (Id.)

HN14 As a general rule, corporate officers cannot be

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held personally liable for infringing actions taken by the

corporation. Drink Group, Inc. v. Gulfstream Communications, 7 F. Supp. 2d 1009, 1010 (N.D. Ill. 1998) (citing Dangler v. Imperial Mach. Co., 11 F.2d 945, 947

(7th Cir. 1926)). However, this court has recognized that

an individual may be held liable for a corporation’s infringement under the theory of vicarious liability or [*24]

contributory liability. Microsoft Corp. v. V3 Solutions,

Inc., 2003 U.S. Dist. LEXIS 15008, No. 01 C 4693, 2003

WL 22038593, at *13 (N.D. Ill. Aug. 28, 2003) (citing

Gershwin Publ’g Corp. v. Columbia Artists Mgmt., 443

F.2d 1159 (2d Cir. 1971)). ′′Personal liability for trademark infringement ... is established if a corporate officer is a moving, active, conscious force behind the defendant corporation’s infringement.′′ Dynamic Force v.

Dynamic Force, Ltd., 1999 U.S. Dist. LEXIS 7892,

No. 98 C 5922, 1999 WL 342407, at *4 (N.D. Ill. May

14, 1999).

The factual situation in the present case is different from

the situation in the V3 Solutions and Dynamic Force

cases. In those cases, the individual corporate officer had

been named as a defendant in the original complaint

filed with the court. Thus, the question was whether it

was appropriate to find personal liability or only limit liability to the named corporation. However, in the present case, Alkhawan and Khawam have never been named

as defendants in the case. Service of process was only effectuated on S&M, not on Alkhawan or Khawam.

(Dkt. No. 14.) The U.S. Marshal’s served Khawam in person on July 18, 2003, however, Khawam was served

[*25] in his role as an employee of S&M and not in

his capacity as an individual. (Dkt. No. 13.)

HN15 This court does have the ability under Rule 15 to

add new defendants after trial and judgment has been

entered. However, as the Supreme Court held in Nelson

v. Adams, that if the court adds a new party to the litigation, due process requires that the new party is given

an opportunity to respond and contest his personal liability. 529 U.S. 460, 463, 146 L. Ed. 2d 530, 120 S. Ct.

1579 (2000). Thus, this court, although it has the power

to add Alkhawan and Khawam, cannot immediately

award judgment against them in favor of Lorillard. Instead, if this court decides to add Alkhawan and Khawam, it must give them the opportunity to respond.

Furthermore, HN16 although Rule 15 provides a liberal

policy for amending pleadings, the right to amend is not

absolute. See Crestview Vill. Apartments v. United

States Dep’t of Hous. and Urban Dev., 383 F.3d 552,

2004 WL 1965663, at *5 (7th Cir. 2004) (citing Perkins

v. Silverstein, 939 F.2d 463, 471-72 (7th Cir. 1991)).

Lorillard provides no reason for its failure to name Alkhawan and Khawam as individual defendants [*26] before the trial. Lorillard was aware of Alkhawan and Khawam existence and their roles in the counterfeiting

before the trial. Alkhawan was present for this trial, however, his presence was in his capacity as the owner of

S&M. Whether he and Khawam would have dealt with

this case in the same way as S&M, if they were facing personal liability and a possible judgment against them as

individuals, is a matter of speculation. The only way to

know would be to retry the case and the court is unwilling at this point to impose to undertake that burden especially when Lorillard could have named Alkhawan and

Khawam as defendants much earlier in the litigation. Consequently, the court denies Lorillard’s motion to amend

the pleadings to conform to the evidence presented at

trial.

CONCLUSION

For the reasons set forth above, this court order judgment to Plaintiff Lorillard Tobacco Company of statutory damages of Fifty Thousand Dollars ($ 50,000) per infringed mark for a total statutory damage award,

pursuant to 15 U.S.C. § 1117(c), of Two Hundred and

Fifty Thousand Dollars ($ 250,000) from Defendant S&M

Central Service Corporation. This court also finds that

Lorillard [*27] Tobacco Company is entitled to receive

reasonable costs and attorneys’ fees from S&M Central Service Corporation, pursuant to 15 U.S.C. § 1117(b),

but the parties must comply with the requirements of Local Rule 54.3 as follows: Lorillard must provide S&M

with its 54.3 material by November 12, 2004 and S&M

must provide Lorillard with its 54.3 material by November 23, 2004. The parties should then attempt to resolve any remaining disputes over attorneys’ fees and

costs. If an agreement cannot be reached, Lorillard’s further petition for fees and costs, including the joint statement under 54.3(e), is due no later than December 6,

2004. Response is due December 17, 2004 and the reply

is December 28, 2004.

This court denies Lorillard’s Motion to Amend the Pleadings to Conform to the Evidence and denies Lorillard’s

August 16, 2004 Motion to Strike S&M’s Brief on Damages.

The court orders the clerk of this court to release the

five hundred dollar ($ 500) bond posted by Lorillard Tobacco Company at the commencement of this action

on July 18, 2003, plus interest, be immediately released

to Martin Kedziora or Thomas Kost in a check payable to Greenberg Traurig, LLP.

[*28] Furthermore, it is therefore ordered that defendant S&M Central Service Corporation, and their agents,

servants, employees, attorneys, and those personal or entities in active concert or participating with them who receive actual notice of this order by personal service or

otherwise, are permanently enjoined from doing, or assisting others in doing, the following acts:

(i) using any reproduction, counterfeit, copy,

or colorable imitation of the Lorillard

Marks in connection with the importation,

sale, offering for sale, or distribution of cigarettes in the United States, which cigarettes

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in fact are not connected with Lorillard or

are not genuine Lorillard products, which such

use is likely to cause confusion, or to cause

mistake, or to deceive;

(ii) using the Lorillard Marks or any reproduction, counterfeit, copy, or colorable imitation of the same in any manner likely to cause

others to believe that Defendants’ products

are connected with Lorillard or are genuine

Lorillard products if they are not, which such

use is likely to cause confusion, or to cause

mistake, or to deceive;

(iii) passing off, inducing, or enabling others

to sell or pass off any merchandise which

is [*29] not genuine Lorillard merchandise

as and for genuine Lorillard merchandise;

(iv) committing any other acts reasonably calculated to cause purchasers to believe that

Defendant’s products are Lorillard’s products, when in fact such products are not Lorillard products;

(v) importing, shipping, delivering, distributing, holding for sale, returning, transferring, or otherwise moving or disposing of in

any manner such cigarettes falsely bearing

one or more of the Lorillard Marks or any reproduction, counterfeit, copy, or colorable

imitation of the same;

(vi) discussing or communicating any aspect

of the seizure of counterfeit cigarettes or

the identifying markers of counterfeit cigarettes with any person or entity selling or attempting to sell cigarettes to Defendants;

(vii) assisting, aiding, or abetting any other

person or business entity in engaging in or performing any of the activities referred to in

the above paragraphs (i) through (vi); and

(viii) other than by an order of this Court,

(1) selling, moving, destroying,

or otherwise disposing of any

goods, boxes, labels, packaging or other items or documents

bearing any reproduction, counterfeit, or imitation of the Lorillard [*30] Marks, which such use

is likely to cause confusion, or

to cause mistake, or to deceive;

(2) moving, destroying, or otherwise disposing of any business

records or documents relating in

any way to the manufacture, importation, acquisition, purchase,

distribution, or sale of goods or

merchandise bearing any of the

Lorillard Marks or any reproduction, counterfeit, or imitation of

the Lorillard Marks, which such

use is likely to cause confusion, or to cause mistake, or to deceive; or

(3) assisting any third party in

identifying, moving, destroying,

or otherwise disposing of any reproduction, counterfeit or imitation goods, as well as any records pertaining to reproduction,

counterfeit or imitation goods,

which such use is likely to cause

confusion, or to cause mistake,

or to deceive.

S&M Central Service Corporation and their agents, servants, employees, attorneys, and those personal or entities in active concert or participating with them who receive actual notice of this order by personal service or

otherwise is warned that any act by them in violation

of any of the terms of this Order may be considered and

prosecuted as contempt of this Court.

ENTER:

JAMES F. HOLDERMAN

United [*31] States District Judge

DATE: November 5, 2004

JUDGMENT IN A CIVIL CASE

Decision by Court. This action came to trial before the

Court. The issues have been tried and a decision has been

rendered.

IT IS HEREBY ORDERED AND ADJUDGED that judgment is entered in favor of plaintiff and against defendant in the amount of $ 250,000.00 plus costs and attorneys’ fees.

Date: 11/5/2004

Page 9 of 9

2004 U.S. Dist. LEXIS 22563, *28

Jessica Bloodgood

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

BURBERRY LIMITED, a United Kingdom )

corporation, and BURBERRY LIMITED, a New )

York corporation,

Plaintiffs,

Case No. l4-cv-8220

Judge John W. Darrah

Magistrate Judge Geraldine Soat Brown v.

THE PARTNERSHIPS aNd

UNINCORPORATED AS SOCIATIONS

IDENTIFIED ON SCHEDULE "A,"

Defendants.

FINAL JUDGMENT ORDER

This action having been commenced by Plaintiffs Burberry Limited, a United Kingdom

corporation ("Burberry UK"), and Burberry Limited, a New York corporation ("Burberry US"),

together, 'oBurberry" or "Plaintiffs," against the Partnerships and Unincorporated Associations

identified on Amended Schedule A attached hereto (collectively, the "Defendants"), and using

the Defendant Domain Names and Online Marketplace Accounts (collectively, the "Defendant

Intemet Stores");

This Court having entered upon a showing by Burberry, a temporary restraining order

and preliminary injunction against Defendants which included a domain name transfer order and

asset restraining order;

Burberry having properly completed service of process on Defendants, the combination

of providing notice via electronic publication or email, along with any notice that Defendants

received from domain name registrars and payment processors, being notice reasonably

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calculated under all circumstances to apprise Defendants of the pendency of the action and

affording them the opportunity to answer and present their objections; and

None of the Defendants identified in Amended Schedule A attached hereto (collectively,

the "Defaulting Defendants") having answered the Complaint or appeared in any way, and the

time for answering the Complaint having expired;

THIS COURT HEREBY FINDS that Defaulting Defendants are liable for willful federal

trademark infringement and counterfeiting (15 U.S.C. $ 1114), false designation of origin (15

U.S.C. g ll25(a)), cybersquatting (15 U.S.C. $ 1125(d)) and violation of the Illinois Uniform

Deceptive Trade Practices Act (815 ILCS $ 510, et seq.).

IT IS HEREBY ORDERED that Plaintiffs' Motion for Entry of Default and Default

Judgment is GRANTED in its entirety, that Defaulting Defendants are deemed in default and

that this Final Judgment is entered against Defaulting Defendants.

IT IS FURTHER ORDERED that:

1. Defaulting Defendants, their affiliates, officers, agents, servants, employees, attorneys,

confederates, and all persons acting for, with, by, through, under, or in active concert

with them be permanently enjoined and restrained from:

a. using Burberry's BURBERRY Trademarks or any reproductions, counterfeit copies

or colorable imitations thereof in any manner in connection with the distribution,

marketing, advertising, offering for sale, or sale of any product that is not a genuine

Burberry Product or not authorized by Burberry to be sold in connection with

Burberry's BURBERRY Trademarks;

b. passing off, inducing, or enabling others to sell or pass off any product as a genuine

Burberry Product or any other product produced by Burberry, that is not Burberry's

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d.

or not produced under the authorization, control or supervision of Burberry and

approved by Burberry for sale under Burberry's BURBERRY Trademarks;

committing any acts calculated to cause consumers to believe that Defaulting

Defendants' products are those sold under the authorization, control or supervision of

Burberry, or are sponsored by, approved by, or otherwise connected with Burberry;

further infringing Burberry's BURBERRY Trademarks and damaging Burberry's

goodwill;

otherwise competing unfairly with Burberry in any manner;

shipping, delivering, holding for sale, transferring or otherwise moving, storing,

distributing, returning, or otherwise disposing of, in any manner, products or

inventory not manufactured by or for Burberry, nor authorized by Burberry to be sold

or offered for sale, and which bear any of Burberry's BURBERRY Trademarks or

any reproductions, counterfeit copies or colorable imitations thereof;

using, linking to, transferring, selling, exercising control over, or otherwise owning

the Online Marketplace Accounts, the Defendant Domain Names or any other domain

name or online marketplace account that is being used to sell or is the means by

which Defaulting Defendants could continue to sell Counterfeit Burberry Products;

and

operating and/or hosting websites at the Defendant Domain Names and any other

domain names registered or operated by Defaulting Defendants that are involved with

the distribution, marketing, advertising, offering for sale, or sale of any product

bearing the BURBERRY Trademarks or any reproductions, counterfeit copies or

e.

f.

o

b'

h.

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2.

colorable imitations thereof that is not a genuine Burberry Product or not authorized

by Burberry to be sold in connection with Burberry's BURBERRY Trademarks.

The Defendant Domain Names are perrnanently transferred to Burberry's control. The

domain name registries for the Defendant Domain Names, including, but not limited to,

VeriSign, Inc., Neustar, Inc., Afilias Limited, CentralNic, Nominet and the Public

Interest Registry, within three (3) business days of receipt of this Order, shall unlock and

change the registrar of record for the Defendant Domain Names to a registrar of

Burberry's selection, and the domain name registrars shall take any steps necessary to

transfer the Defendant Domain Names to Burberry's account at a registrar of Burberry's

selection.

Those in privity with Defendants and with actual notice of this Order, including any

online marketplaces such as iOffer, social media platforms, Facebook, YouTube,

Linkedln, Twitter, Internet search engines such as Google, Bing and Yahoo, web hosts

for the Defendant Domain Names, and domain name registrars, shall within three (3)

business days of receipt of this Order:

a. disable and cease providing services for any accounts through which Defaulting

Defendants engage in the sale of counterfeit and infringing goods using the

BURBERRY Trademarks, including any accounts associated with the Defaulting

Defendants listed on Amended Schedule A attached hereto;

b. disable and cease displaying any advertisements used by or associated with

Defaulting Defendants in connection with the sale of counterfeit and infringing goods

using the BURBERRY Trademarks; and

J.

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4.

c. take all steps necessary to prevent links to the Defendant Domain Names identified

on Amended Schedule A from displaying in search results, including, but not limited

to, removing links to the Defendant Domain Names from any search index.

Pursuant to 15 U.S.C. $ I I l7(c)(2), Burberry is awarded statutory damages from each of

the Defaulting Defendants in the amount of two million dollars ($2,000,000) for willful

use of counterfeit BURBERRY Trademarks on products sold through at least the

Defendant Internet Stores.

Western Union shall, within two (2) business days of receipt of this Order, permanently

block any Western Union money transfers and funds from being received by the

Defaulting Defendants identified in Amended Schedule A.

PayPal, Inc. ("PayPal") shall, within two (2) business days of receipt of this Order,

permanently restrain and enjoin any China or Hong Kong based accounts connected to

Defaulting Defendants, Defaulting Defendants' Online Marketplace Accounts or

Defaulting Defendants' websites identified in Amended Schedule A from transferring or

disposing of any money or other of Defaulting Defendants' assets.

All monies currently restrained in Defaulting Defendants' financial accounts, including

monies held by PayPal, are hereby released to Burberry as partial payment of the aboveidentified damages, and PayPal is ordered to release to Burberry the amounts from

Defaulting Defendants' PayPal accounts within ten (10) business days of receipt of this

Order.

Until Burberry has recovered full payment of monies owed to it by any Defaulting

Defendant, Burberry shall have the ongoing authority to serve this Order on PayPal in the

5.

6.

7.

8.

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b.

event that any new PayPal accounts controlled or operated by Defaulting Defendants are

identified. Upon receipt of this Order, PayPal shall within two (2) business days:

a. Locate all accounts and funds connected to Defaulting Defendants, Defaulting

Defendants' Online Marketplace Accounts or Defaulting Defendants' websites,

including, but not limited to, any PayPal accounts;

Restrain and enjoin such accounts or funds that are China or Hong Kong based from

transferring or disposing of any money or other of Defaulting Defendants' assets; and

Release all monies restrained in Defaulting Defendants' PayPal accounts to Burberry

as partial payment of the above-identified damages within ten (10) business days of

receipt of this Order.

Until Burberry has recovered full payment of monies owed to it by any Defaulting

Defendant, Burberry shall have the ongoing authority to serve this Order on any banks,

savings and loan associations, or other financial institutions (collectively, the "Financial

Service Providers") in the event that any new financial accounts controlled or operated by

Defaulting Defendants are identified. Upon receipt of this Order, the Financial Service

Providers shall within two (2) business days:

a. Locate all accounts connected to Defaulting Defendants, Defaulting Defendants'

Online Marketplace Accounts or Defaulting Defendants' websites;

b. Restrain and enjoin such accounts from receiving, transferring or disposing of any

money or other of Defaulting Defendants' assets; and

c. Release all monies restrained in Defaulting Defendants' financial accounts to

Burberry as partial payment of the above-identified damages within ten (10) business

days of receipt of this Order.

9.

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10. In the event that Burberry identifies any additional online marketplace accounts, domain

names or financial accounts owned by Defaulting Defendants, Burbeffy may send notice

of any supplemental proceeding to Defaulting Defendants by email at the email addresses

identified in Amended Schedule A attached hereto.

The ten thousand dollar ($10,000) cash bond posted by Burberry, including any interest

minus the registry fee, is hereby released to Burberry or its counsel, Greer Burns & Crain,

Ltd. The Clerk of the Court is directed to return the cash bond previously deposited with

the Clerk of the Court to Burberry or its counsel by check made out to the Greer Burns &

Crain IOLTA account.

11.

This is a Final Judgment.

DATED:December I / ,2014

rict Court Judge John W. Darrah

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No Shepard’s SignalTM

As of: August 7, 2015 11:35 AM EDT

Luxottica USA LLC v. P’ships & Unincorporated Ass’ns Identified on Schedule

′′A′′

United States District Court for the Northern District of Illinois, Eastern Division

June 18, 2015, Decided; June 18, 2015, Filed

Case No. 14 c 9061

Reporter

2015 U.S. Dist. LEXIS 78961

LUXOTTICA USA LLC, Plaintiff, v. THE PARTNERSHIPS

AND UNINCORPORATED ASSOCIATIONS

IDENTIFIED ON SCHEDULE ′′A′′, Defendants.

Core Terms

statutory damages, counterfeit, damages, trademarks,

attorneys’, awards, products, summary judgment,

infringement, seller, eBay, permanent injunction, fees and

costs, Injunction, profits, willful, courts, marks, stipulated

facts, freeze, online, cases

Counsel: [*1] For Luxottica USA LLC, Plaintiff: Kevin W.

