A blog about patent, copyright and trademark law in the U.S. District Court
for the Southern District of New York

Court Awarded Treble Damages For The Intentional Use In Commerce Of A Mark Known To Be Counterfeit, Pre and Post Judgment Interest, Attorneys Fees and Costs.

In a February 28, 2014 Report and Recommendation to the Honorable Lorna G. Schofield, Magistrate Judge Sarah Netburn conducted an inquest on damages following an entry of default against defendants Fastmac Performance Upgrades, Inc. and TruePower, Inc. Because Leviton Manufacturing Company provided the Court with a sufficient basis on which to award damages, the Court recommended an award of $6,054,720 plus pre-judgment and post-judgment interest and reasonable attorneys’ fees and costs. In a June 13, 2014 ruling, Judge Lorna G. Schofield adopted the Report and Recommendation in its entirety.

Courts evaluating damages in a default context first look to the complaint to determine whether the plaintiff has established a prima facie case for recovery. Plaintiff filed federal claims for trademark infringement, false designation of origins, and dilution under the Lanham Act and New York state law causes of action. “To succeed on . . . Lanham Act claims for federal trademark infringement in violation of 15 U.S.C. § 1114(1), [the plaintiff] must show that it has a valid mark that is entitled to protection under the Lanham Act and that [the defendant’s] actions are likely to cause confusion with [the plaintiff’s] mark.” The court recommended that the allegations in the complaint established a valid claim of infringement. Indeed, Judge Schofield had already granted plaintiff an injunction against the defendants on this claim for the following reasons.

Court Awards Damages and Attorneys' Fees for Wrongful Seizure in Couterfeiting Case

In a February 28, 2014 ruling, Magistrate Judge Frank Maas issued a Report and Recommendation recommending that the Court award defendant Top Quality Food Market, LLC and the other defendants $22,535 in attorneys’ fees and damages for the wrongful ex parte seizure of allegedly counterfeit goods. Plaintiff Prince of Peace Enterprises, Inc. obtained the seizure order, which Judge Howell later vacated. The defendants then asserted a counterclaim seeking damages for the wrongful seizure. After the plaintiff defaulted in responding to the defendants’ motion to dismiss, Judge Howell granted the motion and ordered that the defendants’ counterclaim be decided in their favor. The Court then referred the matter to Judge Maas for an inquest on damages arising from the unwarranted seizure.

Judge Maas began his analysis by noting that because the plaintiff never answered the counterclaim, “the well-pleaded factual allegations therein must be accepted as true,” but the plaintiffs “nevertheless still must submit proof sufficient to enable this Court to determine their losses since a default ‘is not an admission of damages.’” Judge Maas also wrote that the amount of damages recoverable is governed by 15 U.S.C. § 1116(d)(11), which provides that a victim of a wrongful seizure is entitled to recover “lost profits, cost of materials, loss of good will, and punitive damages in instances where the seizure was sought in bad faith, and unless the court finds extenuating circumstances, to recover a reasonable attorneys’ fee.”

The plaintiffs sought $192 for seized goods that were never returned, $2,000 for goods that spoiled while the seizure was in effect, $2,064 in wages, $4,577.60 in lost profits and $29,721.95 in attorneys’ fees. Judge Maas awarded the $192 for the seized goods even though they were inadequately documented because the amount is de minimis. The Court examined the documentation with regard to the other non-attorneys’ fees items of damages, and concluded that the defendants had not carried their burden of showing them with reasonable certainty.

Court Denied Defendant’s Motion To Dismiss For Lack of Personal Jurisdiction Where A Hong Kong Based Website Shipped A Single Allegedly Counterfeit Good Into New York.

In a February 18, 2014 ruling, Judge Richard J. Sullivan ruled that New York’s Long Arm statute conferred personal jurisdiction over Defendant Dress Market Ltd., a Hong Kong based dress distributor which sells its dresses through its interactive website, when it shipped a single, allegedly counterfeit product into New York in response to an order from plaintiff’s counsel. The defendant did not challenge whether it been properly served with process. Rather, the defendant argued that it did not have “sufficient contacts” with New York for the court to exercise personal jurisdiction.

