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.
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."
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.
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)