Guynn, LEAD ATTORNEY, Amy Crout Ziegler, Jessica

Lea Bloodgood, Paul G. Juettner, Justin R. Gaudio, Greer

Burns & Crain, Ltd., Chicago, IL.

For The Partnerships and Unincorporated Associations

Identified on Schedule ′′A′′, Defendant: Lingzhi Zhao,

LEAD ATTORNEY, Zhao & Associates, P.C., Chicago, IL;

Michael J. Robins, LEAD ATTORNEY, Robins & Associates

LLC, Chicago, IL.

Judges: Harry D. Leinenweber, United States District

Judge.

Opinion by: Harry D. Leinenweber

Opinion

MEMORANDUM OPINION AND ORDER

This case arises from the unauthorized sale of counterfeit

Ray-Ban eyewear through various online seller accounts.

Default judgment has been entered against most Defendants,

while others have been voluntarily dismissed. A single

Defendant (′′Defendant′′), who has been identified by two

eBay seller IDs, remains.

Before the Court is Plaintiff Luxottica USA LLC’s

(′′Luxottica′′) Motion for Summary Judgment, Statutory

Damages of $450,000, Permanent Injunction, and Attorneys’

Fees and Costs [ECF No. 77]. For the reasons stated herein,

Luxottica’s Motion is granted, except that the Court awards

statutory damages in the amount of $150,000.

I. BACKGROUND

Luxottica is the exclusive wholesale distributor [*2] of

genuine Ray-Ban products in the United States and holds

the exclusive right to enforce RAY-BAN trademarks within

the United States. (Joint Stmt. of Stipulated Facts, ECF No.

75, ¶1.) RAY-BAN marks have been used continuously and

exclusively by Luxottica and its predecessors since as early

as 1937. (Id. ¶3.) Luxottica has protected the value of the

Ray-Band brand by registering the following trademarks

with the United States Patent and Trademark Office: Reg.

No. 1,080,886, Reg. No. 1,320,460, Reg. No. 3,522,603.

(Id. ¶1.)

Defendant stipulates that up until November 2014, it sold

and offered for sale knockoff products featuring counterfeit

RAY-BAN trademarks via online marketplace accounts

associated with the eBay seller IDs ′′g7178a′′ and

′′qhgypchyh2.′′ (Id. ¶¶5-8.) (The introductory paragraph of

the parties’ joint statement of stipulated facts refers to the

seller IDs as ′′g7178′′ and ′′qhgypchyh.′′) Defendant has

stipulated to owning the online marketplace accounts

associated with these seller IDs, as well as seven PayPal

accounts associated with various email addresses. (Id. ¶4.)

Defendant sold at least 106 counterfeit Ray-Ban products at

prices ranging from $6.29 to $6.99 each. (Id. [*3] ¶5.)

II. ANALYSIS

Luxottica requests that this Court (1) enter summary

judgment in its favor on the two claims asserted against

Defendant, (2) award statutory damages of $450,000

pursuant to 15 U.S.C. § 1117(c), (3) enter a permanent

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injunction against Defendant and transfer to Luxottica all

assets currently restrained in PayPal accounts that are

connected to Defendant, and (4) award attorneys’ fees and

costs pursuant to 15 U.S.C. § 1117(a)-(b).

A. Summary Judgment

Luxottica argues that it is entitled to summary judgment on

its claims for false designation of origin under the Lanham

Act, 15 U.S.C. § 1125(a), and violation of the Illinois

Uniform Deceptive Trade Practices Act, 815 ILCS § 510, et

seq. Summary judgment is appropriate when ′′there is no

genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.′′ Fed. R. Civ. P.

56(a). Defendant has already admitted liability on the

above-mentioned counts in a Joint Statement of Stipulated

Facts filed with the Court on April 7, 2015. (ECF No. 75

¶¶6-8 (′′Defendant knowingly and willfully offered for sale

and sold at least one hundred six (106) Counterfeit Ray-Ban

Products. . . . Defendant admits liability for false designation

of origin using counterfeit trademarks and violation of the

Illinois Uniform Deceptive [*4] Trade Practices Act.′′).)

Summary judgment is therefore entered in favor of Luxottica.

B. Statutory Damages

Luxottica seeks a total damages award of $450,000 -

$150,000 for each of the three trademarks that Defendant

used on the counterfeit products. Defendant argues that

statutory damages of no more than $7,440 are appropriate

because it generated only $800 in total revenue from the

sale of the counterfeit goods, and only a fraction of that

amount within the United States.

Under 15 U.S.C. § 1117(c), a plaintiff in a case involving the

use of a counterfeit mark may elect to recover an award of

statutory damages 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′′ or, in the case of willful

infringement, ′′not more than $2,000,000 per counterfeit

mark per type of goods or services sold, offered for sale, or

distributed.′′ Although the Lanham Act permits a plaintiff to

choose either actual or statutory damages, statutory damages

are ′′most appropriate′′ when an infringer’s nondisclosure

makes actual damages uncertain. Sara Lee Corp. v. Bags of

N.Y., Inc., 36 F.Supp.2d 161, 165 (S.D.N.Y. 1999).

Though § 1117(c) places a dollar range on possible statutory

damages awards, the statute provides no guidance on how to

[*5] select a figure within that range. Lorillard Tobacco Co.

v. S & M Cent. Serv. Corp., No. 03 C 4986, 2004 U.S. Dist.

LEXIS 22563, 2004 WL 2534378, at *4 (N.D. Ill. Nov. 8,

2004). Accordingly, ′′[c]ourts interpreting section 1117(c)

have looked by analogy to case law applying the statutory

damage provision of the Copyright Act contained in 17

U.S.C. § 504(c).′′ Id.

The Seventh Circuit’s standard for the award of statutory

damages in copyright infringement cases is set forth in

Chi-Boy Music v. Charlie Club, Inc., 930 F.2d 1224, 1229

(7th Cir. 1991). Under Chi-Boy, ′′district courts enjoy wide

discretion in awarding fees and may consider various

factors such as [1] the difficulty or impossibility of proving

actual damages, [2] the circumstances of the infringement,

and [3] the efficacy of the damages as a deterrent to future

copyright infringement.′′ Id. at 1229-30 (citation and internal

quotations omitted). Courts have also considered the value

of a plaintiff’s brand, ′′and the efforts taken to protect,

promote, and enhance that brand.′′ Lorillard, 2004 U.S.

Dist. LEXIS 22563, 2004 WL 2534378, at *6. Ultimately, §

1117(c) looks to both ′′compensatory considerations′′ such

as ′′actual losses and trademark value,′′ as well as ′′punitive

considerations′′ such as ′′deterrence of other infringers and

redress of wrongful defense conduct.′′ Sara Lee, 36

F.Supp.2d at 165; see also, Sands, Taylor & Wood v. Quaker

Oats Co., 34 F.3d 1340, 1347 (7th Cir. 1994) (noting that

statutory damages under § 1117(c) are not merely remedial

but serve an important public interest), modified on reh’g in

part, 44 F.3d 579 (7th Cir. 1995).

The Court turns first to compensatory considerations. [*6]

Although there is ′′no necessary mathematical relationship

between the size of [a statutory damages award] and the

extent or profitability of the defendant’s wrongful activities,′′

Sara Lee, 36 F.Supp.2d at 165, statutory damages must

′′bear some relation′′ to actual damages, Coach, Inc. v.

Tom’s Treasure Chest, No. 2:10-CV-00243, 2011 U.S. Dist.

LEXIS 107243, 2011 WL 4399355, at *3 (N.D. Ind. Sept. 21,

2011) (citation and internal quotations omitted). Courts may

look to the size and scope of a defendant’s operations to

determine a baseline for damages. Id. High statutory damages

may be appropriate when counterfeiting activities take place

online and are capable of reaching a wide audience. Id.

Here, Defendant argues that ′′the parties have a complete

record of all the sales of the accused products′′ — namely,

PayPal records documenting Defendant’s sales, which totaled

approximately $800 worldwide and $372 in the United

States. (Def.’s Resp., ECF No. 82, at 11.) Plaintiff counters

that Defendant’s evidence — which was submitted without

a declaration — is unauthenticated and contains contradictory

information. For instance, the figures displayed on the

webpages for Defendant’s eBay storefronts indicate that

Defendant sold more than 200 pairs of sunglasses, (see, Ex.

Page 2 of 5

2015 U.S. Dist. LEXIS 78961, *4

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2 to Joint Stmt. of Stipulated [*7] Facts, ECF No. 75-2), but

the PayPal figures Defendant submits show only 106 pairs

of sunglasses sold. (Def.’s Resp., ECF No. 82, at 5.) While

the parties dispute the exact sales figures, no evidence

submitted suggests that Defendant is a large-scale

counterfeiter. For instance, all seven PayPal accounts that

have been ′′connected′′ to Defendant contain only $75,000.

(See, id. at 2-3.)

On the other hand, Defendant’s counterfeiting took place on

the Internet, enabling Defendant to reach a ′′vast customer

base,′′ Burberry Ltd. & Burberry USA v. Designers Imports,

Inc., No. 07 CIV. 3997 (PAC), 2010 U.S. Dist. LEXIS 3605,

2010 WL 199906, at *10 (S.D.N.Y. Jan. 19, 2010), and

making Luxottica’s actual losses difficult to calculate,

Brown v. Walker, No. 1:06-CV-218, 2010 U.S. Dist. LEXIS

56933, 2010 WL 2346242, at *7 (N.D. Ind. May 25, 2010),

report and recommendation adopted as modified, No.

1:06-CV-218-TLS, 2010 U.S. Dist. LEXIS 57127, 2010 WL

2346225 (N.D. Ind. June 9, 2010). In cases involving the

online sale of counterfeit goods, courts have found

substantial damages awards appropriate. See, e.g., id.

(awarding $50,000 per mark); Burberry, 2010 U.S. Dist.

LEXIS 3605, 2010 WL 199906, at *10 (awarding $100,000

per mark); Deckers Outdoor Corp. v. Does 1-55, No. 11 C

10, 2011 U.S. Dist. LEXIS 119448, 2011 WL 4929036, at *5

(N.D. Ill. Oct. 14, 2011) (awarding $750,000 per mark). In

this case, the Court has already awarded damages of $2

million against each defaulting Defendant. (See, ECF No.

65 ¶4.)

In addition, the RAY-BAN marks are well known and

highly valuable. As noted, Luxottica and its predecessors

have used the RAY-BAN marks continuously and exclusively

[*8] since as early as 1937, and the marks at issue in this

lawsuit are all federally registered. Luxottica submits that it

has expended significant resources in promoting the Ray-Ban

brand, making Ray-Ban the ′′undisputed world leader in the

field of sun and prescription eyewear.′′ (Pl.’s Mem., ECF

No. 78, at 10.) Luxottica has also filed numerous lawsuits

within this District in an effort to protect the RAY-BAN

marks and their associated goodwill. (See, id. at 11 n.6.)

The Court now turns to punitive considerations. ′′[P]art of

the purpose of statutory damages is to deter the current

violator and other potential future violators.′′ Lorillard,

2004 U.S. Dist. LEXIS 22563, 2004 WL 2534378, at *6.

Damages awards limited to lost profits are typically

ineffective deterrents because ′′[a] counterfeiter must fear

more than just having to turn over his ill-gotten gains to the

rightful owners.′′ Id. Here, Defendant has stipulated that it

engaged in willful infringement. However, Defendant has

also mitigated the degree of willfulness by ceasing the sale

of the counterfeit products immediately, retaining an attorney,

and voluntarily providing information to Luxottica.

Because this is not a case of default, and based on the

mitigating factors identified above, the Court finds it

appropriate [*9] to reduce the statutory damages Luxottica

seeks by two-thirds. Pursuant to 15 U.S.C. § 1117(c), the

Court awards Luxottica statutory damages in the amount of

$50,000 per mark, for a total award of $150,000.

C. Permanent Injunction

Luxottica seeks permanent injunctive relief pursuant to 15

U.S.C. § 1116(a), which enables district courts to grant

injunctions, ′′according to the principles of equity and upon

such terms as the court may deem reasonable.′′ A plaintiff

seeking a permanent injunction must demonstrate the

following:

(1) that it has suffered an irreparable injury; (2) that

remedies available at law, such as monetary damages,

are inadequate to compensate for that injury; (3) that,

considering the balance of hardships between the

plaintiff and defendant, a remedy in equity is warranted;

and (4) that the public interest would not be disserved

by a permanent injunction.

eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391, 126

S. Ct. 1837, 164 L. Ed. 2d 641 (2006); accord e360 Insight

v. The Spamhaus Project, 500 F.3d 594, 604 (7th Cir. 2007).

The Seventh Circuit has ′′clearly and repeatedly held that

damage to a trademark holder’s goodwill can constitute

irreparable injury for which the trademark owner has no

adequate legal remedy.′′ Re/Max N. Cent., Inc. v. Cook, 272

F.3d 424, 432 (7th Cir. 2001). As this Court recognized in

granting Luxottica’s Motion for a Temporary Restraining

Order and Preliminary Injunction, counterfeiting has eroded

[*10] consumer goodwill in the RAY-BAN trademarks and

constitutes irreparable harm for which there is no adequate

remedy at law. Further, because Defendant’s conduct was

willful, the balance of hardships favors Luxottica. See,

Bulgari, S.p.A. v. Partnerships & Unincorporated

Associations Identified On Schedule ′′A′′, No. 14-CV-4819,

2014 U.S. Dist. LEXIS 107218, 2014 WL 3749132, at *6

(N.D. Ill. July 18, 2014), report and recommendation

adopted, No. 14 CV 4819, 2014 U.S. Dist. LEXIS 103652,

2014 WL 3765854 (N.D. Ill. July 29, 2014). The public

interest also favors Luxottica, because ′′enforcement of the

trademark laws prevents consumer confusion,′′ Eli Lilly &

Co. v. Natural Answers, Inc., 233 F.3d 456, 469 (7th Cir.

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2000), and consumers have a legitimate ′′interest in knowing

with whom they do business.′′ Re/Max N. Cent., 272 F.3d at

433.

As part of the injunction, Luxottica seeks the immediate

transfer of ′′all assets in financial accounts operated by

PayPal, Inc. and linked to Defendant, as well as any newly

discovered assets, to Luxottica.′′ (Pl.’s Mem., ECF No. 78,

at 12.) In granting Luxottica’s Motion for Preliminary

Injunction, the Court previously froze assets held in accounts

′′connected′′ to Defendant on the basis that Luxottica sought

an accounting of profits as an alternative to statutory

damages. See, CSC Holdings, Inc. v. Redisi, 309 F.3d 988,

996 (7th Cir. 2002) (upholding asset freeze where plaintiff

sought accounting in the alternative to statutory damages).

Now, relying on the PayPal records, Defendant argues that

the asset [*11] freeze is too broad, sweeping up accounts

′′wholly unrelated to the accused products.′′ (Def.’s Resp.,

ECF No. 82, at 8.) Defendant urges the Court to scale back

the asset freeze to $7,440, an amount it contends is ′′more

than adequate to satisfy the Court’s interests in preserving

any equitable accounting of profits.′′ (Id. at 10.)

In arguing that the asset restraint should be modified,

Defendant relies on Klipsch. In Klipsch, after a preliminary

injunction hearing in which a defendant submitted evidence

that it had only sold a few thousand dollars’ worth of

counterfeit goods, a court reduced a prejudgment asset

restraint from $2 million to $20,000. Klipsch Grp., Inc. v.

Big Box Store Ltd., No. 12 CIV. 6283 AJN, 2012 U.S. Dist.

LEXIS 153137, 2012 WL 5265727, at *3 (S.D.N.Y. Oct. 24,

2012). The court held that, under the Supreme Court’s

ruling in Grupo Mexicano de Desarrollo, S.A. v. Alliance

Bond Fund, Inc., 527 U.S. 308, 119 S. Ct. 1961, 144 L. Ed.

2d 319 (1999), asset freezes are limited to preserving the

equitable remedy of an accounting for profits. Klipsch, 2012

U.S. Dist. LEXIS 153137, 2012 WL 5265727, at *3.

To exempt assets from an asset freeze, ′′[t]he burden is on

the party seeking relief to present documentary proof that

particular assets [are] not the proceeds of counterfeiting

activities.′′ N. Face Apparel Corp. v. TC Fashions, Inc., No.

05 CIV. 9083 (RMB), 2006 U.S. Dist. LEXIS 14226, 2006

WL 838993, at *3 (S.D.N.Y. Mar. 30, 2006) (citation and

internal quotations omitted). Defendant claims that only two

of Defendant’s seven PayPal accounts [*12] contain any

profits related to the sale of counterfeit Ray-Ban goods. In

support of this argument, Defendant has submitted a

spreadsheet of transactions associated with one of

Defendant’s email addresses, as well as an untranslated

Chinese email. (See, Exs. K & L to Def.’s Resp., ECF No.

82-1.) To rule out the five remaining accounts, Defendant

has submitted PayPal account summaries it claims show no

connection to the eBay Seller IDs ′′g7178a′′ and

′′qhgypchyh2.′′ (See, Exs. C-I to Def.’s Resp., ECF No.

82-1.) Defendant has also provided several hundred pages

of eBay feedback ratings associated with the two seller IDs,

showing that it sold a variety of products in addition to

sunglasses. (See, Ex. N to Def.’s Resp., ECF No. 82-1.)

Luxottica, however, disputes the authenticity and validity of

this evidence. For instance, Luxottica notes that the evidence

was not accompanied by a declaration, that the transaction

spreadsheet does not identify the quantity of glasses sold,

and that Defendant’s sales figures contradict information

displayed on the eBay storefronts. Despite Defendant’s

contention that it is unconnected to five of the seven PayPal

accounts, Defendant has admitted to owning the [*13]

PayPal accounts associated with the email addresses shown

in the account summaries. (Joint Stmt. of Stipulated Facts,

ECF No. 75, ¶5.) Luxottica submits that the restraint on

these accounts ′′was based on PayPal, Inc.’s . . .

determination through PayPal’s proprietary methods, which

have not been disclosed to Luxottica or Luxottica’s counsel.′′

(Gaudio Decl, Ex. 1 to Pl.’s Reply, ECF No. 84-1, ¶ 2.)

The Court cannot conclude, based on the evidence before it,

that Defendant has met its burden in showing that the asset

restraint should be limited to only a portion of two of the

seven PayPal accounts and declines to modify the asset

restraint on this basis.