Pursuant to Federal Rule of Civil Procedure 4(k)(1)(A), a federal court has jurisdiction over a defendant that has been properly served if the defendant "is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located." Fed. R. Civ. P. 4(k)(1)(A). Absent personal service within the state, New York state courts may exercise personal jurisdiction over a non-domiciliary only as permitted by New York's long-arm statute. N.Y. C.P.L.R. § 302. In addition, even if New York law allows for jurisdiction, personal jurisdiction in the case must "comport with the Due Process Clause of the United States Constitution" – i.e., there must be minimum contacts with the forum jurisdiction.

The Court deemed it unnecessary to engage in a detailed “minimum contacts” analysis because it found that the facts in this matter were legally indistinguishable from the facts of the Second Circuit’s controlling decision in Abc v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 161 (2d Cir. 2010). In Queen Bee, the Second Circuit found that New York's long-arm statute and the "minimal contacts" inquiry of Due Process were satisfied when the defendant (l) shipped a single, allegedly counterfeit product into New York; (2) "operated a highly interactive website offering such [products] for sale to New York customers"; and (3) "engaged in fifty-two other transactions where merchandise was shipped to New York." Here, defendant shipped at least one dress into New York that allegedly infringes Plaintiffs' Sherri Hill’s copyrights, albeit in response to an order from plaintiffs' attorneys.

The only distinction between the fact pattern in this matter and Queen Bee was that plaintiff had not shown evidence of fifty-two other transactions in New York. The Court found, however, that this difference was irrelevant. Queen Bee emphasized that the crux of the long-arm statute and the Due Process Clause was whether the defendant had "purposefully availed himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." That requirement was met, the court ruled, where the defendant has "developed and served a market for its products" within New York, and "might well be" satisfied by the shipping of a single product alone. Accordingly, the Court determined that personal jurisdiction was appropriate under New York’s long-arm statute and the Due Process “minimal contacts” inquiry.

The Court denied the defendant’s motion to dismiss.

Court Dismisses Most of Copyright Licensee's Infringement Claims on Standing Grounds

In a February 21, 2014 ruling, Judge Katherine Polk Failla denied in part and granted in part the parties’ cross motions for summary judgment. Plaintiff John Wiley & Sons, Inc. started a declaratory judgment action against DRK Photo for a declaration that Wiley had not infringed DRK’s copyrights in certain stock photographs that DRK had previously licensed to Wiley as the representative for the photographers that originally took the photographs. DRK then counterclaimed for copyright infringement. After the completion of discovery, the parties cross-moved for summary judgment.

A threshold issue for DRK’s motion was its standing to assert copyright infringement claims. Judge Failla wrote that under 17 U.S.C. § 501(b), only legal or beneficial owners of a copyright have standing to sue, and that “the Second Circuit enforces Section 501(b) by holding that ‘[t]he Copyright Act authorizes only two types of claimants to sue for copyright infringement: [i] owners of copyrights, and [ii] persons who have been granted exclusive licenses by owners of copyrights.’” After analyzing the Representation Agreements under which DRK acquired the right to license the photographs at issue to Wiley, the Court concluded that the “record provides uncontroverted proof that the Representation Agreements are nonexclusive licenses.” Judge Failla premised her conclusion in part on the fact that “DRK admitted that the Representation Agreements are nonexclusive licenses.” Judge Failla also rejected DRK’s argument that was a beneficial owner of the copyrights at issue because it was entitled to one-half of the licensing revenue, noting that “the cases on which DRK relies in support do not prove otherwise.”

Court Dismissed Defendants’ Counterclaims Asserting Anti-Trust and Unfair Competition Claims Alleging Misuse of Copyright-Protected Jewelry

In a February 19, 2014 ruling, Judge Colleen McMahon dismissed defendants’ A.O.D. Jewelry Company and David Aghbashoff’s three counterclaims against plaintiff IDI Design Inc. for (i) violation of the antitrust laws through misuse of its copyright registration; (ii) copyright misuse constituting unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a); and (iii) unfair competition in violation of the New York General Business Law § 360.

