Counting "Type of Goods" for Statutory Damages -- Function, not Form, Controls
Under the statutory damage provision of the Lanham Act, 15 U.S.C. 1117(c), the court can award statutory damages of not less than $500 or more than $100,000 per counterfeit mark per "type of goods or services," or not more than $1,000,000 per counterfeit mark "per type of goods or services" if the court finds that the use of the counterfeit mark was willful. A recent decision out of the Southern District of New York addresses what constitutes a “type" of good under this provision. In Gucci America, Inc. v. MyReplicaHandbag.com, 2008 WL 512789 (S.D.N.Y. Feb. 26, 2008), Judge Koeltl accepted the recommendation of Magistrate Judge Eagan that the Internet retailer MyReplicaHandbag.com be assessed statutory damages of $4.3 million for counterfeiting trademarks owned by Gucci, Chloe and Davidoff. The plaintiffs had sought even more – $21.2 million – based on their assertion that MyReplicaHandbag.com had sold 424 different “types” of counterfeit goods. The court rejected this count, holding that “[f]or the purpose of awarding damages, it seems unduly artificial to categorize the merchandise into separate ‘types’ for each subtle difference in a particular product’s size, shape, color, pattern or fabric.” Instead, the court held, “the separate ‘types’ should be based on the functional purpose of the product.” Based on the functional purpose of the counterfeit goods, the court held that “the defendants sold replicas of the following types of goods: (1) handbags (Gucci and Chloe); (2) wallets (Gucci); (3) handbag and wallet sets (Gucci); (4) watches (Gucci and Dunhill); (5) eyeglasses (Gucci); and (6) belts (Gucci).” It then awarded Gucci $3,600,000 ($100,000 x 6 marks x 6 types of goods), Chloe $400,000 ($100,000 x 4 marks x 1 type of good), and Dunhill $300,000 ($100,000 x 3 marks x 1 type of good). While Judge Eagan's observation that it is "unduly artificial to categorize the merchandise into separate ‘types’ for each subtle difference in a particular product’s size, shape, color, pattern or fabric" may have some merit, the standard he adopts -- that the "separate 'types' should be based on the functional purpose of the product" -- is overly simplistic and is not easily reconciled with other decisions. For example, a 2006 decision cited in Gucci considered t-shirts and polo shirts to be separate types of goods. Nike, Inc. v. Top Brand Co. Ltd., 2006 WL 2946472 (S.D.N.Y. Feb. 27, 2006) (Ellis, M.J.) (awarding$12 million -- $1,000,000 per infringed mark for each of four Nike trademarks for three types of goods, t-shirts, polo shirts and sweatshirts), adopted by Chief Judge Wood on October 6, 2006. Handbag aficionados would argue that the differences between certain sizes and shapes of handbags are equivalent to the differences between a t-shirt and a polo shirt.
| Comments (0)Election of Statutory Damages May Be Bar to Attorney's Fee Award
The Ninth Circuit Court of Appeals held in December that a plaintiff in a trademark counterfeiting case who elects to recover statutory damages is not entitled to recover attorney’s fees under Section 35(b) of the Lanham Act. Unlike Section 35(a), which only allows an award of attorney’s fees upon a finding that the case is “exceptional,” Section 35(b) provides for attorney’s fees to be granted as a matter of course, absent extenuating circumstances, in a case of willful counterfeiting:
“In assessing damages under subsection (a) of this section, the court shall, unless the court finds extenuating circumstances, enter judgment for three times such profits or damages, whichever is greater, together with a reasonable attorney's fee, in the case of any violation … that consists of intentionally using a mark or designation, knowing such mark or designation is a counterfeit mark.”
Focusing on the clause “[i]n assessing damages under subsection (a),” the Ninth Circuit in K and N Engineering, Inc. v. Bulat, 2007 WL 4394416 (9th Cir. Dec. 18, 2007), held that the Section 35(b) presumption in favor of attorney’s fees does not apply if the plaintiff elects statutory damage because statutory damages are provided for by subsection (c), rather than assessed “under subsection (a).” The court did not decide whether a plaintiff that elects statutory damages also waives its right to recover attorney’s fees under the "exceptional case" standard of Section 35(a).