D. Attorneys’ Fees and Costs

Finally, Luxottica seeks an award of attorneys’ fees and

costs. As the prevailing party, Luxottica is entitled to costs

under Federal Rule of Civil Procedure 54(d)(1). Under 15

U.S.C. § 1117(a), which addresses recovery in terms of

profits and actual damages, a court may, ′′in exceptional

cases . . . award reasonable attorney fees to the prevailing

party.′′ Exceptional cases include those in which a

defendant’s conduct is willful. BASF Corp. v. Old World

Trading Co., 41 F.3d 1081, 1099 (7th Cir. 1994). In

assessing damages under § 1117(a), courts ′′shall′′ award

attorneys’ fees, absent extenuating circumstances, in cases

involving the intentional use [*14] of a counterfeit mark. 15

U.S.C. § 1117(b). An award of attorneys’ fees is available

where, as here, a plaintiff ′′opt[s] to receive statutory

damages under section 1117(c).′′ Louis Vuitton Malletier

S.A. v. LY USA, Inc., 676 F.3d 83, 111 (2d Cir. 2012); accord

Coach, Inc. v. Treasure Box, Inc., No. 3:11CV468-PPS,

2014 U.S. Dist. LEXIS 28713, 2014 WL 888902, at *5 (N.D.

Ind. Mar. 6, 2014). Accordingly, and in light of Defendant’s

willful counterfeiting, Luxottica is awarded reasonable

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attorneys’ fees and costs in an amount to be determined by

the Court.

III. CONCLUSION

For the reasons stated herein, Luxottica’s Motion for

Summary Judgment and Statutory Damages is granted in

part and denied in part.

The Court enters summary judgment in favor of Luxottica

and against Defendant. Pursuant to 15 U.S.C. § 1117(c), the

Court awards Luxottica $150,000 in statutory damages. The

Court also awards Luxottica reasonable attorneys’ fees and

costs, and will enter a permanent injunction prohibiting

Defendant from violating Luxottica’s rights in the RAY-BAN

marks.

Within seven (7) days of the entry of this order, Luxottica

shall submit a revised Final Judgment Order consistent with

this opinion. The parties are to attempt to reach an agreement

on the issue of attorneys’ fees in accordance with Local

Rule 54.3. If an agreement cannot be reached, Luxottica is

to file a Motion for Attorneys’ Fees within thirty (30) days

of the entry [*15] of this Order.

IT IS SO ORDERED.

/s/ Harry D. Leinenweber

Harry D. Leinenweber, Judge

United States District Court

Dated: June 18, 2015

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2015 U.S. Dist. LEXIS 78961, *14

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Caution

As of: June 26, 2013 12:26 PM EDT

Coach, Inc. v. Ocean Point Gifts

United States District Court for the District of New Jersey

June 14, 2010, Decided; June 14, 2010, Filed

Civil Action No. 09-4215 (JBS)

Reporter: 2010 U.S. Dist. LEXIS 59003; 2010 WL 2521444

COACH, INC. and COACH SERVICES, INC., Plaintiff,

v. OCEAN POINT GIFTS and DOES 1 THROUGH 10,

Defendant.

Core Terms

counterfeit, trademark, infringement, statutory damages,

default, default judgment, cause of action, attorney’s

fees, marks, copyright infringement, permanent

injunction, actual damage, trademark infringement,

cigarette, likelihood of confusion, false designation,

unjust enrichment, public interest, trade dress,

culpability, dilution, handbags, famous

Counsel: [*1] Erica Susan Helms, Esq., STERNS &

WEINROTH, PC, Trenton, NJ, for Plaintiffs.

Judges: HONORABLE JEROME B. SIMANDLE,

United States District Judge.

Opinion by: JEROME B. SIMANDLE

Opinion

SIMANDLE, District Judge:

This matter comes before the Court on Plaintiffs Coach,

Inc. and Coach Services, Inc.’s (′′Coach′′) motion for default judgment (Docket No. 9) as against Defendant Ocean

Point Gifts (′′Defendant′′). For the reasons expressed below, the Court will grant Plaintiffs’ motion.

I. BACKGROUND

A. Facts

1

For over sixty years Coach has been in the trade of

luxury fashion accessories. Coach manufactures, markets, and sells a variety of goods including, most prominently, handbags. Coach sells its goods through its own

specialty retail stores, department stores, catalogs, and via

the Internet at www.coach.com. Coach owns a number

of trademarks, trade dresses, and design elements/copyrights that it uses on its products.

Based on information obtained from a private investigator and Coach staff, Coach alleges that [*2] Defendant Ocean Point Gifts has sold counterfeit Coach items

at its store located at 1631 Boardwalk, Atlantic City,

New Jersey. (Compl. P 28; Smith Decl. PP 3-4.) For example, Defendant sold a $ 12.99 imitation of a $ 200

Coach wallet that included a paper insert reading ′′The

Coach Signature Collection′′ with contact information for

Coach Consumer Service. (Smith Decl. PP 5-6.) Ocean

Point Gifts has not been given permission to use the Coach

trademarks. (Pyatt Decl. P 11; Compl. P 33.)

Plaintiffs served Defendant Ocean Point Gifts with a

copy of the summons and complaint on August 23, 2009.

(Docket No. 5.) On November 20, 2009, nearly three

months after process was served, the investigator returned to the store and found that the Defendant was still

selling counterfeit Coach products. (Smith Decl. P 8.)

Coach alleges that Defendant Ocean Point Gifts has engaged in selling counterfeit goods knowingly and intentionally for the purpose of trading on the reputation of

Coach and that Defendant will continue to do so unless otherwise restrained. (Compl. PP 34, 36.)

B. Procedure

On August 18, 2009, the Plaintiffs filed a nine-count Complaint against Ocean Point Gifts and ten John Does presenting [*3] claims of trademark counterfeiting (15

U.S.C. § 1114), trademark infringement (15 U.S.C. §

1114), trade dress infringement (15 U.S.C. § 1125(a)),

false designation of origin and false advertising (15 U.S.C.

§ 1125(a)), trademark dilution (15 U.S.C. § 1125(c)),

copyright infringement (17 U.S.C. §§ 501-513), trafficking in counterfeit trademarks (N.J. Stat. Ann. § 56:3-

13.16), unfair competition (N.J. Stat. Ann. §§ 56:4-1, 56:4

-2), and unjust enrichment. The Defendant was properly

1

The facts recited herein are derived from the Plaintiffs’ supporting declaration, including private investigator Richard H.

Smith and Coach’s Manager of Intellectual Property April E. Pyatt, and documents attached thereto.

Jessica Bloodgood

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served on August 23, 2009, but has failed to respond.

On November 10, 2009, Coach filed a request for default, which the Clerk of Court entered pursuant to Rule

55(a), Fed. R. Civ. P., on November 12, 2009. Coach

now moves the Court to enter a default judgment against

Defendant and seeks a permanent injunction, statutory

damages, and an award of attorney fees, investigator fees,

and costs.

II. DISCUSSION

Fed. R. Civ. P. 55(b)(2) authorizes the entry of a default

judgment against a party that has defaulted. However,

default judgment is not a right. Franklin v. Nat’l Mar.

Union of Am., No. 91-480, 1991 U.S. Dist. LEXIS 9819,

1991 WL 131182, at *1-2 (D.N.J. July 16, 1991) (quoting 10A Wright, Miller, & Kane, Federal Practice and

Procedure § 2685 [*4] (3d ed. 1998)), aff’d, 972 F.2d

1331, 1331 (3d Cir. 1992). The decision about whether default judgment is proper is primarily within the discretion of the district court. Hritz v. Woma Corp., 732 F.2d

1178, 1180 (3d Cir. 1984).

A. Standard of Review

Once a party has defaulted, the consequence is that ′′the

factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.′′ Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir.

1990) (internal quotations omitted) (citing Thomson v.

Wooster, 114 U.S. 104, 5 S. Ct. 788, 29 L. Ed. 105, 1885

Dec. Comm’r Pat. 279 (1885)). Entry of default judgment where damages are not a sum certain requires an application to the court to prove, inter alia, damages.

Fed. R. Civ. P. 55(b)(2); Comdyne, 908 F.2d at 1149. In addition, liability is not established by default alone. D.B.

v. Bloom, 896 F. Supp. 166, 170 n.2 (D.N.J. 1995) (citing Wright, supra, § 2688). The Court must determine

whether a sufficient cause of action was stated, Chanel,

Inc. v. Gordashevsky, 558 F. Supp. 2d 532, 535 (D.N.J.

2008), and whether default judgment is proper. Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000).

B. Sufficiency of Causes of Action

In the present case, after being properly [*5] served on

August 23, 2009 (Docket No. 5), the Defendant failed

to appear or otherwise defend and the Clerk of the Court

entered a default. Therefore, the first issue is whether

the Plaintiffs have stated a sufficient cause of action. As

will be explained below, the Court determines that

Coach has established Defendant’s liability for the purposes of this default judgment motion.

1. Federal Claims

In their Complaint, Plaintiffs have asserted six federal

claims against the Defendant: trademark counterfeiting

(15 U.S.C. § 1114(1)(a)); trademark infringement (15

U.S.C. § 1114(1)(a)); trade dress infringement (15

U.S.C. § 1125(a)); false designation of origin and false advertising (15 U.S.C. § 1125(a)(1)(A)); trademark dilution (15 U.S.C. § 1125(c)); and copyright infringement (17

U.S.C. §§ 501-513). Each was stated sufficiently to establish liability based on federal law.

a. Trademark Infringement (15 U.S.C. § 1114(1)(a))

and False Designation (15 U.S.C. § 1125(a)(1)(A))

Trademark infringement (Count II) and false designation

(Count IV) are measured by identical standards. A &

H Swimwear, Inc. v. Victoria’s Secret Stores, Inc., 237 F.3d

198, 210 (3d Cir. 2000). The record must show: (1) the

[*6] plaintiff has a valid and legally protectable mark, (2)

the plaintiff owns the mark, and (3) the defendant’s use

of the mark causes a likelihood of confusion. Id.

The first two elements are satisfied by registration and

ownership of the relevant trademarks. (Compl. PP 14-

15.) The third element is also satisfied. In the Complaint (Compl. P 49) and through exhibits, (e.g. Smith

Decl., Ex. B) the record has uncontested assertions and

evidence that are sufficient to show a likelihood of confusion between the counterfeit handbags and genuine

Coach product. Further, it is reasonable to believe that

some consumers would be confused by these counterfeit

products. See Coach, Inc. v. Cellular Planet, No. 2:09-

cv-00241, 2010 U.S. Dist. LEXIS 45087, 2010 WL

1853424, at *1, *4 (S.D. Ohio, May 7, 2010) (holding

that although the counterfeit items could be distinguished from genuine Coach items because they were being sold out of a trunk of a car, the counterfeit nature

of the products meant they were inherently likely to cause

confusion). Therefore, a cause of action for trade infringement and false designation has been sufficiently established.

b. Trademark Counterfeiting (15 U.S.C. § 1114(1)(a))

To establish trademark counterfeiting [*7] (Count I)

the record must show (1) the defendant infringed a registered trademark in violation of the Lanham Act, 15

U.S.C. § 1114(1)(a) and (2) the defendant intentionally

used the trademark knowing it was counterfeit or was willfully blind to such use. Chanel v. Gordashevsky, 558 F.

Supp. 2d at 537. ′′The only distinction between the standard for federal trademark counterfeiting and the standard for establishing infringement is that to obtain treble

or statutory damages for a counterfeiting claim, a plaintiff must show that the defendant intentionally used the

plaintiff’s trademark, knowing that it was a counterfeit.′′ Chanel v. Gordashevsky, 558 F. Supp. 2d at 536-

537. Intent can be inferred from continued use after being given notice. Platypus Wear, Inc. v. Bad Boy

Club, Inc., No. 08-02662, 2009 U.S. Dist. LEXIS

60637, 2009 WL 2147843, at *6 (D.N.J. July 15, 2009)

Here, both elements of trademark counterfeiting are met.

As discussed above, a trademark was infringed. The alPage 2 of 7

2010 U.S. Dist. LEXIS 59003, *3

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leged willfulness of the Defendant (Compl. P 41) is confirmed by evidence showing the Defendant continuing

to sell the handbags nearly three months after being served

with notice of the Complaint. (Smith Decl. P 8, Ex. C.)

Therefore, a cause [*8] of action for trademark counterfeiting has been sufficiently established.

c. Trade Dress Infringement (15 U.S.C. § 1125(a))

To establish trade dress infringement (Count III), a plaintiff must show: (1) the allegedly infringing design is nonfunctional, (2) the design is inherently distinctive or

has acquired secondary meaning, and (3) consumers are

likely to confuse the source of the plaintiff’s product

with that of the defendant’s product. McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, 511 F.3d 350, 357

(3d Cir. 2007).

Each of these elements was stated in the Complaint,

(Compl. PP 57-59) and was not contested. The Court is

therefore satisfied that the Plaintiffs have a meritorious

claim for trade dress infringement based on the nonfunctional nature of the infringement, the distinctiveness

of the Coach elements, and the likelihood of confusion.

d. Trademark Dilution (15 U.S.C. § 1125(c))

To establish trademark dilution under the Lanham Act a

plaintiff must prove:

(1) the plaintiff is the owner of a mark that

qualifies as a ’famous’ mark in light of the totality of eight factors listed in § 1125(c)(1);

(2) the defendant is making commercial use in

interstate commerce of a mark or [*9] trade

name; (3) defendant’s use began after the

plaintiff’s mark became famous; and (4) defendant’s use causes dilution by lessening

the capacity of the plaintiff’s mark to identify and distinguish goods or services.

Times Mirror Magazines, Inc. v. Las Vegas Sports

News, LLC, 212 F.3d 157, 163 (3d Cir. 2000); 800

-JR-Cigar, Inc. v. GoTo.com, Inc., 437 F. Supp.

2d 273, 293 (D.N.J. 2006).

As set forth in Count V of the Complaint, the Plaintiff

has shown that the relevant Coach marks are ′′famous′′ and

Defendant’s actions lessen the capacity of such marks

to identify and distinguish Coach products. (Compl. PP 75

-76.) The interstate nature of the commerce and the timing of the Defendant’s use of the mark is not perfectly clear from the record. Private investigator Erin

Smith, employed by a Pennsylvania investigative firm,

purchased a wallet at Defendant’s store. (Smith Decl. PP

2, 5.) This is evidence that the Defendant is involved

in interstate commerce. Similarly, although uncertain due

to the Defendant’s failure to respond, the Defendant’s

use almost certainly began following the time when the

Plaintiffs’ marks became famous. Therefore, the Court

will accept that these elements are satisfied [*10] and a

cause of action for trademark dilution has been established.

e. Copyright Infringement (17 U.S.C. §§ 501-513)

To establish copyright infringement pursuant to 17 U.S.C.

§§ 501-513, a plaintiff must prove (1) ownership of a

valid copyright, and (2) copying of constituent elements

of the work that are original. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361, 111 S. Ct. 1282,

113 L. Ed. 2d 358 (1991); Dam Things from Denmark

v. Russ Berrie & Co., Inc., 290 F.3d 548, 561 (3d Cir.

2002). The copying element can be proven by showing

that the defendant had access to the work and there are

substantial similarities between the two works. Dam

Things, 290 F.3d at 561. Both elements have been sufficiently asserted to state a cause of action for copyright

infringement. (Compl. PP 84-86.) Therefore, a cause

of action for copyright infringement has been established.

2. State Claims

In their Complaint Plaintiffs have also asserted three

state law claims: trademark counterfeiting (N.J. Stat. Ann.

§ 56:3-13.16); unfair competition (N.J. Stat. Ann. §§

56:4-1, 56:4-2); and unjust enrichment. The state common law claim was sufficiently stated and because federal liability has already been established, state statutory [*11] liability is also met.

a. State Statutory Claims

N.J. Stat. Ann. § 56:3-13.16 provides civil liability

against a person who engages in trafficking of counterfeit marks and N.J. Stat. Ann. § 56:4-2 provides civil liability against a person who appropriates trademarks.

These state law claims are similar to the federal Lanham

Act claims and this Court has found liability under federal law to be sufficient to establish liability under state

law. See Axelrod v. Heyburn, No. 09-5627, 2010 U.S.

Dist. LEXIS 43391, 2010 WL 1816245, at *3 (D.N.J. May

3, 2010); Zinn v. Seruga, No. 05-3572, 2009 U.S. Dist.

LEXIS 89915, 2009 WL 3128353, at *27-*28 (D.N.J.

Sept. 28, 2009); N.V.E., Inc. v. Day, No. 07-4283,

2009 U.S. Dist. LEXIS 72934, 2009 WL 2526744, at *2

(D.N.J. Aug. 18, 2009). Therefore, because Plaintiffs

have established liability for their federal claims for trademark counterfeiting, the Plaintiffs have also established

trademark counterfeiting under N.J. Stat. Ann. § 56:3-

13.16 and unfair competition under N.J. Stat. Ann. §§

56:4-1, 56:4-2.

b. Unjust Enrichment

The Plaintiffs have stated a claim under New Jersey common law for unjust enrichment. (Compl. P 107.) Here

the Defendant was profiting from counterfeit items based

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2010 U.S. Dist. LEXIS 59003, *7

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on Coach’s reputation. It would be unjust for the Defendant [*12] to enrich itself without compensating the

Plaintiffs, so a cause of action for unjust enrichment has

been established. See Howard Johnson Int’l, Inc. v.

Vraj Brig, LLC, No. 08-1466, 2010 U.S. Dist. LEXIS

3189, 2010 WL 215381, at *9 (D.N.J. Jan. 14, 2010) (citing Kopin v. Orange Prods., Inc., 297 N.J. Super. 353,

366-68, 688 A.2d 130 (N.J. Super. Ct. App. Div. 1997)).

In sum, each count of the complaint stated a sufficient

cause of action that is supported by evidence in the record. The Court now turns to whether default judgment is

proper.

C. Default Judgment

′′Before imposing the extreme sanction of default [judgment], district courts must make explicit factual findings as to (1) whether the party subject to default has a

meritorious defense, (2) the prejudice suffered by the party

seeking default, and (3) the culpability of the party subject to default.′′ Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008)

(citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74

(3d Cir. 1987)).

The current record does not show any meritorious defenses. Because the Defendant did not respond, the Court

cannot determine whether the Defendant had meritorious defenses that are not reflected in the record. The Plaintiffs [*13] have been prejudiced by the Defendant’s failure to answer because they have been prevented from

prosecuting their case, engaging in discovery, and seeking relief in the normal fashion. Defendant was properly

served, yet failed to appear or defend itself in any fashion and has continued to sell bags. (See Smith Decl. P8.)

It has been nearly a year and the Defendant has failed

to contact the Court or the Plaintiffs. This shows the Defendant’s culpability in its default. See Platypus Wear,

2009 U.S. Dist. LEXIS 60637, 2009 WL 2147843 at *5.

Plaintiff is entitled to default judgment against Defendant Ocean Point Gifts.