First, defendants alleged that plaintiff had violated antitrust laws by misusing its copyright registration, basing its claim on the belief that plaintiff was “engaged in interfering in commerce by expanding the scope of its Copyright Registration beyond a reasonable scope to intimidate and inhibit commerce in the jewelry business.” The Court held that the defendants plead no facts to support its allegation of a violation of the antitrust laws, and failed to state which antitrust law had allegedly been violated. In order to state an antitrust claim, “[P]laintiff must allege a relevant product market in which the anti-competitive effects of the challenged activity can be assessed.” The defined market must be supported in the complaint by a “theoretically rational explanation” for why the boundaries of the market are defined as they are. Finding that the “jewelry business,” in which plaintiff was purportedly trying to intimidate and inhibit commerce,” was not a bounded market, the court dismissed defendants’ first counterclaim.

Court Dismisses Copyright Declaratory Judgment Action for Failing to Plead Plausible Claim

In a February 6, 2014 ruling, Judge P. Kevin Castel dismissed plaintiff Newlight Eyewear, LLC’s action seeking a declaration that it does not infringe defendant Art-Optic, Ltd.’s copyrights and asserting claims for Art-Optic’s interference with Newlight’s contractual relations with its customers. Both parties currently sell hand-painted eyeglass frames. Newlight had previously distributed Art-Optics’ frames. After the relationship ended, Art-Optics sued Newlight for copyright infringement, but discontinued the action after it was assured that Newlight’s sales were merely disposing of left over inventory from the distributorship relationship. In its complaint, Newlight alleges that Art-Optics is nevertheless still informing Newlight’s customers that Newlight’s products infringe its copyrights and that they should not do business with Newlight.

Judge Castel dismissed the claim to declare non-infringement of Art-Optics’ copyrights, writing that the “Complaint does not describe [Newlight’s] product line, or the differences and similarities between [Newlight’s] eyeglass frames and the” Art-Optics frames. The Court added that the Complaint “is silent as to the design of the [Newlight] product line and how the design and how the design elements compare with those of” Art-Optics, and that “Newlight has offered no examples of its products and does not allege that it has registered copyrights for any of its designs.” Judge Castel concluded that the Complaint “is so lacking in detail as to which of Newlight’s products are at issue and the design elements of those products as to fail to state a claim for relief.” The Court also dismissed Newlight’s claim to declare Art-Optics’ copyright registrations invalid, finding that Newlight did not make any “allegations that plausibly contend that defendant’s copyrights for the [Art-Optics] frames are somehow invalid and/or unenforceable.” And having dismissed the federal claims, Judge Castel declined to exercise supplemental jurisdiction over Newlight’s common law claims, and dismissed the entire action.

Court Finds No Personal Jurisdiction Over Defendant in Trademark Infringment Action; Transfers It to Proper Court

In a February 5, 2014 ruling, Judge Ronnie Abrams granted defendant Positive Impact, Inc.’s motion to dismiss the trademark infringement claims against it for lack of personal jurisdiction, and transferred the action to the Northern District of Georgia. Having concluded that the Court lacks personal jurisdiction, Judge Abrams declined to reach Positive Impact’s motion to dismiss certain claims.

After the Atlanta-based Positive Impact sent New York-based plaintiff DH Services, LLC a cease and desist letter over DH Services use of the “Mister” mark for its online dating services and made a follow up telephone call to Positive Impact, Positive Impact started this action as a declaratory judgment of non-infringement. It later amended the complaint to add statutory and common law claims of unfair competition and deceptive practices.

Because Positive Impact is located outside New York, and the Lanham Act “‘does not specifically provide for national service of process,’” Judge Abrams applied the law of the forum state, New York’s Long Arm statute. It was undisputed that there was no general jurisdiction over Positive Impact in New York. So DH Services alleged jurisdiction based on Positive Impact’s transaction of business in New York, its alleged commission of a tort here, and its alleged commission of a tort outside New York that had a foreseeable impact in New York.
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