GS Holistic, LLC v. Lava Smoke Shop LLC

1

GS HOLISTIC, LLC, Plaintiff, v. LAVA SMOKE SHOP LLC d/b/a LAVA SMOKE SHOP and ZIYAD ABDALLAH, Defendants.

No. 23-CV-748-JPS

United States District Court, E.D. Wisconsin

November 28, 2023

ORDER

J. P Stadtmueller, U.S. District Judge

1. INTRODUCTION

In June 2023, Plaintiff GS Holistic, LLC (“Plaintiff”) sued Defendants Lava Smoke Shop LLC d/b/a Lava Smoke Shop (“Lava Smoke Shop”) and its owner, Ziyad Abdallah (collectively, “Defendants”) for willful trademark infringement and counterfeiting in violation of 15 U.S.C. § 1114 (“Count One”) and false designation of origin and unfair competition in violation of 15 U.S.C. § 1125(a) (“Count Two”). ECF No. 1. Defendants failed to timely appear to answer or otherwise respond to Plaintiff's complaint after being served. See ECF Nos. 5, 6. Accordingly, the Court ordered Plaintiff to request entry of default and, later, to move for default judgment. See August 8, 2023 and September 14, 2023 text orders.

Now before the Court is Plaintiff's motion for default judgment.^[1]ECF No. 9. For the reasons discussed herein, the Court will grant the motion for default judgment, award Plaintiff statutory damages in the total amount of $75,000, and dismiss the case.

2. FACTUAL ALLEGATIONS^[2]

Since 2020, Plaintiff has marketed and sold products using its trademark “Stundenglass.” The Stundenglass products include glass infusers and related accessories and are recognized nationally and internationally. The Stundenglass brand is a leading company in the industry, known for its high quality and innovation.

For approximately two years, Plaintiff worked to distinguish its Stundenglass brand as the premier manufacturer of glass infusers by emphasizing its use of quality materials and focusing on principles that facilitate a superior smoking experience. Because of this commitment to quality and innovation, Stundenglass products have accrued a significant consumer following.

Due to Plaintiff's continuous and extensive use of the trademark “Stundenglass,” Plaintiff was granted valid and subsisting federal statutory and common law rights to the trademark. Plaintiff owns the following federally registered “Stundenglass”-related trademarks, all of which are registered on the Principal Register, have become incontestable within the meaning of Section 15 of 15 U.S.C. § 1065, and are distinctive to both consumers and in Plaintiff's trade:

1. U.S. Trademark Registration Number 6,633,884 for the standard character mark “Stundenglass” in association with goods further identified in registration in international class 011.

2. U.S. Trademark Registration Number 6,174,292 for the design plus words mark “S” and its logo in association with goods further identified in the registration in international class 034.

(Image Omitted)

ECF No. 9-11 at 2 (“Description of Mark . . . The mark consists of the letter ‘S' through the center of which is a capsule shape.”)

3. U.S. Trademark Registration Number 6,174,291 for the standard character mark “Stundenglass” in association with goods further identified in registration in international class 034.

(collectively, the “Stundenglass Marks”). Plaintiff has used the Stundenglass Marks in commerce in the United States continuously since 2020. The Stundenglass Marks appear clearly on Plaintiff's products, packaging, and advertising, and Plaintiff has expended substantial time, money, and other resources in developing, promoting, and protecting the Stundenglass Marks, as well as in building goodwill.

Plaintiff sells products branded with its Stundenglass Marks to approximately 3,000 authorized stores in the United States, including in Wisconsin. Due to the recognized quality associated with genuine Stundenglass products, consumers are willing to pay higher prices for products branded with the Stundenglass Marks. For example, a Stundenglass brand glass infuser is priced at $599.95, while a non-Stundenglass competing product is sold at anywhere from $199 to $600.

Defendants have offered, and continue to offer, for sale counterfeit Stundenglass products bearing the Stundenglass Marks or imitations thereof without Plaintiff's consent. Defendants continue to offer for sale counterfeit goods bearing the likeness of genuine Stundenglass products and bearing marks which are identical or substantially indistinguishable from the Stundenglass Marks. Defendants also advertise and promote these counterfeit products, which are made of inferior materials and utilize inferior technology compared to genuine Stundenglass products.

On February 17, 2023, Plaintiff's investigator visited Defendants' store and observed that it offered for sale counterfeit glass infusers branded with the Stundenglass Marks. The investigator purchased one such counterfeit product with the Stundenglass Mark affixed to it for $419.99.^[3]

(Image Omitted)

ECF No. 9-12 at 4 (counterfeit product purchased by investigator).