D. Remedies

1. Statutory Damages

The Lanham Act provides that a plaintiff can elect to recover either actual damages based on the defendant’s

profits and the plaintiff’s damages (15 U.S.C. § 1117(a))

or statutory damages (15 U.S.C. § 1117(c)). The Plaintiffs have elected to recover statutory damages. (Mem. in

Supp. of Mot. for Default J. and Permanent Inj., 11.)

As discussed below, after considering past awards in this

District, the point of sale, the extent of sales, and the

lack of evidence concerning plaintiffs’ losses, the Court

will award $ 200,000 in statutory damages.

For statutory damages the plaintiff [*14] may recover

′′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.′′ 15

U.S.C. § 1117(c)(1)). If the use of the counterfeit mark was

willful, the maximum increases to $ 2,000,000 per

mark per type of good. 15 U.S.C. § 1117(c)(2). For use

to be willful, a defendant must show an ′′aura of indifference to plaintiff’s rights′′ or a ′′deliberate and unnecessary duplicating of a plaintiff’s mark . . . in a way that was

calculated to appropriate or otherwise benefit from the

good will the plaintiff had nurtured.′′ SecuraComm Consulting Inc. v. Securacom Inc., 166 F.3d 182, 187 (3d

Cir. 1999) (citations and internal marks omitted), superseded by statute on other grounds as recognized by

Banjo Buddies, Inc. v. Renosky, 399 F.3d 168, 181 (3d

Cir. 2005).

′′In the absence of clear guidelines for setting a statutory

damage award, courts have tended to use their wide discretion to compensate plaintiffs, as well as to deter and

punish defendants, often borrowing from factors considered for statutory damages in copyright infringement.′′

Louis Vuitton Malletier & Oakley, Inc. v. Veit, 211 F.

Supp. 2d 567, 583-84 (E.D. Pa. 2002) [*15] (citing cases

showing wide range of statutory damages awarded by

district courts). Because statutory damages are meant to

serve as a substitute for actual damages the Court

should discern whether the requested damages ′′bear

some relation to the actual damages suffered.′′ Bly v. Banbury Books, Inc., 638 F. Supp. 983, 987 (E.D. Pa.

1986); see also Gucci Am. V. Duty Free Apparel, Ltd.,

315 F. Supp. 2d 511, 520 (S.D.N.Y. 2004) (′′To the extent possible, statutory damages ’should be woven out of

the same bolt of cloth as actual damages.’′′) (quoting 4

Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 14.04[E][1], at 14-69 (2003.))

To assess whether the request is appropriate, the Court

may be guided by past statutory damage awards. See Louis

Vuitton Malletier, S.A. v. Mosseri, No. 07-2620, 2009

U.S. Dist. LEXIS 100851, 2009 WL 3633882, at *3

(D.N.J. Oct. 28, 2009); N.V.E., 2009 U.S. Dist. LEXIS

72934, 2009 WL 2526744, at *3-*4; Louis Vuitton & Oakley, 211 F. Supp. 2d at 583-84. The recent Lanham Act

cases in this District for counterfeit products can be generally grouped under two categories: Internet cases and

cigarette cases.

The typical Internet case involves a suit against someone selling counterfeit luxury items on the Internet. These

cases [*16] often have high damage awards due in

part to the wide market exposure that the Internet can provide. See Louis Vuitton v. Mosseri, 2009 U.S. Dist.

LEXIS 100851, 2009 WL 3633882, at *3 (awarding $

25,141.31 per infringement for $ 4,072,892.22 total);

Chanel, Inc. v. Guetae, 2009 U.S. Dist. LEXIS 49365,

2009 WL 1653137, at *5 (D.N.J. June 8, 2009) (awarding $ 490,818.45 total); Chanel, Inc. v. Mosseri, No. 07-

2619, Order at 2, 2008 U.S. Dist. LEXIS 111825, *1-2

(D.N.J. May 20, 2008) (awarding $ 180,000 per infringement for $ 3,780,000 total); Chanel v. Gordashevsky,

558 F. Supp. 2d at 538 (awarding $ 2,238,624.50 total);

Page 4 of 7

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Chanel, Inc. v. Craddock, No. 05-1593, 2006 U.S. Dist.

LEXIS 27424, 2006 WL 1128733, at *1 (D.N.J. April 27,

2006) (awarding $ 100,000 per infringement for $

8,100,000 total); see also Louis Vuitton & Oakley, 211

F. Supp. 2d 567, 584-85 (awarding $ 1,500,000 total and

stating ′′the point of sale is very relevant to the statutory damages discussion′′).

The typical cigarette case involves a small retail store selling counterfeit cigarettes. These cases have dramatically lower damage awards. See Philip Morris USA, Inc.

v. Jaritza Supermarket, Inc., No. 09-CVS-2372, 2009

U.S. Dist. LEXIS 127641, 2009 WL 4496047, at *2

(D.N.J. Nov. 9, 2009) (awarding $ 4,000 total); Philip

Morris USA, Inc. v. Dorta Bars & Liquors, Inc., No. 07-

4599, Order of June 1, 2009 at 3, 2009 U.S. Dist.

LEXIS 127504, *5 (D.N.J. June 1, 2009) [*17] (awarding $ 1,000 each against two defendants). These

awards were similar to cigarette case settlement amounts

enforced by this Court. See Lorillard Tobacco Co. v.

Asian Am. Mkt., No. 06-cv-00948, Order at 2, 2008 U.S.

Dist. LEXIS 116202 (D.N.J. July 7, 2008) (settlement

of $ 2,000); Lorillard Tobacco Co. v. Atlantic Produce &

Supermarket, No. 06-cv-951, Consent Judgment at 1

(D.N.J. Feb. 13, 2008) (settlement of $ 20,000).

This case falls somewhere between the Internet cases

and the cigarette cases. While the counterfeit products at

issue were not widely distributed via the Internet, they

are counterfeit luxury items of far greater value than cigarettes. If the Internet cases represent ′′the new era of

counterfeiting,′′ Louis Vuitton & Oakley, 211 F. Supp. 2d

at 584, this case reminds us that there are still hucksters on the boardwalk capitalizing on the famous marks

of others. To determine damages when there is less guidance from other cases this Court has adopted factors that

have been used in the Second Circuit:

(1) the expenses saved and the profits reaped;

(2) the revenues lost by the plaintiff; (3)

the value of the copyright; (4) the deterrent effect on others [*18] 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.

Platypus Wear, 2009 U.S. Dist. LEXIS 60637,

2009 WL 2147843, at *7; Fitzgerald Publ’g Co. v.

Baylor Publ’g Co., 807 F.2d 1110, 1117 (2d Cir.

1986).

As discussed earlier in the context of trademark counterfeiting, the Defendant’s conduct was willful, so the

maximum award of $ 2,000,000 per counterfeit mark

per type of good sold is available. Four types of goods

were sold by the Defendant that carried counterfeit Coach

marks: handbags, wallets, scarves, and hats 2

. Five

Coach trademarks were infringed: the ′′ Signature C;′′

3

′′Coach Leatherware Est. 1941;′′

4

′′COACH;′′

5

′′Coach &

Lozenge Design;′′

6

and ′′Coach Op Art′′

7

). Because

there are four types of goods and five marks, the statutory damage amount must be not less than $ 20,000 or

more than $ 40,000,000. The Plaintiffs have requested

one hundred times the minimum statutory damages, $

100,000 per mark per good for a total of $ 2,000,000.

However, the Plaintiffs have provided no information

about [*19] their lost revenue or the value of their trademarks, trade dresses, and copyrights. While the Court

is tempted to follow the approach of Philip Morris v.

Dorta Bars and ask for an affidavit supporting its damage request, 2009 U.S. Dist. LEXIS 25799, 2009 WL

872026, at *3 (D.N.J. Mar. 30, 2009), the Court recognizes that the root of this deficiency is Defendant’s failure to respond.

The Court chooses to follow the approach of Platypus

Wear and award $ 10,000 per infringement for $ 200,000

total, ten times the minimum statutory damages. 2009

U.S. Dist. LEXIS 60637, 2009 WL 2147843, at *7. This

amount is within the guidelines established by Congress, takes into account the wilfulness shown by continuing to sell bags after receiving the Complaint and the culpability of failing to respond, and is significant enough

to serve as compensation [*20] to the Plaintiffs and a deterrent to both the Defendant and others. This award

also acknowledges that the sales took place at a small

shop on the boardwalk rather than the Internet. This award

is consistent with another recent case in this District

which only increased the award beyond $ 10,000 per infringement due to the mass-distribution of a banned substance using the Internet. N.V.E., 2009 U.S. Dist. LEXIS

72934, 2009 WL 2526744, at *4 (awarding $ 250,000

even though plaintiff requested $ 2,000,000). Because neither the Internet nor a banned substance is present

2 Neither scarves nor hats are explicitly listed as a class of goods that the ′′Signature C′′ mark, Registration 2,822,318, is registered for under International Class 24. But because the class is broad and scarves and hats could be considered ′′clothing,′′ then

this will be sufficient.

3 Registration No. 2,822,318

4 Registration No. 3,441,671

5 Registration No. 1,071,000

6 Registration No. 1,309,779

7 Registration No. 3,696,470

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here, ten times the minimum, namely $ 10,000 per infringement, is appropriate, for each of the twenty infringements.

To check whether this amount ′′bears some relation,′′

Bly, 638 F. Supp. at 987, the Court will approximate what

the Plaintiff may have gotten based on an ′′actual damages′′ calculation under 15 U.S.C. §§ 1117(a)-(b). See Malletier v. Apex Creative Int’l Corp., 687 F. Supp. 2d

347, 355-356 (S.D.N.Y. 2010).

During the November 20, 2009 visit 8by Investigator

Smith there were 25 bags priced at $ 24.99, 60 handbags priced from $ 39.00 to $ 59.00 and 5 scarf and hat

matching sets with an unstated price. (Smith Decl. P

8.) If the Court assumes [*21] that the scarf and hat sets

were also priced $ 39.00 to $ 59.00, then the value of

the displayed inventory that day was between $ 3,159.75

and $ 4,459.75. Assuming the store sold this volume of

displayed inventory each week and the store had a 300%

profit margin, then the amount of trebled damages

would be between $ 7,109.44 and $ 10,034.44 per week.

Thus, the ′′actual damages′′ would equal the Court’s determination of statutory damages at some point between

20 and 28 weeks of sales. This period of time is approximately equal to the tourist season on the Jersey Shore. The

Court’s determination is more reasonable than the requested award of $ 2,000,000 which would not approximate actual damages without four to six years of brisk

year-round sales of counterfeit items.

Thus, considering the limited record of losses, the point

of sale, and the likely extent of the Defendant’s business and consistent with other awards in this District, the

[*22] Court will award $ 10,000 per infringement for

$ 200,000 total.

2. Costs and Attorney Fees

In addition to statutory damages, Coach asks for both attorney fees and costs, which their evidence shows to

be $ 7,648 for attorney fees, $ 443.33 for investigative

fees, and $ 434.95 for costs.

The costs of actions brought under § 43(a), § 43(d), or a

willful violation under § 43(c) of the Lanham Act (codified at 15 U.S.C. § 1117(a), (d), & (c), respectively) can be

recovered pursuant to § 35(a) (codified at 15 U.S.C. §

1117(a)). In ′′exceptional cases′′ the court may award reasonable attorney fees. 15 U.S.C. § 1117(a). ′′Exceptional′′ has been interpreted by the Court to mean involving culpable conduct. Securacomm, 224 F.3d at 280.

Because this case involved the culpable conduct of continuing to sell goods after the Complaint was received,

then consistent with other decisions by this Court, attorney fees and costs will be awarded to the Plaintiffs. 9

See Louis Vuitton v. Mosseri, 2009 U.S. Dist. LEXIS

100851, 2009 WL 3633882, at *4; Chanel v. Gordashevsky, 558 F. Supp. 2d at 539.

Attorneys fees can includes fees for investigators working under the direction of an attorney. Chanel v. Gordashevsky, 558 F. Supp. 2d at 539 (citing Louis Vuitton

S.A. v. Downtown Luggage Ctr., 706 F. Supp. 839, 842

(S.D. Fla. 1988); 130 Cong. Rec. H12076, H12083 (Oct.

10, 1984) (J. Explanatory Statement on Trademark

Counterfeiting Legis.)). Thus, in this case the fees that

the Plaintiffs have paid to the investigative firm can be included in damages.

3. Permanent Injunction

Coach also seeks the equitable relief of a permanent injunction to enjoin the Defendant from infringing

Coach’s trademarks. This request is consistent with 15

U.S.C. § 1116(a). The Supreme Court requires that any

plaintiff seeking a permanent injunction to show:

(1) that it has suffered an irreparable injury;

(2) that remedies available at law, such as

monetary damages, are inadequate to compensate for that injury; (3) that, considering

the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would

not be disserved by a permanent injunction.

eBay, Inc. v. MercExchange, LLC, 547 U.S. 388,

391, 126 S. Ct. 1837, 164 L. Ed. 2d 641 (2006)

[*24] (citations omitted).

a. Irreparable Injury

The Third Circuit has explicitly stated that ′′once the likelihood of confusion caused by trademark infringement

has been established, the inescapable conclusion is that

there was also irreparable injury.′′ Pappan Enters., Inc. v.

Hardee’s Food Sys.s, Inc., 143 F.3d 800, 805 (3d Cir.

1998) (quoting Opticians Ass’n of Am. v. Indep. Opticians of Am., 920 F.2d 187, 196-97 (3d Cir. 1990). Thus,

because a likelihood of confusion has been shown, the requirement of irreparable harm has been met.

b. Inadequacy of Remedies at Law

While a remedy at law would provide a degree of monetary relief, it will not compensate for the injury to

Coach’s reputation or necessarily prevent future trade8

This visit identified the largest inventory of any of the investigator’s visits. During the July 13, 2009 visit by Investigator

Smith there were ′′at least 50 different counterfeit Coach products′′ but no price was entered into evidence. (Smith Decl. P 4.)

9

In their brief, Plaintiffs request $ 8,113.25 in attorney fees. The supporting documents (Davis Decl. P 8; Confoy Decl. P 8) show

attorney costs as [*23] $ 7,648. The Court will only award what the evidence shows.

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mark infringement. Louis Vuitton v. Mosseri, 2009 U.S.

Dist. LEXIS 100851, 2009 WL 3633882 at *5; See also

Audi AG v. D’Amato, 469 F.3d 534, 550 (6th Cir.

2006) (stating when there is potential for future harm

there is no adequate remedy at law). A remedy at law

would be inadequate to compensate Coach.

c. Balancing of Hardships

The only hardship imposed upon the Defendant is that

they obey the law. On the other hand if an injunction were

not issued then Coach suffers the hardships that gave

rise to this suit, [*25] loss of reputation and sales. Louis

Vuitton v. Mosseri, 2009 U.S. Dist. LEXIS 100851,

2009 WL 3633882 at *5 (citing Microsoft Corp. v. McGee, 490 F. Supp. 2d 874, 882-83 (S.D. Ohio 2007).

d. Public Interest

The Third Circuit has recognized that the public has an interest in trademark and copyright protection.

Since Congress has elected to grant certain

exclusive rights to the owner of a copyright in

a protected work, it is virtually axiomatic

that the public interest can only be served by

upholding copyright protections and, correspondingly, preventing the misappropriation

of the skills, creative energies, and resources that are invested in the protected

work.

Apple Computer, Inc. v. Franklin Computer Corp.,

714 F.2d 1240, 1255 (3d Cir. 1983) (quoting

Klitzner Indus., Inc. v. H.K. James & Co., 535 F.

Supp. 1249, 1259-60 (E.D. Pa. 1982). Issuing an injunction will serve the public interest goals of preventing consumer confusion and the trademark

holder’s property interest. Microsoft, 490 F. Supp.

2d at 883. Here the public interest is served by issuing an injunction.

Because each of the eBay requirements have been met

by Coach, the Court will grant Coach the relief it seeks by

enjoining Defendant Ocean Point Gifts from [*26] infringing Coach’s trademarks and copyrights. Ocean Point

Gifts must also surrender the infringing products for destruction by freight prepaid to Coach.

In sum, the Court will grant $ 200,000 in statutory damages under the Lanham Act and $ 8,526.28 in attorney

fees and litigation costs, bringing Plaintiffs’ total recovery from Defendant Ocean Point Gifts to $ 208,526.28.

In addition, the Court will permanently enjoin Ocean Point

Gifts from infringing Coach’s trademarks and copyrights in the future and require it to surrender all infringing products it currently possesses.

III. CONCLUSION

For the foregoing reasons the Court will grant the Plaintiffs’ motion for default judgment, award a default judgment of $ 208,526.28, and issue a permanent injunction.

The accompanying order for default judgment and permanent injunction shall be entered.

June 14, 2010

Date

/s/ Jerome B. Simandle

JEROME B. SIMANDLE

United States District Judge

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2010 U.S. Dist. LEXIS 59003, *24

Jessica Bloodgood

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Caution

As of: June 26, 2013 1:28 PM EDT

Burberry Ltd. v. Designers Imps., Inc.

United States District Court for the Southern District of New York

January 19, 2010, Decided; January 19, 2010, Filed

07 Civ. 3997 (PAC)

Reporter: 2010 U.S. Dist. LEXIS 3605; 2010 WL 199906

BURBERRY LIMITED AND BURBERRY USA, Plaintiffs, -against- DESIGNERS IMPORTS, INC., d/b/a DESIGNERS IMPORTS.COM USA, INC., Defendant.

Subsequent History: Related proceeding at Burberry Ltd.

v. RTC Fashion Inc., 2012 N.Y. Misc. LEXIS 4099 (N.Y.

Sup. Ct., Aug. 17, 2012)

Related proceeding at Burberry Ltd. v. Horowitz, 2012

U.S. Dist. LEXIS 167630 (S.D.N.Y., Nov. 26, 2012)

Prior History: Burberry Ltd. v. Euro Moda, Inc., 2009

U.S. Dist. LEXIS 113407 (S.D.N.Y., Dec. 4, 2009)

Core Terms

counterfeit, trademark, merchandise, infringement,

settlement agreement, scarves, famous, trademark

infringement, commerce, the Lanham Act, advertising,

registered, statutory damages, court finds, dilution,

handbags, unfair competition, common law, polo shirt,

registrations, permanently, jacket, injunction, authentic,

website, coats, marks

Counsel: [*1] For Burberry Limited, Burberry USA,

Plaintiffs: Anthony D Boccanfuso, John Maltbie, LEAD

ATTORNEYS, Kimberly Isbell, Arnold & Porter,

LLP, New York, NY; Hadrian Ronald Katz, LEAD ATTORNEY, PRO HAC VICE, Arnold & Porter, LLP (DC),

Washington, DC; Roberta L. Horton, LEAD ATTORNEY, Arnold & Porter LLP, Washington, DC.