A plaintiff who elects statutory damages can still try to recover its attorney's fees "through the back door." As the court noted in Gucci America, Inc. v. Duty Free Apparel, Ltd., 315 F.Supp.2d 511 (S.D.N.Y. 2004), a counterfeiting plaintiff’s attorney’s fees may be “a persuasive measure towards determining statutory damages.” Thus, evidence regarding the plaintiff’s attorney’s fees should be submitted to the court as evidence in support of a significant statutory damage award, and the court should take such fees into consideration when it sets the amount of statutory damages.
| Comments (0)Diane Von Furstenberg Studio Awarded Statutory Damages of $100,000 Against eBay Seller of Fake Dresses
The United States District Court for the Eastern District of Virginia in Diane Von Furstenberg Studio v. Snyder recently awarded Diane Von Furstenberg Studio the maximum statutory damage award available in cases of non-willful trademark counterfeiting. In deciding to award DVF $100,000, the court identified five factors as relevant in deciding the amount of a statutory damage award:
1. The expenses saved and profits reaped by the defendant.
2. The revenues lost by the plaintiff including damage to reputation.
3. The value of the trademark.
4. The need to deter and discourage additional counterfeiting activity by the defendant and others.
5. Whether the defendant cooperated and took responsibility for its actions.
Noting that the Internet gives counterfeit sellers a virtually limitless number of customers, the court stated that Snyder's choice of eBay as her marketplace weighed in favor of a large damage award.
Had the court found that Snyder acted willfully, it could have enhanced the statutory damage award to up to $1 million. However, because DVF withdrew its claim that the defendant acted willfully and in bad faith, DVF was not eligible for enhanced statutory damages or attorney’s fees in this case.
Snyder has filed an appeal from the damage award.
Be Careful What You Copy -- Internal Distribution of "Press Packets" Results in $300,000 Settlement With SIAA
The Software & Information Industry Association (SIAA) has announced the first settlement in its Corporate Content Anti-Piracy Program (CCAP). Knowledge Networks, Inc., a market research company with offices in San Francisco, New York and elsewhere has agreed to pay SIIA $300,000 to settle copyright infringement claims based on Knowledge Networks' internal distribution of “press packets” on a regular basis to its own employees. These packets sometimes included copyrighted articles owned by the Associated Press, Reed Elsevier, and other SIIA members. As part of the settlement, Knowledge Networks agreed to implement an internal training program that will educate employees on copyright compliance and licensing of copyrighted materials. SIIA learned about Knowledge Networks' unauthorized reproduction and distribution of copyrighted materials in its "press packets" from a confidential tip.
| Comments (0)Fendi Settles With Walmart
Fendi SpA has settled its lawsuit against Wal-Mart Stores Inc. in which it alleged that Wal-Mart sold counterfeit handbags and wallets in its Sam's Club stores. The suit was filed in the U.S. District Court for the Southern District of New York last year.
According to Wal-Mart's press release, under the settlement, Wal-Mart has agreed to pay Fendi an undisclosed sum. Wal-Mart has also offered to accept returns of any bags, wallets, and scarves purchased at Sam’s Club with a Fendi label for full refunds.
| Comments (0)SIIA Settles With eBay Sellers of Counterfeit Symantec Software for $205,000
The Software & Information Industry Association (SIIA) announced yesterday that the defendants in Symantec, et al. v. Chan, et al. have agreed to pay $205,000 to settle Symantec's claims that they sold OEM, unbundled, counterfeit, and other unauthorized copies of Norton PartitionMagic, Norton AntiVirus, pcAnywhere, Norton SystemWorks and other software over eBay. The other terms of the settlement are confidential. The lawsuit was among the first filed under SIIA’s Auction Litigation Program.