For Designers Imports, Inc., Defendant: Stanley Richard

Goodman, LEAD ATTORNEY, Goodman & Saperstein, Garden City, NY.

Judges: HONORABLE PAUL A. CROTTY, United

States District Judge.

Opinion by: PAUL A. CROTTY

Opinion

ORDER

HONORABLE PAUL A. CROTTY, United States District Judge:

NATURE OF THE CASE

On May 22, 2007, Plaintiffs Burberry Limited and Burberry USA (′′Burberry′′ or ′′Plaintiffs′′) commenced this

action against defendants Designers Imports, Inc. d/b/a

Designers Imports. Com USA, Inc. (′′Designers′′ or ′′Defendant′′). Their Amended Complaint, filed June 5,

2007, alleges that Defendant used, sold, and advertised

merchandise bearing three counterfeit Burberry registered trademarks: the Burberry name, the Burberry

Check design, and the Burberry ′′Equestrian Knight′′ on

horseback device.

Burberry brings claims of trademark counterfeiting and infringement pursuant to 15 U.S.C. § 1114(1)(a); false designation of origin [*2] and trademark dilution pursuant to 15 U.S.C. § 1125(a)(1)(A); common law claims for

breach of contract and unjust enrichment; trademark infringement and unfair competition in violation of New

York common law; and trademark dilution pursuant to

15 U.S.C. § 1125(c); likelihood of injury to business reputation pursuant to New York General Law Section

360-l; and deceptive acts and practices pursuant to New

York General Law Section 349.

Burberry seeks statutory damages and attorneys’ fees

and costs, and various forms of injunctive relief, including a permanent injunction barring Defendant from selling Burberry-branded merchandise.

Defendant claims half-heartedly that it did not sell counterfeit Burberry-branded merchandise, but its real argument is that it was an innocent infringer whose actions

were not willful and were not the product of willful

blindness. Defendant also claims that Burberry has not

come to Court with clean hands and so Burberry is not entitled to damages, attorney’s fees or costs.

WAIVER OF JURY AND TRIAL

The parties waived jury trial, and the Court conducted a

bench trial on September 14 and 15, 2009. The Court

heard the testimony of witnesses from Burberry and Defendant [*3] and considered the exhibits received in evidence, as well as designated portions of depositions. The

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parties stipulated to the following facts in the jointlysubmitted pretrial order:

1. Plaintiff Burberry Limited is a corporation duly organized and existing under the laws of the United Kingdom with a principal place of business at Horseferry

House, Horseferry Road, London SWIP 2AW, United

Kingdom.

2. Plaintiff Burberry USA, a sister company of Plaintiff

Burberry Limited, is located at 444 Madison Avenue, New

York, NY 10022. Burberry USA enforces in North

America the trademarks owned by Burberry Limited.

Burberry Limited, Burberry USA, and their predecessor

are herein referred to collectively as ′′Burberry.′′

3. Burberry has continuously used the BURBERRY (R)

word mark in commerce since 1856.

4. Burberry introduced the BURBERRY CHECK trademark in its original distinctive red, camel, black and white

check design in the 1920’s. Burberry has continuously

used the BURBERRY CHECK in both the original colors and other distinctive color combinations for over three

-quarters of a century.

5. Burberry has continuously used the Burberry equestrian knight on horseback (the ′′EQUESTRIAN KNIGHT

DESIGN′′) [*4] on numerous products since 1901.

6. Burberry USA is the exclusive importer and distributor in the United States of BURBERRY (R) merchandise that bears the BURBERRY (R) mark, the BURBERRY CHECK, and/or the EQUESTRIAN KNIGHT

DESIGN (collectively, the ′′Burberry Trademarks′′).

Burberry has used the Burberry Trademarks on, and in

connection with, the advertising and sale of Burberry’s

products, including, but not limited to, scarves, swimwear, coats, jackets, polo shirts, handbags, and t-shirts in

interstate and intrastate commerce, including commerce

in the State of New York and in this judicial district.

7. Burberry Limited owns the following valid and enforceable U.S. trademark registrations for the BURBERRY

(R) word mark, among others: U.S. Reg. No. 260,843;

U.S. Reg. No. 510,077; U.S. Reg. No. 1,133,122; and U.S.

Reg. No. 3,202,484. These registrations are incontestable pursuant to 15 U.S.C. § 1065.

8. The BURBERRY word mark is famous within the

meaning of 15 U.S.C. § 1125(c).

9. The BURBERRY word mark was famous within the

meaning of 15 U.S.C. § 1125(c) prior to Defendant’s use

and/or sale of the items in dispute in this litigation.

10. Burberry Limited owns the following valid and enforceable [*5] U.S. trademark registrations for the BURBERRY CHECK trademark, among others: U.S. Reg.

No. 1,241,222; U.S. Reg. No. 2,732,617; and U.S. Reg.

No. 2,022,789. These restrictions are incontestable pursuant to 15 U.S.C. § 1065.

11. The BURBERRY CHECK trademark is famous

within the meaning of 15 U.S.C. § 1125(c).

12. The BURBERRY CHECK trademark was famous

within the meaning of 15 U.S.C. § 1125(c) prior to Defendant’s use and/or sale of the items in dispute in this litigation.

13. Burberry Limited owns the following valid and enforceable U.S. trademark registrations for the EQUESTRIAN KNIGHT DESIGN trademark, among others:

U.S. Reg. No. 863,179; and U.S. Reg. No. 2,512,119.

These registrations are incontestable pursuant to 15 U.S.C.

§ 1065.

14. The EQUESTRIAN KNIGHT DESIGN trademark is

famous within the meaning of 15 U.S.C. § 1125(c).

15. The EQUESTRIAN KNIGHT DESIGN trademark

was famous within the meaning of 15 U.S.C. § 1125 (c)

prior to Defendant’s use and/or sale of the items in dispute in this litigation.

16. Defendant Designers Imports, Inc. d/b/a Designers Imports.com USA, Inc. is a New York corporation located

at 11 Lake Street, No. 201, Monroe, New York 10950

and/or 1117 Route 17M, Suite [*6] 2, Monroe, New

York 10950.

17. Since at least as early as 2003, Designers has continuously sold apparel and accessories online, including at

its website located at www.designersimports.com.

18. Asher Horowitz is the owner and Chief Operating Officer of Designers.

19. Mr. Horowitz is the only officer of Designers, its

only Director, and its sole shareholder.

20. Mr. Horowitz sets the price for the goods that his business sells. He also decides what will be displayed on www.designersimports.com.

21. Mr. Horowitz sets his own salary and makes sure

that bills at the company are paid.

22. Designers cannot allocate a portion of its expenses

to its sale of Burberry-branded items.

23. Mr. Horowitz was aware of BURBERRY products before he founded Designers.

24. Since at least as early as 2003, Designers has sold

or offered for sale products that display one or more of the

Burberry Trademarks that were not purchased directly

from Burberry or one of its authorized retailers.

25. Designers has purchased keywords containing the

BURBERRY trademark from Google’s Pay Per Click proPage 2 of 9

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gram such as ′′Burberry,′′ ′′Burberry scarf or scarves,

′′Burberry jacket,′′ and ′′Burberry handbag.′′ Designers

purchased similar advertising [*7] from Yahoo, including the keyword ′′Burberry scarf.′′ When potential customers shop online for Burberry products, they are automatically referred to the Designers website.

26. Mr. Horowitz is the only person who decides what

Burberry-branded goods Designers will sell on its website.

27. Designers’ suppliers include ′′Moda Oggi.′′ Moda

Oggi has since been sued as a third party by Burberry for

selling counterfeit Burberry-branded products, and Burberry prevailed on summary judgment against Moda

Oggi on this and related claims on June 10, 2009. See

Burberry Limited, et al. v. Euro Moda, Inc., et al., Civil

Docket for Case No. 1:08-cv-05781-CM, 2009 U.S.

Dist. LEXIS 53250, 2009 WL 1675080 (S.D.N.Y. June

10, 2009);

28. On April 12, 2005, Burberry and Designers entered

into a settlement agreement (′′Settlement Agreement′′) regarding Designers’ sales of items that Burberry contented were counterfeit. The agreement was amended on

May 4, 2005. The agreement was received in evidence

(Ex. 185).

29. After the agreement was signed, Burberry bought

products from Defendant to determine whether it was

complying with the agreement.

30. On February 23, 2006, Burberry’s attorney sent a letter to Defendant’s attorney contending that Designers

[*8] sold two counterfeit scarves that infringed the Burberry Trademarks. Designers’ lawyer responded that the

goods were purchased from a Burberry store and that the

goods were not counterfeit.

31. On March 8, 2006, Burberry’s lawyer sent another letter to Defendant’s counsel contending that Designers

sold a counterfeit bikini and three counterfeit polo shirts

that infringed the Burberry Trademarks. Designers’

counsel responded (Ex. 177).32.

32. On May 9, 2007, Burberry’s attorney sent a letter to

Defendant’s counsel contending that Designers sold

two counterfeit quilted coats and two counterfeit white

shirts with check trim that infringed the Burberry Trademarks. Designers’ counsel responded (Ex. 178).33.

33. On July 9, 2007, Burberry’s attorney sent a letter to

Defendant’s counsel contending that Designers sold

two counterfeit scarves that infringed the Burberry Trademarks. Defendant’s counsel received this letter (Ex.

179).34.

34. Investigators acting on behalf of Burberry purchased

the following Burberry-branded articles of clothing

from Designers’ website, www.designersimports.com

(the ′′Purchased Goods′′):

. One bikini with check trim purchased on

March 1, 2006;

. Three polo shirts, one [*9] each in white,

black, and gray purchased on March 1, 2006;

. One ′′Constance′′ padded jacket purchased

on February 7, 2007;

. A second padded jacket, in the longer ′′Langford′′ style, purchased on April 7, 2007;

. One cashmere ′′Baby Blue Happy Scarf′′

and one cashmere ′′Classic Plaid Scarf,′′ purchased on June 9, 2007;

. One ′′Nova Check Cashmere Scarf′′ purchased on October 11, 2007;

. One cashmere Cream-White Check ′′Plaid

Mini Scarf′′ purchased on April 7, 2008; and

. Two white t-shirts with checked trim purchased on February 7, 2007 and April 7, 2007.

35. Designers shipped the Purchased Goods to Burberry’s investigators.

36. Burberry’s investigators shipped the Purchased

Goods to Burberry at its New York offices.

37. An employee in Burberry’s New York office received the Purchased Goods.

38. On June 28, 2005, Kate McKinnon, an Investigator

for Abacus Security, sent three (3) Burberry-branded handbags that had been purchased from Designers to Burberry’s New York Office. Burberry determined that these

three (3) handbags were not counterfeit, but rather genuine.

39. On December 15, 2005, Ayodele Akingbade, an Investigator for Abacus Security, sent three (3) Burberrybranded handbags that had been purchased [*10] from

Designers to Burberry’s New York Office. Burberry determined that these three (3) handbags were not counterfeit, but rather genuine.

ISSUES AT TRIAL AND FINDINGS OF FACT

Defendant stipulated to the counterfeit nature of substantially all of the products that Burberry found to be counterfeit, except for two scarves, purchased in December,

2005. Accordingly, Burberry had two goals at trial: (a)

to establish that Defendants were the source of the counterfeit products; and (b) to establish that Defendant’s violations were willful or the result of willful blindness.

Defendant’s goal was to minimize its damages to the extent possible.

a. Proof Regarding the Source of Products

Burberry engaged a series of investigators to buy certain

products from Defendant and submit these products,

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along with the packing slips, invoices, and shipping information, to Burberry (Trial Tr. 95-100). Burberry would

then attach a security tag bearing a unique number to these

products, photograph the products, and prepare a chain

of custody form (Trial Tr. 95-96). The chain of custody

form listed the source of the product, the date of receipt, and the date the recipient sent the product to another party (Trial [*11] Tr. 96). For everything but the

most obvious counterfeits, Burberry would ship the suspect products to its London office, where Burberry’s expert would examine them and determine whether a product was genuine or counterfeit (Trial Tr. 98).

Burberry submitted twenty products for their expert to review (Trial Tr. 41, 46). Burberry’s expert found that

six products (all handbags) were genuine but that the balance of fourteen were counterfeit (Trial Tr. 36, 42, 44).

As previously indicated, Defendant does not contest the

counterfeit nature of twelve of the fourteen products.

Defendant does contend, however, that two of the Burberry expert’s counterfeit determinations were erroneous: the determinations relating to a blue ′′happy′′ scarf

and a check cashmere scarf, both purchased in December, 2005 (Trial Tr. 248-52). Mr. Horowitz testified

that he suspected that J. Burke was a possible investigator for Burberry when he saw Burke’s name on an order for two scarves and a coat (Trial Tr. 248, 271-72).

While Defendant had Burberry scarves in stock at the

time, Designers was aware that Burberry was monitoring its compliance with the Settlement Agreement, so Mr.

Horowitz enlisted his wife to buy two [*12] Burberry

scarves from a Burberry store in Boca Raton, Florida

(Trial Tr. 249). Mr. Horowitz filled Mr. Burke’s order with

the two scarves his wife had purchased (Trial Tr. 249-

51). Burberry tested these scarves and found them to be

counterfeit (Trial Tr. 251-52). Mr. Horowitz challenges

Burberry’s determinations (Trial Tr. 251-52).

Since Burberry’s findings on the two scarves were erroneous, Defendant argues that Burberry’s twelve other

determinations of counterfeit must be wrong as well. Defendant’s argument is falsus in uno; falsus in omnibus;

but that is inconsistent with Defendant’s stipulation that it

had no factual basis for challenging Burberry’s other determinations. Even if Burberry’s determinations regarding the two scarves were incorrect, moreover, this would

not impair the validity of Burberry’s separate determinations made at different times, on twelve different products, that the Defendant’s goods were in fact counterfeit. Finally, Defendant did not establish that the

determinations were wrong: Defendant cannot prove that

it sent Mr. Burke the two authentic Burberry scarves

that Mrs. Horowitz purchased in the Boca Raton Burberry store.

Based on the routine procedures Burberry [*13] took to

protect its trademarks, and its carefully devised and methodically applied procedures to test the authenticity of

Burberry-branded merchandise, the Court finds that Designers sold the following twelve items of counterfeit merchandise to Burberry:

Date of Purchase Goods Sold

March 1, 2006 1. Bikini

2. White Polo Shirt

3. Black Polo Shirt

4. Gray Polo Shirt

February 7, 2007 5. ′′Constance′′ Jacket

6. White Shirt -- Checked Trim

April 7, 2007 7. Quilted Langford Coat

8. White Shirt -- Checked Trim

9. Cashmere Cream-White Check Mini Scarf

June 9, 2007 10. Cashmere Baby Blue Happy Scarf

11. Cashmere Classic Plaid Scarf

October 11, 2007 12. Nova Check Cashmere Scarf

b. Proof of Defendant’s Willfulness or Willful Blindness

Burberry has demonstrated Defendant’s willfulness

based on its conduct spanning several years during which

Defendant repeatedly sold a variety of counterfeit Burberry merchandise. In addition to the April 2005 Settlement Agreement (Ex. 185), Burberry submitted a series of

letters and emails proving that it repeatedly placed Defendant on notice that Defendant was violating the trademark law by selling counterfeit Burberry merchandise

(Ex. 177-79). Additionally, Mr. Horowitz testified that,

[*14] even after the Settlement Agreement, he occasionally purchased Burberry items from anonymous internet vendors and from vendors whose last names he did

not know (Trial Tr. 282-84). Mr. Horowitz also testified

that he did not always question his vendors about the

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2010 U.S. Dist. LEXIS 3605, *10

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source of their Burberry merchandise (Trial Tr. 284-85);

that he used suppliers whose goods had been seized

by the Customs Department (Trial Tr. 286-87; 289-90; 292

-93); and that he purchased a substantial amount of Burberry goods from Moda Oggi, a known seller of counterfeit merchandise (Trial Tr. 295). In fact, the United

States Customs Service repeatedly notified Defendant that

it was seizing Burberry-branded goods addressed to Designers because the goods were counterfeit (Exs. 223-

25; 302-05).

Defendant introduced testimony, however, that mitigates

the willfulness of his trademark violations. Mr. Horowitz testified, for example, that he often traveled overseas

to purchase branded merchandise (Trial Tr. 242); that

he visited the offices of his suppliers (Trial Tr. 242); that,

following the Settlement Agreement, he ceased selling

items that Burberry claimed were counterfeit (Trial Tr.

248); that he generally complied with his [*15] obligations under the Settlement Agreement (Trial Tr. 247-

48; 300-01); that all the Burberry items he currently sells

originated in Burberry outlet centers (Trial Tr. 254);

that all the non-Burberry branded produces he recently

added to his website originated with authorized distributors or manufacturers (Trial Tr. 257); that he made numerous, sincere efforts to authenticate his merchandise before offering them for sale (Trial Tr. 277-82; 288-89;

292); and that he was unaware that Moda Oggi was a seller

of counterfeit items (Trial Tr. 295). Defendant also introduced a supplier’s deposition testimony, stating that

Mr. Horowitz insisted on buying only authentic goods

(Trial Tr. 304-06).

CONCLUSIONS OF LAW

The Court has subject matter jurisdiction under 15

U.S.C. § 1121, 28 U.S.C. §§ 1331 and 1338, and has

supplemental jurisdiction under 28 U.S.C. § 1367(a).

Trademark Counterfeiting and Infringement under

the Lanham Act (Counts I and II)

Burberry alleges that Defendant committed trademark

counterfeiting and infringement under section 32(1)(a) of

the Lanham Act through its unauthorized use of the Burberry trademarks. Section 32(1)(a) of the Lanham Act

provides that a person shall be civilly [*16] liable if, without the registrant’s consent, such person:

use[s] in commerce any reproduction, counterfeit, or copy or colorable limitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising

of any goods or services on or in connection

with which such use is likely to cause confusion, or to cause mistake, or to deceive.

15 U.S.C. § 1114(1)(a).

Section 45 of the Lanham Act, 15 U.S.C. § 1125, defines a ′′counterfeit′′ mark as ′′a spurious mark which is

identical with, or substantially indistinguishable from, a

registered mark.′′

Defendant is liable for trademark counterfeiting and infringement if Burberry establishes that: (1) Burberry had

valid registered marks entitled to protection under the

Lanham Act; and (2) Defendant used a similar mark in

commerce in a way that would likely cause confusion

among the relevant consuming public. Cartier Int’l

B.V. v. Ben-Menachem, 2007 U.S. Dist. LEXIS 95366,

2008 WL 64005, at *10 (S.D.N.Y. Jan. 3, 2008).

Burberry has met its burden. The parties stipulated that

Burberry had valid registered marks entitled to protection under the Lanham Act. These marks include the

BURBERRY(R) word mark; the BURBERRY CHECK

mark; and the EQUESTRIAN KNIGHT [*17] DESIGN. Defendant has offered for sale and has sold merchandise displaying spurious designations that are identical to, or substantially indistinguishable from, Burberry’s

famous, registered trademarks on goods for which Burberry trademarks are registered, including: a bikini; a

jacket; a coat; five shirts; and four scarves. Defendant intentionally used these spurious designations without authorization and in connection with the advertising, sale, offering for sale and distribution of goods for its own

financial gain.

Defendant’s use of the Burberry trademarks is likely to

cause confusion among the relevant consuming public. To

determine whether confusion is likely to arise, a court

need only determine that the items at issue are counterfeit and that Defendant distributed, offered for sale, and

sold the items. Gucci Am., Inc. v. Duty Free Apparel,

Ltd., 286 F.Supp.2d 284, 287 (S.D.N.Y. 2003).

The Court finds that Defendant is liable for trademark

counterfeiting and infringement.

False Designation of Origin, Trade Name, Infringement, and False Description and Representation under the Lanham Act (Count III)

The Court also finds Defendant liable under Section

43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A):

Any [*18] person who, on or in connection

with any goods or services, or any container for goods, uses in commerce any word,

terms, name, symbol, or device, or any combination thereof, or any false designation

or origin, false or misleading description of

fact, or false or misleading representation of

fact, which is likely to cause confusion, or

to cause mistake, or to ′′deceive as to the affiliation, connection, or association of such

person with another person, or as to the origin, sponsorship, or approval of his or her

goods, services, or commercial activities by

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2010 U.S. Dist. LEXIS 3605, *14

Jessica Bloodgood

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another person....

Having established its claim for federal trademark

infringement under Section 32, it is unnecessary

for the plaintiff to make any additional showing to

satisfy Section 43(a). Russian Kurier, Inc. v. Russian Am. Kurier, Inc., 899 F.Supp. 1204, 1208

(S.D.N.Y. 1995).

Trademark Dilution under the Lanham Act and Dilution and Likelihood of Injury under Section 360-l of

N.Y. Gen. Bus. Law (Counts IV and VI) 1

A trademark holder claiming dilution under 15 U.S.C. §

1125(c) must show that: (1) the senior mark is famous; (2) the defendants are making commercial use of

the junior mark in commerce (under the Federal Trademark Dilution Act, the ′′FTDA′′) or use of the junior mark

in commerce (under the Trademark Dilution Revision

Act of 2006, the ′′TDRA′′); (3) defendant’s use of the junior mark began after the senior mark became famous;

and (4) actual dilution (under the FTDA) or a likelihood

of dilution (under the TDRA). See [*20] e.g., Malletier v. Dooney & Bourke, Inc., 561 F.Supp.2d 368, 380-81

(S.D.N.Y. 2008).

Plaintiffs have met their burden on their trademark dilution claim, based on the parties’ stipulations: the fame

of Burberry’s mark; Defendant’s commercial use of Burberry’s mark in commerce; and Defendant’s use of Burberry’s mark subsequent to Burberry’s mark becoming

famous. Further, Burberry has established a presumption

of actual and likely dilution by showing that Defendant’s used counterfeit marks that were identical to the

Burberry trademarks. See Savin Corp. v. Savin Corp., 391

F.3d 439, 452-53 (2d Cir. 2005).

Dilution by tarnishment reflects an ′′association arising

from the similarity between a mark or a trade name and

a famous mark that harms the reputation of the famous mark.′′ 15 U.S.C. § 1125(c). Defendant tarnished

Burberry’s marks by using them on inferior products (Tr.

18:23-22:19; 36:17-37:4). See e.g., Hormel Foods v.

Jim Henson Products, Inc. 73 F.3d 497, 507 (2d Cir. 1996)

(a trademark may be tarnished when linked to products

of shoddy quality). Accordingly, the Court finds Defendant liable for trademark dilution by tarnishment under

both the FTDA and the TDRA.

Since Burberry has established [*21] that (1) the Burberry trademarks are famous, and (2) there is a likelihood of dilution, Defendants are also liable under New

York State Business Law § 360-l for dilution and likelihood of injury to business reputation. See Malletier,

561 F.Supp.2d at 381.

Deceptive Acts and Practices under New York Law

(Count V)

New York General Business Law § 349 forbids ′′[d]eceptive acts and practices.′′ Burberry has satisfied the three

-factor test for establishing a § 349 violation: (1) that Defendant engaged in a consumer-oriented act (sale of

Burberry-branded merchandise); (2) that was misleading

in a material way (the products were counterfeit); and

(3) Burberry suffered injury. See Vitabiotics, Ltd. V.

Krupka, 606 F.Supp. 779, 785 (E.D.N.Y. 1984) (sale of infringing products creates presumption of injury under

Section 349). Accordingly, the Court finds Defendant liable under Section 349 of the New York General Business Law.

Trademark Infringement and Unfair Competition under New York Common Law (Counts VII and VIII)

The New York common law on trademark infringement

and unfair competition claims mirrors the Lanham

Act. To prevail on its common law claim of trademark infringement, Burberry need only [*22] present evidence

sufficient to establish a violation of section 32(1) of the

Lanham Act. Standard & Poor’s Corp., Inc. v. Commodity Exch., Inc., 683 F.2d 704, 708 (2d Cir. 1982). Since

Burberry has established liability under the Lanham

Act, it has also established liability under New York’s

common law of trademark infringement.

The same principle is applicable to the New York State unfair competition claim. A claim under the Lanham Act,

coupled with a showing of bad faith or intent, establishes a claim for unfair competition. Girl Scouts of

U.S.A. v. Bantam Doubleday Dell Publ’g Group, Inc.,

808 F.Supp. 1112, 1131 (S.D.N.Y. 1992). Use of a counterfeit mark creates a presumption of bad faith under

New York law. Philip Morris U.S.A., Inc. v. Felizardo,

2004 U.S. Dist. LEXIS 11154, 2004 WL 1375277

(S.D.N.Y. June 18, 2004), at *6. Accordingly, Burberry’s

evidence of Defendant’s sale of counterfeit Burberrybranded merchandise creates a presumption of bad faith,

satisfying the elements of Burberry’s common law unfair competition claim.

1

The Court will analyze Burberry’s federal and state law dilution claims together. The New York State anti-dilution statute,

N.Y. Gen. Bus. L. § 360-l, and the Federal Trademark Dilution Act, the federal anti-dilution [*19] statute in effect prior to October 6, 2006, are alike. Louis Vuitton Malletier v. Dooney & Bourke, Inc., 454 F.3d 108, 119 (2d Cir. 2006). This analysis is essentially unchanged under the Trademark Dilution Revision Act of 2006, effective October 6. 2006. Tiffany (NJ) Inc. v. eBay, Inc.,

576 F. Supp. 2d 463, 523 (S.D.N.Y. 2008). Some courts have held that the New York State statute provides greater protection

against dilution than the TDRA. See GMA Accessories, 2008 U.S. Dist. LEXIS 16052, 2008 WL 591803, at *11. But the Court

need not engage in a separate analysis for Burberry’s New York State claims because the Court concludes that Burberry’s dilution claim succeeds under the more exacting FDTA standard.

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2010 U.S. Dist. LEXIS 3605, *20

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Common Law Breach of Contract (Count IX)

The April 12, 2005 Settlement Agreement is governed

by New York law (Ex. 185 P11). The parties do not dispute the existence or validity of the [*23] April 12,

2005 Settlement Agreement, nor does Defendant argue

that Burberry failed to perform under the Settlement

Agreement.

Burberry has also established Defendant’s nonperformance. Paragraph 2.6 of the Settlement Agreement

provides that Defendant will not ′′knowingly infringe

or dilute Burberry’s trademarks.′′ The same paragraph defines ′′knowingly′′ as occurring when Defendant

′′knows or should have known that their actions violate

Burberry’s trademark rights.′′

The Court has already found that Defendant committed

trademark infringement. It now finds that the same infringing conduct constituted a breach of contract. See e.g.,

Heisman Trophy Trust v. Smack Apparel Co., 595

F.Supp.2d 320, 329 (S.D.N.Y. 2009) (evidence of trademark infringement shows the likelihood of success on

breach of settlement agreement claim).

Regarding damages, Section 12 of the Settlement Agreement contains a liquidated damages clause providing

that Defendant is obligated to pay ′′$ 1,500.00 per day

for each day a breach occurs.′′

Defendant’s breach of contract liability, however, is limited to violations that occurred prior to Burberry’s commencement of the lawsuit. Under New York’s doctrine of

the election of remedies, [*24] when a party breaches

a contract, the adverse party has to make an election: to either treat the entire contract as breached and pursue damages for the breach or, alternatively, to reject the proposed breach, demand performance, and continue to treat

the contract as valid. See e.g., Inter-Power of New York

Inc. v. Niagara Mohawk Power Corp., 259 A.D.2d 932,

934, 686 N.Y.S.2d 911 (3d Dept. 1999).

Accordingly, Defendant is liable only for trademark violations occurring prior to May 22, 2007, the date Burberry commenced this lawsuit. These pre-commencement

violations include nine of the twelve items: the four

items Defendant sold on March 1, 2006 (Bikini; White

Polo Shirt; Black Polo Shirt; and Gray Polo Shirt); the two

items Defendant sold on February 7, 2007 (the ′′Constance′′ Jacket and the White Shirt - Checked Trim); and

the three items Defendant sold on April 7, 2007 (the

Quilted Langford Coat; the White Shirt-Checked Trim;

and the Cashmere Cream-White Check Mini Scarf).

Common Law Unjust Enrichment (Count X)

The Court dismisses Burberry’s unjust enrichment claim

because a party cannot prevail on remedies under both

contract and quasi-contract theories. See e.g., ClarkFitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382,

388, 516 N.E.2d 190, 521 N.Y.S.2d 653 (1987)

[*25] (′′quasi contract′′ only applies in the absence of

an express agreement, and is not really a contract at all,

but rather a legal obligation imposed in order to prevent a party’s unjust enrichment).

Defendant ’s Willfulness or Willful Blindess

The Court finds that Defendant acted willfully in selling

twelve counterfeit Burberry-branded items of merchandise. Actual knowledge is not necessary for willful trademark infringement liability; rather, ′′[i]nfringement is

willful when the defendant had knowledge that [his] conduct represented infringement or perhaps recklessly disregarded the possibility.′′ Hermes Int’l v. Kiernan,

2008 U.S. Dist. LEXIS 70506, 2008 WL 4163208, at *3

(E.D.N.Y. Aug. 28, 2008).

Here, Burberry established Defendant’s willfulness by

demonstrating a course of conduct spanning several years

during which Defendant repeatedly sold a variety of

counterfeit Burberry merchandise. Defendant repeatedly

and knowingly violated its obligations under the Settlement Agreement. Defendant willfully failed to investigate the bona fides of Burberry-branded goods it purchased for sale and by failing to implement procedural

safeguards against the sale of counterfeit goods. When Defendant became aware that Burberry, through [*26] its

agent J. Burke, placed a test order for Burberry items, Defendant did not fill the order from its own inventory,

but rather sent Mrs. Horowitz to an authorized Burberry

store to purchase items to fill the order. This is further

evidence that Defendant was not confident in the authenticity of its own Burberry-branded inventory. Accordingly, the Court finds that Defendant’s trademark violations were willful.

Defendant, however, has introduced some evidence of

compliance with the terms of the Settlement Agreement

and of some level of diligence. These factors mitigate the

degree of Defendant’s willfulness.

DAMAGES

The Court asked the parties to provide summations of

their damages. Burberry claimed statutory damages under 15 U.S.C. § 1117(c) in the amount of $ 6.5 million

(Dkt. # 30, at 2, 10). Defendants argued that its maximum exposure is $ 18,000 (Dkt. # 32 at 13).

Section 15 U.S.C. § 1117(c) provides:

In a case involving the use of a counterfeit

mark (as defined in section 1116(d) of this

title) in connection with the sale, offering

for sale, or distribution of goods or services,

the plaintiff may elect, at any time before final judgment is rendered by the trial court, to

recover, instead [*27] of actual damages

and profits under subsection (a) of this secPage 7 of 9

2010 U.S. Dist. LEXIS 3605, *22

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tion, an award of statutory damages for any

such use in connection with the sale, offering for sale, or distribution of goods or services 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) (2004) (amended 2008). 2

In determining the amount of statutory damages, courts

consider several factors, including:

(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.

Kenneth Jay Lane, Inc. v. Heavenly Apparel, Inc.,

2005 U.S. Dist. LEXIS 28815,, 2006 WL 728407, at

*6 (S.D.N.Y. November 17, 2005).

Several of these factors support a substantial award. Defendant has acted willfully in selling twelve counterfeit

Burberry-branded items of merchandise. Burberry’s trademarks are highly valuable and of worldwide renown.

The goal of deterring others from similar conduct requires a significant award. Louis Vuitton Malletier, S.A. v.

LY USA, 2008 U.S. Dist. LEXIS 107592, 2008 WL

5637161, at *2 (S.D.N.Y. Oct. 3, 2008). A large award

is also necessary because the Settlement Agreement

failed to deter Defendant and because of Defendant’s ability to reach a vast customer base through internet

[*29] advertising. See e.g., Rolex Watch U.S.A., Inc. v.

Jones, 2002 U.S. Dist. LEXIS 6657, 2002 WL 596354, at

*5 (S.D.N.Y. Apr. 17, 2002).

3

There are other factors which mitigate the degree of Defendant’s willfulness. Defendant cooperated in providing financial records. These records indicate that Defendant reported sales of $ 4,276,581 for Burberrybranded merchandise sold between March 29, 2005 and

June 26, 2008 (Ex. 308). Defendant also reported net income of $ 1,158,295 for scarves, shorts, jackets, and coats

sold between March 29, 2005 and May 13, 2008 (Ex.

220). 4 Burberry-branded merchandise, however, represented only a percentage of Defendant’s entire business,

and not all Burberry-branded items were counterfeit. 5

Finally, few courts have awarded maximum statutory damages on the basis of a per mark, per type of good calculation. See e.g., Gucci Am., Inc. v. MyReplicaHandbag-

.com, 2008 U.S. Dist. LEXIS 14047, 2008 WL 512789, at

*5 (S.D.N.Y. Feb. 26, 2008) (collecting cases to note

that ′′[M]ost judges have [*30] issued awards well below the maximum available on the basis of per-mark-per

-type-of-goods′′).

Having considered all relevant factors, the Court awards

Burberry statutory damages in the amount of $

1,500,000. This amount represents $ 100,000 per mark

per types of goods sold. Specifically, Defendant infringed three of Burberry’s registered trademarks (the

Burberry name, the Burberry Check design, and the Burberry ′′Equestrian Knight′′ on horseback device) and

sold five types of counterfeit Burberry-branded merchandise (Bikini; Shirts; Jacket; Coat; and Scarves). An

award of $ 100,000 per mark per type of good sold totals $ 1,500,000.

Since there was willful infringement and [*31] no ′′extenuating circumstances,′′ the Court allows Burberry attorneys’ fees and costs, as required by 15 U.S.C. §

1117(b). Sara Lee Corp. v. Bags of New York, Inc., 36

F.Supp.2d 161, 170 (S.D.N.Y. 1999). Burberry’s counsel

2

Prior to October 13, 2008, the minimum for § 1117(c)(1) was $ 500 and the maximum was $ 1,00,000; and the maximum for

§ 1117(c)(2) was $ 1,000,000. See Prioritizing Resources and Organization for Intellectual Property Act of 2008, Title I, sec.

104, § 1117, 122 Stat 4256, 4259 (Oct. 13, 2008). Defendant’s sales of counterfeit Burberry items occurred prior to October 13,

2008. Accordingly, the Court applies the pre-amendment statutory amounts. See e.g., Century 21 Real Estate LLC v. Bercosa Corp.,

F.Supp.2d , 666 F. Supp. 2d 274, 2009 U.S. Dist. LEXIS 94094, 2009 WL 3111759, at *12 n.9 (E.D.N.Y. Sept. 18, 2009).

[*28]

3

Plaintiffs’ Ex. 300 indicates that between September 13, 2003 and June 11, 2008, Designer’s Burberry advertising in Google

had been clicked 1,021,744 times.

4

Plaintiffs’ Ex. 220 was not introduced at trial. After the trial, however, on September 25, 2009, the Court reopened the trial record to admit this exhibit into evidence (Dkt. # 28).

5

Plaintiffs’ Ex. 308 indicates that Burberry-branded merchandise represents the following percentages of Designer’s overall

sales: 65.13% between March 29, 2005 and December 31, 2005; 34.44% between January 1, 2006 and December 31, 2006; 21.35%

between January 1, 2007 and December 31, 2007; and 6.97% between January 1, 2008 and June 26, 2008.

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should submit an itemized fee application, supported by

time-sheets, along with a statement of the nature of

the work performed, as well as explanations of each attorney’s expertise and any other relevant factors. See e.g.,

Pressman v. Estate of Steinvorth, 886 F. Supp. 365, 367

(S.D.N.Y. 1999).

INJUNCTIVE RELIEF

Section 34(a) of the Lanham Act provides for injunctive

relief to prevent trademark violations ′′according to the

principles of equity and upon such terms as the court may

deem reasonable.′′ 15 U.S.C. § 1116(a). Courts may

grant permanent injunctions where a plaintiff demonstrates actual success on the merits and irreparable harm.

Gucci Am., Inc. v. Duty Free Apparel, Ltd., 286

F.Supp.2d at 290. As indicated, Burberry has established

success on the merits. Burberry has also established irreparable harm by establishing a likelihood of confusion. See Genesee Brewing Co., Inc. v. Stroh Brewing

Co., 124 F.3d 137, 142 (2d Cir. 1997). Accordingly, the

Court permanently [*32] enjoins Defendant from infringing on any Burberry trademarks.

The Court denies Burberry’s request to completely bar Defendant from selling Burberry goods. Defendant may

continue to participate in the secondary market provided

Defendant sells only legitimate products. In light of Defendant’s continuing pattern of trademark infringement,

however, any further violation of the injunction will result in Defendant’s being permanently enjoined from selling, offering for sale, advertising, or distributing any

Burberry-branded merchandise.

CONCLUSION

The foregoing constitutes the Court’s findings of fact

and conclusions of law. Defendant is liable to Burberry

for a total of $ 1,500,000 in statutory damages. Defendant is further liable for Burberry’s reasonable attorneys’ fees and costs, in an amount to be determined by

the Court, after Burberry’s counsel submits contemporaneous time records, reflecting the work done in this litigation. Finally, Defendant is hereby permanently enjoined from infringing on any Burberry trademarks. If

Defendant violates Burberry’s trademarks in the future,

then Defendant will automatically be permanently enjoined from selling, offering for sale, advertising, or distributing [*33] any Burberry-branded merchandise.