| Comments (0)Symantec Sues Distributors of Counterfeit Software
Symantec has announced the filing of eight federal lawsuits in California against distributors of counterfeit Symantec software. Symantec alleges that the distributors, Acortech (California), mPlus (California), Logical Plus (New York), SoftwareOutlets.com (Florida), Rowcal Distribution (California), Global Impact Inc. (Florida), Directron.com (Texas) and eDirect Software, (Canada), engaged in trademark infringement, copyright infringement, fraud, unfair competition, trafficking in counterfeit labels and documentation, and false advertising. The complaints are based on purchases of counterfeit software by Symantec’s Brand Protection Task Force, including counterfeit copies of Norton SystemWorks, Norton AntiVirus, Norton Internet Security, pcAnywhere and Symantec AntiVirus Small Business Edition. Symantec’s investigation indicates that most of the defendants' sales were made online and that the counterfeit disks were delivered in blank white sleeves without documentation, directions, labeled packaging, or activation code information.
Insurer Required to Defend Alleged Counterfeiter
In Allied Insurance Co. v. Bach, decided on February 27, 2007 and reported at 2007 WL 627635, the federal court for the Northern District of Illinois addressed the obligation of an insurer to defend its insured against counterfeiting and related claims under the Advertising Injury provision of the insured’s policy. The policy at issue defines "Advertising Injuries" to include "infringement upon another's copyright, trade dress or slogan in your 'advertisement.'" Excluded from coverage are advertising injuries "[c]aused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict 'personal and advertising injury.”
The insured, Cam Golf, was sued by Acushnet Company which alleged that Cam and others had marketed counterfeits of Acushnet's well known Titlest Pro VI golf ball. The Complaint alleged eight counts including: (1) federal trademark infringement; (2) federal trademark infringement based on false designation of origin; (3) federal anti-dilution of a famous trademark; (4) Illinois unfair competition; (5) Illinois deceptive trade practice violation; (6) Illinois consumer fraudulent practice; (7) Illinois anti-dilution of a famous trademark; and (8) copyright infringement. It expressly charged Cam with "willful and intentional violation of Acushnet's marks.”
Continue Reading | Comments (0)Court Denies Microsoft Maximum Statutory Damage Award
In Microsoft v. Wubbena, decided February 28, 2007 and reported at 2007 WL 656688, the United States District Court in Atlanta rejected Microsoft's request for the maximum statutory damages allowable for non-willful conduct, despite finding, in granting Microsoft attorneys' fees, that the defaulting defendants' counterfeiting of Microsoft's trademarks was willful. Although Microsoft maintained that the Defendants' actions were willful, it had elected to ask for statutory damages based on the maximum statutory limits for non-willful conduct, rather than evoking the enhanced damage provisions of the Copyright and Lanham Acts applicable to willful counterfeiters. Microsoft thus requested statutory damages of $610,000: $30,000 for each of the seven allegedly infringed copyrights (the maximum for non-willful conduct under the Copyright Act), and $100,000 for each of four marks alleged to have been counterfeited (the maximum for non-willful conduct under the Lanham (trademark) Act.
In declining to award the amount requested by Microsoft, the Court stated that the purpose of a range of statutory damages is to "allow courts to calibrate statutory damage awards to the scope of the conduct and the culpability of the defendant." It then articulated the belief that "statutory damage maximums should be reserved for cases of notable scope or particularly egregious conduct." Because Microsoft had not alleged any facts concerning the scope of the defendants' operations, and had chosen not to pursue damages for willfulness, in the absence of any allegation that the defendants had operated on a "notable scale," the Court declined to impose the maximum statutory award. Instead, it awarded an amount it felt would be "still substantial enough to compensate Microsoft and to deter future potential infringers" -- $15,000 per infringed copyright, and $40,000 per counterfeited trademark, for a total statutory damage award of $265,000.
Interestingly, in finding Microsoft's entitled to attorneys' fees and costs under the Lanham Act, which limits attorneys' fees in trademark cases to "exceptional cases," the Court relied on Microsoft's allegations that defendants' trademark infringements were willful because each was warned to cease its infringement of Microsoft's intellectual property, but persisted, to find the case exceptional. Thus, it held, "[e]ven though Microsoft elected not to ask for [statutory] damages consistent with willful conduct, an award of attorneys fees is in this context appropriate."
RIAA Announces Stepped-Up Piracy Program Aimed at Students
The Recording Industry Association of America (RIAA) has sent 400 pre-litigation settlement letters to 13 universities each of which informs the school of a forthcoming copyright infringement lawsuit against a user of its network. The RIAA is asking the schools to forward its letters to the appropriate network user. Under this new approach, the student (or other network user) can settle the record company claims against him or her at a discounted rate before a lawsuit is ever filed. The initial wave of letters went out in the following quantities to Arizona State University (23 pre-settlement litigation letters), Marshall University (20), North Carolina State University (37), North Dakota State University (20), Northern Illinois University (28), Ohio University (50), Syracuse University (37), University of Massachusetts – Amherst (37), University of Nebraska – Lincoln (36), University of South Florida (31), University of Southern California (20), University of Tennessee – Knoxville (28), and University of Texas – Austin (33). The RIAA plans to pursue hundreds of similar enforcement actions against university network users each month. According to the RIAA, a survey by the Intellectual Property Institute at the University of Richmond’s School of Law found that more than half of college students download music and movies illegally.
Statutory Damage Provision of Anti-Counterfeiting Amendments Act of 2004 Upheld
The Anti-Counterfeiting Amendments Act of 2004 (codified at 18 U.S.C. § 2318) makes it a crime, punishable by 5 years imprisonment and a fine, knowingly to traffic in a counterfeit or illicit documentation or packaging for a copyrighted computer program. It also creates a civil remedy, authorizing the injured copyright owner to sue to recover damages and obtain injunctive relief. In such a suit, in lieu of actual damages, the copyright owner may elect an award of statutory damages of $2,500 to $25,000 per violation.
In Microsoft v. A Plus Open, LLC, reported at 2007 WL 437776, Microsoft sued the defendants under this statute, alleging that they had distributed Microsoft Certificates of Authenticity without the corresponding Microsoft software. The defendants counterclaimed for a declaratory judgment that the civil remedy provision of the statute violates due process because the statutory damages are a criminal penalty punitive in both purpose and effect. Their principal argument in support of this claim was that the statutory damages are disproportionate to the harm caused to the plaintiff and are therefore the equivalent of a punishment.
Noting that the statutory damages remedy recognizes the difficulty in quantifying the harm that may result from counterfeiting, including the confusion of the public and damage to the copyright owner's goodwill and business reputation, the court rejected the defendants' challenge to the statute and denied their petition for declaratory relief.
RIAA v. AllofMP3.Com
Click here to see the Complaint filed by RIAA members on December 20, 2006 against the Russian website allofmp3.com. For more on this case, click here.
| Comments (1)Louis Vuitton Awarded $1.1 Million in Statutory Damages for Trademark Counterfeiting
Judge Louis Kaplan of the Southern District of New York federal court has accepted a Magistrate Judge's recommendation that Louis Vuitton be awarded $1.1 million in statutory damages ($100,000 per mark for 11 marks) in its case against lushbags.com, a website that had been selling counterfeit Vuitton handbags and wallets. Click here to see the Magistrate's decision.
| Comments (0)Absent Evidence of On-going Sales of Counterfeits Court Concludes Risk of Harm from Preliminary Injunction Outweighs Harm Trademark Owner Would Suffer If Injunction Denied
The 10th Circuit Court of Appeals recently affirmed denial of a preliminary injunction against a liquor retailer that had sold two packs of counterfeit Newport cigarettes to a Lorillard representative. The decision in Lorillard Tobacco Co. v. Engida, reported at 2007 WestLaw 39207 (Jan. 8, 2007), hints that getting a preliminary injunction in a trademark counterfeiting case may not always be as straight-forward as brand owners would like.