Plaintiff is directed to submit a proposed order of judgment on 10 days notice.

Dated: New York, New York

January 19, 2010

SO ORDERED

/s/ Paul A. Crotty

PAUL A. CROTTY

United States District Judge

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2010 U.S. Dist. LEXIS 3605, *31

Jessica Bloodgood

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Caution

As of: June 26, 2013 12:41 PM EDT

Phillip Morris USA Inc. v. Marlboro Express

United States District Court for the Eastern District of New York

August 26, 2005, Decided

CV-03-1161 (CPS)

Reporter: 2005 U.S. Dist. LEXIS 40359; 2005 WL 2076921

PHILLIP MORRIS USA INC., Plaintiff, - against - MARLBORO EXPRESS, TOBACCO TRADERS AND

TRUST, TIMOTHY FARNHAM, individually and doing

business as Tobacco Traders and Trust and Marlboroexpress.com, MARY KIM JAMIESON, individually and

doing business as Tobacco Traders and Trust and Marlboroexpress.com, NATIVE EXPRESS, DON DOCTOR,

individually and doing business as Marlboroexpress.com

and Nativeexpress.com, DENNIS KENNEDY, individually and doing business and Double D Smoke Shop,

SOVEREIGNTY VENTURES, INC., DON DELAND,

individually and doing business as Sovereignty Ventures,

Inc., IROQOUIS TOBACCO COMPANY, SCOTT SNYDER, individually and doing business as Iroquois Tobacco

Company, SIMON MOSHEL, an individual; MICHAEL

MOSHEL, an individual, ROBERT BERARDELLI, an

individual, and Does One Through Ten Inclusive, Defendants.

Subsequent History: Related proceeding at Philip Morris

USA Inc. v. A & V Minimarket, Inc., 2008 U.S. Dist. LEXIS

120183 (S.D.N.Y., Dec. 15, 2008)

Core Terms

counterfeit, trademark, cigarette, infringement, register,

statutory damages, summary judgment, default, brand,

label, default judgment, district court, maximum,

violation of section, injunctive relief, statutory award,

registrant, permanent, carton, roof, entry of default, do

business, plea guilty, indictment, injunction, pentagonal,

traffic

Counsel: [*1] For Philip Morris USA Inc., Plaintiff:

Samuel L. Barkin, Heller Ehrman LLP, New York, NY.

For Michael Moshel, as individual, Defendant: Saul E.

Feder, Regosin, Edwards, Stone & Feder, New York, NY.

Judges: Charles P. Sifton, United States District Judge.

Opinion by: Charles P. Sifton

Opinion

MEMORANDUM OPINION AND ORDER

SIFTON, Senior Judge.

Plaintiff Philip Morris USA, Inc. (′′Philip Morris′′)

brings this trademark action seeking damages and injunctive relief against defendants Marboro Express, Tobacco Traders and Trust, Timothy Farnham, individually

and doing business as ′′Tobacco Traders and Trust′′

and ′′Marlboroexpress.com,′′ Don Doctor, individually

and doing business as ′′Marlboroexpress.com′′ and ′′Nativeexpress.com,′′ Dennis Kennedy, individually and doing business as ′′Double D Smoke Shop,′′ Don Deland,

individually and doing business as ′′Sovereignty Ventures, Inc.,′′ Iroqois Tobacco Company, Scott Snyder, individually and doing business as ′′Iroqois Tobacco Company,′′ and Robert Berardelli. 1

Plaintiff’s claims arise

out of defendants’ sale of counterfeit Marlboro[R] brand

cigarettes. Specifically, plaintiff alleges the following

claims against the defendants: (1) infringement of

plaintiff’s [*2] registered trademarks in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114 (Claims

1-4); (2) importation of counterfeit goods bearing an infringing trademark in violation of Section 42 of the Lanham Act, 15 U.S.C. § 1124 (Claims 5-6); (3) false designation of origin in violation of Section 43(a) of the

Lanham Act, 15 U.S.C. § 1125(a) (Claims 7-8); (4) trademark dilution in violation of the Federal Trademark Di1

Plaintiff’s complaint also named as defendants Simon Moshel, Michael Moshel and Mary Kim Jamieson. Plaintiff has entered

a Consent Judgment with defendants Simon and Michael Moshel, which was ′′so ordered′′ by this Court on February 2, 2005. Pursuant to the Consent Judgment, defendants Simon and Michael Moshel agreed to pay plaintiff $ 150,000 and were permanently enjoined from selling counterfeit or illegally imported Marlboro cigarettes. (See Consent Judgment at 2). Plaintiff also filed a notice of voluntary dismissal of the claims asserted against defendant Mary Kim Jamieson without prejudice, pursuant to Rule 41(a)

of the Federal Rules of Civil Procedure on July 22, 2005.

Jessica Bloodgood

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lution Act, 15 U.S.C. §§ 1125(c) and 1127 (Claims

9-10); (5) ′′cybersquatting′′ in violation of the AntiCybersquatting Consumer Protection Act, 15 U.S.C. §

1125(d) (Claim 11); (6) unfair competition in violation of

the common law of New York (Claim 12); (7) trademark infringement in violation of the common law of New

York (Claim 13); and (8) trademark dilution in violation of New York General Business Law § 360-l et seq.

(Claim 14).

[*3] Presently before the court are the following motions: (1) plaintiff’s motion for partial summary judgment against defendant Snyder on Claims 1, 2, 5, and

7 alleged in the complaint, pursuant to Rule 56 of the Federal Rules of Civil Procedure (′′Fed. R. Civ. P.′′); and

(2) plaintiff’s motion for entry of default judgment and order granting damages and injunctive relief against defendants Berardelli, Deland, Farnham, Kennedy, and Doctor (collectively ′′Default Defendants′′), pursuant to Fed.

R. Civ. P. 55(b). The defendants have not responded to

plaintiff’s motions. 2For the reasons set forth below, the

motions are granted.

BACKGROUND

The following facts are drawn from the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits in connection with this

motion. The facts are undisputed unless [*4] otherwise

noted.

Plaintiff Phillip Morris is a corporation organized under

the laws of Virginia with its principal place of business in

New York. For several decades, Phillip Morris has manufactured and sold tobacco products under the Marlboro[R] brand (Pl. 56.1 Statement P1). Among the distinctive features of the Marlboro[R] brand is its pack

design, which features the Marlboro Roof Design Label[R] Mark (a pentagonal figure with a horizontal top and

two vertical sides with two upwardly and inwardly sloping diagonals). Phillip Morris is the registered owner

of the ′′Marlboro Marks′′ on the Principal Register of the

United States Patent and Trademark Office (′′USPTO′′).

The ′′Marlboro Marks′′ include the Roof Design Label[R] Mark, Marlboro[R], Marlboro Lights[R], Marlboro Menthol[R], Marlboro Lights Menthol[R], Marlboro Ultra Lights[R]. (See Registration Certificates,

Johnson Decl. Ex. A). Phillip Morris has invested substantial time, effort, and money to advertise and promote

the Marlboro Marks, and as a result, they are widely recognized trademarks for which significant ′′good will′′

has developed.

Between August 2000 and February 2003, defendants Snyder, Deland, Farnham, [*5] and Berardelli, in conjunction with others, imported approximately 200,000 cartons of counterfeit Marlboro[R] and Marlboro Lights[R]

cigarettes from China. (Pl. 56.1 P3; Johnson Dec. Ex.

B). These cartons were imported in at least five separate

shipments, and were monitored by the United States

Customs Service after arrival in the United States from

China. (Pl. 56.1 PP3-4; Johnson Dec. Ex. B). Defendants sold counterfeit Marlboro brand cigarettes at retail stores, including the ′′Double D Smoke Shop,′′ located on the Seneca Indian Cattaraugus reservation and the

′′Iroqious Tobacco Company,′′ located in Irving, New

York, and through various Internet websites, including

′′Marlboroexpress.com′′ and ′′Smokeheap.com.′′ (Pl. 56.1

P5; Johnson Dec. Ex. C). Defendants purchased counterfeit cigarettes at prices between $ 2.00 and $ 2.20 per

carton and sold them at retail prices between $ 19.00

and $ 29.99 per carton. (Pl. 56.1 P6; Johnson Dec. Ex.

H).

On February 14, 2003, the United States Customs Service filed a criminal complaint in the United States District Court for the Eastern District of New York

against defendants Snyder, Deland, Farnham, Berardelli

and others 3

for conspiracy to smuggle [*6] and traffic in

counterfeit goods, in violation of 18 U.S.C. §§ 545 and

2320.

4

(See Criminal Complaint, United States v. Moshel,

et. al., 1:03-m-276 (E.D.N.Y.), Johnson Decl. Ex. B).

On March 20, 2003, defendants Snyder, Deland, Farnham, Berardelli were indicted in the United States District Court for the Eastern District of New York on three

counts of trafficking and conspiring to traffic counter2

The defendants against whom these motions are brought appear to be proceeding pro se.

3

The criminal complaint also named Simon and Michael Moshel as defendants. (Johnson Dec. Ex. B at 1).

4

18 U.S.C. § 545 provides in relevant part that:

Whoever knowingly and wilfully . . . smuggles or clandestinely introduces . . . into the United States any merchandise which should have been invoiced . . . . or fraudulently or knowingly imports or brings into the United States

any merchandise contrary to law. . . shall be fined under this title or imprisoned. . .

18 U.S.C § 2320 provides in relevant part that:

Whoever intentionally traffics or attempts to traffic in goods or services and knowingly uses a counterfeit mark on

or in connection with such good or services shall be fined. . . or imprisoned. . . .

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feit goods in violation of 18 U.S.C. §§ 545 and 2320.

(See Indictment, Johnson Decl. Ex. C). On September 30,

2003, defendant Farnham pled guilty before Magistrate

Judge Cheryl Pollack to Count One of the indictment

which accused them of knowingly and intentionally conspiring to traffic in counterfeit cigarettes. On October 1,

2003, defendants Snyder and Deland also pled guilty before Judge Raymond Dearie to Count One of the indictment. (See Johnson Decl. Ex. D; Barkin Decl. Ex. 7-8;

Pl. 56.1 Statement P29). 5 Defendant Berardelli pled guilty

to Count Two of the Indictment which accused him of

knowingly and intentionally trafficking in counterfeit

goods in violation of 18 U.S.C. § 2320.

[*8] Plaintiff commenced this action by filing a complaint and summons against the defendants on March 10,

2003 (the ′′Complaint′′). Between March 2003 and June

2003, plaintiff served process upon each of the defendants. To date, defendants Berardelli, Deland, Farnham,

Kennedy, and Doctor 6

have not filed an answer or otherwise responded to the Complaint. On May 11, 2005,

the Clerk of this Court issued a Notation of Default pursuant to Fed. R. Civ. P. 55(a) against defendants Farnham, Doctor, Kennedy and Deland. 7

[*9] DISCUSSION

Jurisdiction

The Court has jurisdiction over this action pursuant to

15 U.S.C. § 1121 and 28 U.S.C. § 1338, which confers jurisdiction over actions involving violations of patents

and trademarks, 28 U.S.C. § 1331, which authorizes jurisdiction over civil actions arising under federal law, and

principles of pendent jurisdiction over the state law

claims.

Motion for Partial Summary Judgment

Summary Judgment Standard

A motion for summary judgment may be granted only

where ′′the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if

any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.′′ Fed. R. Civ. P. 56(c); Celotex

Corp v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed.

2d 265 (1986). A motion for summary judgment may

be defeated by the non-moving party if that party produces sufficient specific facts to establish that there is a

material issue of fact for trial. See Montana v. First Federal Sav. & Loan Ass’n of Rochester, 869 F.2d 100, 103

(2d Cir. 1989). [*10] The role of the court on such a

motion is ′′not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried.′′

Knight v. United States Fire Ins. Co., 804 F.2d 9, 11 (2d

Cir. 1986). The ′′court must view the evidence in the

light most favorable to the party against whom summary

judgment is sought and must draw all reasonable inferences in his favor.′′ L.B. Foster Co. v. America Piles, Inc.,

138 F.3d 81, 87 (2d Cir. 1998); Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L.

Ed. 2d 202 (1986).

Defendant Snyder’s Failure to Respond

Local Rule 56.1 of the Eastern and Southern Districts of

New York requires that all summary judgment motions

be accompanied by a ′′short or concise statement of material facts as to which the moving party contends

there is no genuine issue to be tried.′′ Local Rule 56.1(a).

The rule also requires that the party opposing summary

judgment file a response setting forth the material facts

about which it contends there exists a triable issue. Because defendant Snyder has failed to file any response, all

facts contained in plaintiff’s Rule 56.1 statement are

deemed admitted. 8See Local [*11] Rule 56.1(b) and

(d). However, defendant Snyder’s failure to respond to

plaintiff’s motion does not mean that plaintiff automatically prevails. See e.g. Adickes v. S.H. Kress & Co.,

398 U.S. 144, 160, 90 S. Ct. 1598, 26 L. Ed. 2d 142

5 Defendants Snyder, Deland and Farnham were also charged in the United States District Court for the Western District of

Texas with smuggling and trafficking counterfeit cigarettes in violation of 18 U.S.C §§ 371, 2342(a) and 2320(a). Defendant Synder pled guilty and was sentenced to 27 months imprisonment in December 2003. He was also ordered to pay $ 861,260 in restitution for unpaid cigarette taxes. Phillip Morris is not entitled to any part of that restitution award. (See Johnson Decl. Ex. G.). Defendants Deland and Farnham also pled guilty, and were sentenced to 24 and 18 months imprisonment, respectively. (See

Barkin Decl. Ex. 11-12).

6 Although defendants Kennedy and Doctor were not named in the related criminal action, they are alleged in plaintiff’s complaint to be co-owners or operators of some of the outlets through which the counterfeit cigarettes were sold, including ′′Double D

Smoke Shop,′′ ′′Marlboroexpress.com′′ and ′′Nativeexpress.com.′′

7 Defendant Berardelli is not listed on the Clerk’s Notation of Default. However, this appears to be an oversight, as plaintiff provided the Clerk of Court with a copy of the summons and complaint served by personal service on defendant Berardelli on

March 25, 2003. (See Barkin Decl., Ex. 14 PP7-8; Ex. 15). The default is hereby noted.

8

Plaintiff filed a ′′Notice to Pro Se Litigant Opposing Motion for Summary Judgment′′ on May 23, 2005, informing defendant Snyder of the consequences of failing to respond to a summary judgment motion. See Champion v. Artuz, 76 F.3d 483, 486 (2d Cir.

1996) (an ′′easily comprehensible notice′′ from the party moving for summary judgment provides sufficient notice to a pro se litigant).

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2005 U.S. Dist. LEXIS 40359, *6

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(1970). The moving party must ′′nevertheless offer facts

supporting its Rule 56.1 Statement, and must satisfy

the movant’s Rule 56 burden.′′ Smith v. Principi, 2004

U.S. Dist. LEXIS 16418, 2004 WL 1857582, at *1, n.1

(S.D.N.Y. 2004); see also Vermont Teddy Bear Co., Inc. v.

1-800 BEARGRAM Co., 373 F.3d 241, 242 (2d Cir.

2004) (′′Even when a motion for summary judgment is unopposed, the district court is not relieved of its duty to decide whether the movant is entitled to judgment as a

matter of law.′′).

[*12] Lanham Act

Plaintiff seeks summary judgment against defendant Snyder on its First, Second, Fifth and Seventh Claims for relief, which allege (1) trademark infringement in violation of Section 32 of the Lanham Act, (2) importation of

goods bearing an infringing trademark in violation of

Section 42 of the Lanham Act, and (3) false designation

of origin and trademark and dress infringement in violation of Section 43(a) of the Lanham Act. 9

See 15 U.S.C.

§§ 1114(1), 1124, 1125(a).

Sections 32 and 43(a)

Section 32 of the Act prohibits the use in commerce, without consent, of any ′′reproduction, counterfeit, copy, or

colorable imitation of a registered mark in connection with

the sale, offering for sale, [*13] distribution, or advertising of any goods,′′ in a way that is likely to cause confusion with plaintiff’s registered trademarks. 15 U.S.C. §

1114 (1)(a). Section 43(a) prohibits similar conduct,

though it is not limited to registered trademarks, and

deems liable for false designation of origin ′′any person

who. . .uses in commerce any container for goods. . .

name, symbol, device. . .or any false designation of origin . .which is likely to cause confusion.′′ 15 U.S.C. §

1125(a); see also Chambers v. Time Warner, Inc., 282

F.3d 147, 155 (2d Cir.2002). Liability is established under both Sections 32 and 43(a) of the Lanham Act if

a plaintiff can demonstrate (1) that it has a valid trademark entitled to protection under the Act, and (2) defendant’s actions are ′′likely to cause confusion.′′ Arrow

Fastener v. Stanley Works, 59 F.3d 384, 390 (2d Cir.1995).

In this case, plaintiff’s certificates of registration with

the USPTO for the Marlboro Marks are ′′prima facie evidence that the mark[s] [are] registered and valid (i.e. protectible), that the registrant owns the mark[s], and that

the registrant has the [*14] exclusive right to use the

mark[s] in commerce.′′ Lane Capital Management, Inc. v.

Lane Capital Management, Inc., 192 F.3d 337, 345 (2d

Cir. 1999); 15 U.S.C. § 1067(b)(′′A certificate of registration of a mark...shall be prima facie evidence of the validity of the registered mark′′). Thus, the plaintiff has established that its Marlboro Marks are valid and entitled

to protection under the Act.

In considering the likelihood of confusion, district courts

generally apply eight nonexclusive factors, known as

the Polaroid factors:

(1) the strength of the plaintiff’s mark; (2)

the similarity of plaintiff’s and defendant’s

marks; (3) the competitive proximity of their

products; (4) the likelihood that plaintiff

will ′′bridge the gap′′ and offer a product like

defendant’s; (5) actual confusion between

products; (6) defendant’s good faith; (7) the

quality of defendant’s product as compared to

plaintiff’s; and (8) the sophistication of the

purchasers.

Streetwise Maps, Inc. v. VanDam, Inc., 159 F.3d

739, 742-43 (2d Cir.1998) (citing Polaroid Corp. v.

Polarad Elecs. Corp., 287 F.2d 492, 495 (2d

Cir.1961). [*15] However, in cases involving counterfeit marks, ′′the Court need not undertake a factor-by-factor analysis under Polaroid because

counterfeits, by their very nature, cause confusion.′′ Gucci America, Inc. v. Duty Free Apparel,

Ltd., 286 F.Supp.2d 284, 287 (S.D.N.Y. 2003); Phillip Morris USA Inc. v. Felizardo, 2004 U.S. Dist.