In the case, Lorillard had requested and the district court had granted both a temporary restraining order (TRO) and ex parte seizure order on the basis of the retailer's sale of two counterfeit cigarette packs to the Lorillard rep. However, the resulting search of the liquor store found no Newport cigarettes, either genuine or counterfeit. At a subsequent hearing, the court held that Lorillard had failed to demonstrate that the retailer presented a sufficient risk of irreparable harm to Lorillard to justify an on-going injunction. It, therefore, dissolved the TRO and denied Lorillard a preliminary injunction. [In snippets from the hearing that are reproduced in the appeals court's decision, the judge expressed considerable annoyance that he had been persuaded to issue an ex parte seizure order authorizing a raid on a location where no counterfeits were found. (E.g., "I think plaintiff's counsel better consider seriously continuing this case. Perhaps you ought to find a better small fish.")]
To qualify for a preliminary injunction, a plaintiff must show that the defendant's conduct threatens it with irreparable harm. On appeal, the 10th Circuit rejected Lorillard's argument that a prima facie case of trademark infringement establishes irreparable harm per se. It pointed out that, while irreparable harm is frequently presumed where trademark infringement is shown, there is no iron-clad rule requiring the court to apply this presumption. Interestingly, the court of appeals cited the Supreme Court's recent decision in the patent case eBay, Inc. v. MercExchange, LLC, 126 S. Ct. 837, 1840-41 (2006), which put an end to a presumption that a permanent injunction should follow a finding of patent infringement, observing that eBay disapproved of "the use of categorical rules in connection with injunctive relief in intellectual property actions." It then side-stepped the question of whether eBay will make it more difficult to obtain injunctions in trademark cases, stating that "we need not consider how eBay may apply in this context" because Lorillard failed to satisfy another requirement for injunctive relief -- that it show that the threatened injury to it outweighs the injury that would be caused to the defendant by the injunction. (For more on the eBay decision, check out the blog Patently O.)
How, one might ask, could a court conclude that an injunction against continued sales of counterfeits would cause greater harm to the defendant than denial of the injunction would cause Lorillard? In this case, it did so by reasoning that, because "the counterfeit packages are so similar to genuine packages...,an injunction would probably require [the liquor store] to stop selling any Newport cigarettes while the suit was pending, for fear that it would inadvertently violate the injunction." Thus, the risk that the preliminary injunction would have a chilling effect on the liquor store's sales of genuine Newport cigarettes was deemed greater than the risk to Lorillard that the defendant would knowingly sell counterfeits in the absence of an injunction.
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Copier Beware: CD replicator duped by forged Microsoft license agrees to multimillion dollar settlement
In this era of rampant counterfeiting, even legitimate CD and DVD replicators run the risk of facing expensive counterfeiting claims. As the case of French CD duplicator MPO Group illustrates, the only way to ensure that a customer ordering copies of a copyrighted work is legit is to get confirmation directly from the copyright owner
In 2003, MPO Group's Thai subsidiary was approached by a software distributor bearing a license from Microsoft. The Thai factory filled his order for 20,000 copies of Microsoft Exchange and SQL server software. Unbeknownst to MPO Group, the license was forged and the copies counterfeits.
A year later, Microsoft purchased some of the counterfeit CDs and traced them to the Thai MPO Group factory. This put MPO Group in the awkward position of having participated in the counterfeiting of software owned by one of its important business partners, for MPO Group has a disc replication agreement with Microsoft for other software products. The result: the announcement today that MPO Group has agreed to pay a multimillion dollar settlement to Microsoft.
Had MPO Group's factory contacted Microsoft to confirm the distributor's authority to order copies of the server software, it would have learned that Microsoft never licenses third party distributors to have copies of its software made in this fashion. Instead, it accepted the forged license at face value.
According to InfoWorld, MPO joined the International Recording Media Association's Anti-Piracy Compliance Program in 2005 although its plant in Thailand is not yet on the list of IRMA Anti-Piracy Certified Plants.