LEXIS 11154, 2004 WL 1375277, at *5 (S.D.N.Y.

2004). Thus, the Court ′′need only determine the

more fundamental question of whether there are

items to be confused in the first place--that is,

whether the items at issue here are, in fact, counterfeit, and whether defendant [Snyder] sold those

items.′′ Gucci America, Inc., 286 F.Supp.2d at

287. In this case, it has not been disputed that the

items at issue are counterfeit Marlboro brand cigarettes, and that defendant Snyder sold and distributed these items. See Pl. 56.1 Statement at P29. Accordingly, defendant Synder’s actions caused a

likelihood of consumer confusion, and plaintiff has

established liability under Sections 32 and 43(a)

of the Lanham Act. See Phillip Morris Inc. v. Felizardo, 2004 U.S. Dist. LEXIS 11154, 2004 WL at

*5.

Section 42

Section 42 of the Lanham Act, 15 U.S.C. § 1124, [*16]

provides in relevant part that ′′no article of imported

merchandise...which shall copy or simulate a trademark

registered in accordance with the provisions of this

chapter...shall be admitted entry at any customhouse of

the United States.′′ The Second Circuit has explained that

9 During oral argument before this Court on July 21, 2005, plaintiff’s counsel stated that plaintiff intends to dismiss the remaining claims against defendant Snyder if plaintiff’s motion for partial summary judgment on the claims which are the subject of

this motion is granted.

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15 U.S.C. § 1124 ′′applies only to merchandise bearing

counterfeit or spurious trademarks that copy or simulate

genuine trademarks.′′ Olympus Corp. v. U.S., 792 F.2d

315, 322 (2d.Cir. 1986), cert. denied, 486 U.S. 1042, 108

S. Ct. 2033, 100 L. Ed. 2d 618 (1988); Disenos Articos

E Industriales, S.A. v. Work, 676 F.Supp. 1254, 1271

(E.D.N.Y. 1987). In this case, it has not been disputed

that defendant Snyder, together with others, imported at

least five separate shipments of cigarettes from China

bearing counterfeit Marlboro marks. 10 Accordingly,

plaintiff has established defendant Snyder’s liability under Section 42 of the Lanham Act. 11

Injunctive Relief

Plaintiff seeks to permanently enjoin defendant Snyder

from future trademark infringement. 12 Section 34(a) of

the Lanham Act provides courts with the ′′power to

grant injunctions according to the principles of equity

and upon such terms as the Court may deem reasonable,

to prevent the violation of any right of the registrant of

a mark registered in the Patent and Trademark Office.′′ 15

U.S.C. § 1116(a). To obtain a permanent injunction,

plaintiff must demonstrate (1) actual success on the merits and (2) irreparable harm. See e.g., Gucci America,

Inc., 286 F.Supp.2d at 290; Wojnarowicz v. American Family Ass’n, 745 F.Supp. 130, 148, n.13 (S.D.N.Y. 1990).

[*18] As previously discussed, plaintiff has established

success on the merits on its Lanham Act claims. Moreover, in this Circuit, ′′proof of a likelihood of confusion establishes both likelihood of success on the merits and irreparable harm.′′ Brennan’s Inc. v. Brennan’s Rest.,

360 F.3d 125, 129 (2d Cir.2004); Genesee Brewing Co.,

Inc. v. Stroh Brewing Co., 124 F.3d 137, 142 (2d

Cir.1997). Accordingly, plaintiff is entitled to a permanent injunction enjoining defendant Snyder from further

infringement of plaintiff’s trademarks. See e.g., Phillip

Morris v. Felizardo, 2004 U.S. Dist. LEXIS 11154, 2004

WL at *7; Gucci America, Inc., 286 F.Supp.2d at 290.

[*19] Damages

Plaintiff seeks statutory damages rather than actual damages for defendant Snyder’s infringement. Plaintiff argues that it is entitled to recover $ 4 million in statutory

damages based on defendant Snyder’s willful use of

counterfeit versions of four registered Marlboro Marks.

Section 35(c) of the Lanham Act provides that:

in a case involving the use of a counterfeit

mark. . .in connection with the sale, offering

for sale, or distribution of good or services, the plaintiff may elect, at any time before final judgment is rendered by the trial

court, to recover, instead of actual damages

and profits. . ., an award of statutory damages for any such use in connection with

the sale, offering for sale, or distribution of

goods or services. . .

15 U.S.C. § 1117(c). Congress added the statutory

damages provision of the Lanham Act in 1995 because ′′counterfeiters’ records are frequently nonexistent. . .making proving actual damages in these

cases extremely difficult, if not impossible.′′ See Gucci America, Inc., 315 F. Supp. 2d 511, at 520. A

plaintiff may recover ′′not less than $ 500 or more

than $ 100,000 per counterfeit mark [*20] per

type of goods or services sold. . .′′ 15 U.S.C. § 1117

(c)(1). If the Court finds that ′′the use of the counterfeit mark was willful,′′ then the plaintiff may

recover ′′not more than $ 1,000,000 per counterfeit

mark. . .′′ Id. at 1117(c)(2). ′′The standard for willfulness is whether the defendant had knowledge that

[his] conduct represented infringement or perhaps

recklessly disregarded the possibility.′′ Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283, 289 (2d Cir.

1999).

District courts have wide discretion in awarding statutory damages. See Cable/Home Communication Corp. v.

Network Prod., Inc., 902 F.2d 829, 852 (11th Cir.1990).

Although Section 1117(c) ′′does not provide guidelines for

courts to use′′ in determining an appropriate statutory

damage award, ′′many courts have found guidance in the

caselaw of an analogous provision of the Copyright

Act, 17 U.S.C. § 504(c), which also provides for statutory damages for willful infringement.′′ Gucci America,

315 F.Supp.2d at 520; Sara Lee Corp. v. Bags of New

York, Inc., 36 F.Supp.2d 161, 165-67 (S.D.N.Y. 1999);

Rodgers v. Anderson, 2005 U.S. Dist. LEXIS 7054, 2005

WL 950021, [*21] at *2 (S.D.N.Y. 2005). Using Copy10 I should note that in this case, defendant Snyder has not argued nor do plaintiff’s submissions indicate that the cigarettes imported by defendant Snyder and his co-conspirators were genuine Marlboro cigarettes bearing a genuine trademark. The importation of genuine goods, unlike counterfeit goods, is not actionable under the Lanham Act. Olympus Corp., 792 F.2d at 321-22.

11 While plaintiff moves for summary judgment on this claim, plaintiff does not brief this issue in its supporting memorandum,

apart from stating that ′′the same facts that support Phillip Morris USA’s First and Second Claims also establish Plaintiff’s

Fifth claim for violation of Section 42 of the Lanham Act, 15 U.S.C. § 1124.′′ (Pl. Summary Judgment Memo at 1).

12 Specifically, plaintiff seeks to permanently enjoin defendant Snyder from the following: (1) importing, distributing, purchasing, selling, offering for sale, or otherwise using in commerce any counterfeit Philip Morris USA branded cigarettes; (2) aiding or

abetting others in the importation, distribution, purchase, sale, or offering for sale or other use in commerce of any Philip Morris USA branded cigarettes; and (3) engaging in any other activity constituting infringement of Phillip Morris USA’s rights in any

Phillip Morris USA trademarks, including without limitation the Marlboro Marks. (See Pl. Summary Judgment Memo at 12).

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right Act caselaw as a guide, courts have considered the

following factors in setting statutory damage awards under the Lanham Act: defendant’s profits from infringement, the defendant’s wilfulness, the size of defendant’s counterfeiting operation, defendant’s efforts to

mislead and conceal, ′′the deterrent effect on others besides the defendant. . . and the potential for discouraging the defendant.′′ Sara Lee Corp., 36 F.Supp.2d at

166.

In this case, I find that defendant Snyder’s conduct was

willful. Defendant Snyder recently pled guilty to knowingly and intentionally conspiring to traffic counterfeit

cigarettes. (Johnson Decl. Ex. D). Moreover, defendant’s counterfeiting operating was large, involving at

least 200,000 cartons and millions of cigarettes. (Johnson Decl. Ex. B, Criminal Compl. at 3). The government, using a conservative retail price of $ 23.50 per carton, estimated the total value of the five infringing

shipments to be $ 4,773,790. (Johnson Decl. Ex. I at

7). Given the evidence of willfulness, demonstrated by defendant Snyder’s own admissions, the size of the potential profit, the large quantities of cigarettes involved,

[*22] and the need for a substantial deterrent to future

misconduct by Snyder and other similarly situated counterfeit cigarette traffickers, I find that the maximum statutory award is warranted. See e.g. Philip Morris USA,

Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 501-02

(C.D.Cal. 2003) (awarding maximum statutory award

of $ 2 million for the infringement of two trademarks

where the defendant ′′imported 8,000,000 counterfeit cigarettes, having a street value of millions of dollars.′′); Phillip Morris USA, Inc. v. David Banh, et.al., 2005 U.S.

Dist. LEXIS 43113, CV-03-4043 (GAF) (C.D.Cal. 2005)

(awarding maximum statutory award); Philip Morris

United States v. Sheng Chen Lin & Does One ex rel. Ten,

2004 U.S. Dist. LEXIS 29904, CV-03-08923 (CAS)

(C.D.Cal. 2004) (same); Gucci America, Inc., 315

F.Supp.2d at 520-21 (awarding $ 2 million in statutory

damages for use of two counterfeit marks). The counterfeit cigarettes imported and sold by defendant Snyder

and his co-conspirators infringed upon four of plaintiff’s

registered and valid trademarks: the Marlboro(R) brand

trademark (i.e. the word ′′Marlboro′′), the Marlboro Roof

Design Label(R) mark (i.e. the red and gold pentagonal

label), the Marlboro Lights(R) brand trademark (i. [*23]

e. the phrase ′′Marlboro Lights′′), and the Marlboro

Lights Roof Design Label(R) mark (i.e. the gold pentagonal label). (See Supplemental Decl. of Samuel Barkin

PP3-4; Newman Aff. Ex. 1). 13 Accordingly, plaintiff is entitled to a maximum statutory award of $ 4,000,000.

[*24] Motion for Default Judgment, Damages and Injunctive Relief

Default Judgment

Plaintiff also moves for an entry of default judgment

against defendants Berardelli, Deland, Farnham, Kennedy, and Doctor pursuant to Fed. R. Civ. P. 55(b). Pursuant to Fed. R. Civ. P. 55(b), a Court may enter a default judgment against a party who ′′has failed to plead or

otherwise defend′′ an action, and this constitutes a final

judgment in the action. 14 Id. at 325. The Second Circuit

has noted that default judgments are ′′left to the sound

discretion of the district court because it is in the best position to assess the individual circumstances of a given

case and to evaluate the credibility and good faith of the

parties.′′ Enron Oil, 10 F.3d at 95. An entry of default

judgment should be made only where there was willful default, involving more than a failure to answer as a result of negligence or carelessness. See SEC v. McNulty,

137 F.3d 732, 738 (2d Cir.1998).

[*25] In this case, defendants Berardelli, Deland, Farnham, Kennedy, and Doctor have failed to file an answer or otherwise respond to the complaint, which was

filed by plaintiff in March 2003, or to respond to plaintiff’s application for default judgment. 15 Having failed

to provide any explanation for their failure to defend, I

find that these defendants have defaulted willfully. See

Cablevision Sys. N.Y. City Corp. v. Leath, 2002 U.S. Dist.

LEXIS 13768, 2002 WL 1751343, at *2 (S.D.N.Y.

2002) (default willful where defendant never responded

13 Plaintiff’s original submissions did not provide sufficient evidence of the number of counterfeit marks used by defendant

Snyder and his co-conspirators. During oral argument held on July 21, 2005, the Court advised plaintiff to provide additional evidence on the issue. Plaintiff subsequently provided an affidavit from Assistant United States Attorney Debra D. Newman, the attorney assigned to the criminal proceedings against defendant Snyder and his co-conspirators, dated August 2, 2005 (′′Newman

Aff.′′), accompanied by two sample counterfeit cigarette packs that were seized by customs officials. The sample packs were packaged to look like genuine Marlboro and Marlboro Lights cigarette packs, and contain counterfeit versions of the four trademarks discussed above. (Newman Aff. Ex. 1).

14 Fed. R. Civ. P. 55(a) provides that a ′′clerk may enter a default upon being advised by affidavit or otherwise that a party

against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend.′′ Enron Oil Corp. v. Diakuhara,

10 F.3d 90, 95 (2d Cir. 1993). Unlike a court’s entry of default judgment pursuant to Fed. R. Civ. P. 55(b), a clerk’s ′′default notation is an interlocutory action; it is not itself a [final] judgment.′′ Dow Chemical Pacific Ltd. v. Rascator Maritime S.A., 782 F.2d

329, 335 (2d Cir. 1986).

15 In a letter to the Court, plaintiff’s attorney Samuel Barkin stated that he had ′′received a request from defaulting defendant Timothy Farnham for a 3 week extension of time to respond to Phillip Morris’s default judgment against him.′′ As a result of that letter, oral argument on this motion was continued from June 6 to July 21, 2005. However, since that last communication, Farham has not filed any response to the default judgment motion.

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to the complaint, appeared, or explained default). Plaintiff has documented service of its complaint and of its

motion papers. There is no indication that requiring plaintiff to take further steps prior to a determination on the

merits would be effective in eliciting a response. See id.

Accordingly, an entry of default judgment is appropriate.

[*26] Damages and Injunctive Relief

′′While a party’s default is deemed to constitute a concession of all well pleaded allegations of liability, it is not

considered an admission of damages.′′ See Greyhound Exhibitgroup v. E.L.U.L. Realty Corp., 973 F.2d 155, 158

(2d Cir.1992), cert. denied, 113 S.Ct. 1049, 506 U.S. 1080,

122 L. Ed. 2d 357 (1993). A plaintiff must substantiate

a claim with evidence to prove the extent of damages. Although an evidentiary hearing may be held, ′′it is not necessary for the district court to hold a hearing, as long as-

...there was a basis for the damages specified in the

default judgment.′′ Transatlantic Marine Claims

Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111

(2d Cir. 1997); Tamarin v, Adam Caterers, Inc., 13 F.3d

51, 54 (2d Cir.1993) (district judges are given much discretion to determine whether an inquest need be held).

In this case, plaintiff seeks a permanent injunction against

all defaulting defendants enjoining them from future distribution and sale of counterfeit Marlboro brand cigarettes. As previously discussed, Section 34(a) of the Lanham Act gives courts the ′′power to grant injunctions...to

prevent [*27] the violation of any right of the registrant of a mark registered in the Patent and Trademark Office.′′ 15 U.S.C. § 1116(a). Given the risk of irreparable

harm caused by default defendants’ continued sale of

counterfeit Marlboro brand cigarettes, I find that permanent injunctive relief is warranted. See Philip Morris, USA

v. Castworld Products, Inc., 219 F.R.D. 494, 502 (C.D-

.Cal.2003) (′′failure to grant injunction would needlessly

expose Plaintiff to the risk of continuing irreparable

harm′′).

Plaintiff also seeks statutory damages against three of

the defaulting defendants, Berardelli, Deland and Farnham, 16 jointly and severally, in the amount of $ 4 million, based on their willful use of counterfeit versions

of four Marlboro Marks. (See Pl. Default Judgment Memo

at 2, 9). Plaintiff submits evidence that these defendants, along with defendant Snyder and others, imported

counterfeit cigarettes that infringed upon four registered Marlboro Marks: the Marlboro(R) brand trademark

(i.e. the word ′′Marlboro′′), the Marlboro Roof Design

Label(R) mark (i.e. the red and gold pentagonal label), the

Marlboro Lights(R) brand trademark (i.e. the phrase

[*28] ′′Marlboro Lights′′), and the Marlboro Lights

Roof Design Label(R) mark (i.e. the gold pentagonal label). (See Supplemental Decl. of Samuel Barkin PP3-4;

Newman Aff. Ex. 1). As previously discussed, under 15

U.S.C. § 1117(c) a plaintiff may elect to pursue statutory rather than actual damages. ′′Several courts have

found statutory damages especially appropriate in default judgment cases due to infringer nondisclosure.′′

PetMed Express, Inc. V, MedPets.Com, Inc., 336

F.Supp.2d 1213, 1219 (S.D.Fla. 2004) (citing Sara Lee

Corp., 36 F.Supp.2d at 165). Here, given the willfulness

of Berardelli, Deland and Farnham who each pled

guilty to knowingly trafficking counterfeit cigarettes, the

size of the potential profit given the large quantities of

cigarettes involved, and the need for a substantial deterrent to future misconduct by defendants and other counterfeit cigarette traffickers, I find that plaintiff is entitled

to the maximum statutory award under 15 U.S.C. §

1117(c)(2)--$ 4,000,000 or $ 1,000,000 per counterfeit

mark. See e.g. Philip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. at 501-02 (C.D.Cal. 2003) [*29]

(awarding maximum statutory award of $ 2 million for the

infringement of two trademarks where the defendant ′′imported 8,000,000 counterfeit cigarettes, having a street

value of millions of dollars′′); Phillip Morris USA, Inc. v.

Glenda Patton, CV-03-2569 (GAF) (C.D.Cal.2003)

(granting default judgment and awarding plaintiff maximum statutory damages in the amount of $ 4 million).

CONCLUSION

For the reasons set forth above, (1) plaintiff’s motion for

partial summary judgment against defendant Snyder on

Claims 1, 2, 5, and 7 alleged in the complaint is granted;

(2) plaintiff’s motion for an entry of default judgment

against defendants Berardelli, Deland, Farnham, Kennedy, and Doctor pursuant to Fed. R. Civ. P. 55(b) is

granted; (3) defendants Snyder, Berardelli, Deland,

Farnham, Kennedy, [*30] and Doctor are permanently

enjoined from future infringement of plaintiff’s trademarks; and (4) plaintiff is awarded $ 4 million in statutory damages, for which defendants Snyder, Berardelli,

Deland, and Farnham are liable, jointly and severally.

Plaintiff is directed to settle a final judgment on notice

in accordance with this opinion and its undertaking to discontinue claims not made the subject of the motion.

The Clerk is directed to furnish a filed copy of the within

to all parties and to the Magistrate.

SO ORDERED.

Dated: Brooklyn, New York

August 26, 2005

By: /s/ Charles P. Sifton (electronically signed)

United States District Judge

16 Plaintiff does not seek any damages against defendants Doctor and Kennedy, the two defendants who were not criminally

prosecuted. (See Pl. Default Judgment Memo at 10, n.8).

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2005 U.S. Dist. LEXIS 40359, *25

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