Symantec Sues Software Distributors
PC World reports on Symantec's recently-filed civil lawsuit against an alleged software piracy ring operating in the U.S. and Canada. According to the magazine, the pirates sold customers disks in plain white sleeves bearing Symantec's logo that would not install or work properly. Some disks included malicious software. Despite the filing of the suit, one of the sites named in the suit, sle-business.com, continues to offer Symantec's Norton Antivirus software for $6 per disk, a price greatly below that customarily charged. for genuine copies of the software.
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eBay software pirates settle for $100,000
The Software & Information Industry Association (SIIA) has settled with two defendants in Symantec Corporation v. Kevin Liu, one of the first lawsuits filed under SIIA's Auction Litigation Program. Under the settlement, Kevin Liu and G.T. Tian paid $100,000 in damages, agreed to stop selling counterfeit software and provided SIIA with records identifying their customers and suppliers.
The suit, which was filed in the Central District of California, alleged that Liu and Tian sold pirated Norton pcAnywhere, Norton SystemWorks 2005 Premier, and Norton Ghost software on eBay, completing more than 8,000 auctions on eBay over the past two years under dozens of different eBay identities. According to the SIAA, the defendants sold software with a retail value of more than $750,000 for approximately $123,000.
An SIAA press release quotes Liu saying, "If I had known that SIIA was checking eBay for software piracy, and if I had known the software was pirated and that I'd have to pay such a high fine, I would have never sold the pirated software to begin with."
The SIAA launched its Auction Litigation Program to deter sales of pirated software through auction sites "because current strategies, such as taking down auctions through eBay's Verified Rights Owner (VeRO) program, have not adequately remedied the problem." It filed three suits in mid-May and two this month.
Walmart Impleads Suppliers in Fendi Suit
Walmart has filed a third party complaint against the three suppliers from which it has purchased Fendi-branded purses -- Maxime LLC, Corporate Image Solutions, Inc. and Showcase Collections, Inc. While the Answer Walmart filed in court denies that the purses are fakes, its third party complaint seeks indemnification from the suppliers in the event that Fendi establishes that the purses are counterfeits, including reimbursement of the attorney's fees Walmart incurs defending against Fendi's claims.
Fendi's suit against Walmart is pending in the federal district court in Manhattan.
| Comments (1)Coach v Target: More than a Look Alike
The Complaint recently filed by Coach against Target alleges that Target sold a counterfeit Coach purse at its Largo, Florida store. The purse, a photo of which is included in the Complaint, is made of fabric that appears to be identical to Coach's "Signature C" fabric. However, Coach's claims do not rest solely on the purse's use of its Signature C trademarks or on its assertion that the purse is an exact replica of a genuine Coach product. The Complaint goes further, alleging that tags attached to the purse explicitly identified it as a genuine Coach product.
Target has not yet filed a formal response to Coach's Complaint. However, according to press reports, Target is claiming that the purse, which it sold for $200, is, in fact, a genuine Coach product. Coach, on the other hand, has publicly asserted that its engineers examined the bag and determined that it is a counterfeit.
The first count of the Complaint asserts a claim for trademark counterfeiting which, if established, would entitle Coach to elect to recover statutory damages. To establish a counterfeiting violation, Coach will have to show that Target knew that the Coach trademarks used on the purse were counterfeits. The Complaint asserts that "there is a price difference between the Target Counterfeit item and genuine Coach products of the same design" and that Target obtained the purse "with reckless disregard and/or willful blindness as to whether the products it sold bear counterfeits of Coach's Trademarks." These allegations set the stage for a claim by Coach that, even if Target did not have actual knowledge that it was trafficking in counterfeit goods, in light of the price it must have paid for the purse, Target's ignorance was the result of willful blindness.
Coach's lawsuit, Coach, Inc. v. Target Corporation, 06-CV-7875, was filed in the U.S. District Court for the Southern District of New York on September 29, 2006 and has been assigned to Judge Alvin Hellerstein.
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