Defendants' use of the counterfeit Stundenglass Marks began after the registration of the Stundenglass Marks. Defendants' sale of these counterfeit products bearing the Stundenglass Marks or imitations thereof, and Defendants' deliberate practice of using names and images identical or similar to the Stundenglass Marks, has caused Plaintiff to suffer financial losses (in an amount that Plaintiff concedes is “difficult to determine”), damages to Plaintiff's goodwill and reputation, and confusion among consumers. Defendants' infringing acts deceive consumers as to the source or origin of the counterfeit products and lead consumers to mistakenly believe that the counterfeit products are affiliated with Plaintiff. Defendants deliberately intend to trade on the goodwill of the Stundenglass Marks and divert potential sales of Stundenglass products to themselves. As a result, Defendants have accrued and will continue to accrue substantial profits to which they are not entitled.

Defendants' actions have not only caused Plaintiff to suffer lost profits but have also forced Plaintiff to retain counsel and incur costs associated with bringing this action.

3. LAW & ANALYSIS

When a defendant has defaulted, the Court must accept all the allegations in the complaint as true, except those relating to damages. Arwa Chiropractic, P.C., 961 F.3d at 948 (citing Fed.R.Civ.P. 8(b)(6) and Quincy Bioscience, LLC v. Ellishbooks, 957 F.3d 725, 725 (7th Cir. 2020)); in re Catt, 368 F.3d 789, 793 (7th Cir. 2004) (“Once the default is established, and thus liability, the plaintiff still must establish his entitlement to the relief he seeks.”).

3.1 Liability

“Even after default . . . it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action.” Quincy Bioscience, LLC v. Bryk Enter., LLC, No. 22-CV-658-JDP, 2023 U.S. Dist. LEXIS 65712, at *8 (W.D. Wis. Apr. 13, 2023) (quoting 10A Fed. Prac. & Proc. Civ. § 2688.1 (4th ed.)). The Court therefore begins by analyzing whether the allegations in the complaint, taken as true, state claims for relief under 15 U.S.C. §§ 1114 (Count One) and 1125(a) (Count Two).

Section 1114(a) of the Lanham Act “specifies a cause of action for the unauthorized use of a registered trademark” and

renders a person liable . . . when he “use[s] in commerce any reproduction, counterfeit, copy, or colorable imitation 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.”

Phoenix Entm't, LLC v. Rumsey, 829 F.3d 817, 822 (7th Cir. 2016) (quoting 15 U.S.C. § 1114). Meanwhile, § 1125(a) “creates a remedy against a person who engages in unfair competition by, inter alia, falsely designating the origin of a product.” Id. Section 1125 provides that

[a]ny person who, on or in connection with any goods .... uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin . . ., 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 .... shall be liable in a civil action ....

“To prevail on either type of claim, a plaintiff must be able to show (1) that its mark is protectable, and (2) that the defendant's use of the mark is likely to cause confusion among consumers.” Phoenix, 829 F.3d at 822 (citing CAE, Inc. v. Clean Air Eng'g, Inc., 267 F.3d 660, 673-74 (7th Cir. 2016)); see also Uncommon, LLC v. Spigen, Inc., 926 F.3d 409, 419 (7th Cir. 2019) (“[C]laims for trademark infringement and unfair competition both require (1) that [plaintiff's] mark be validly registered and (2) that [defendant's] use be likely to cause confusion among consumers.”) (citing H-D Mich., Inc. v. Top Quality Serv., Inc., 496 F.3d 755, 759 (7th Cir. 2007) and Packman v. Chi. Trib. Co., 267 F.3d 628, 638 & n.8 (7th Cir. 2001)).

3.1.1 Protectability of the Marks

With respect to the protectability of the marks “[r]egistration under the [Lanham] Act affords the registrant a rebuttable presumption of validity.” CAE, Inc., 267 F.3d at 673 (quoting 15 U.S.C. § 1115(a) (“[A] mark registered on the principal register . . . shall be prima facie evidence of the validity of the registered mark ....”)); see also Uncommon, LLC, 926 F.3d at 419 (describing this first element as requiring “valid[] regist[ration]”). Plaintiff has satisfied this element. See ECF No. 1 at 3 (asserting that the Stundenglass Marks are registered on the Principal Register and have become incontestable); ECF No. 9-11 (proof of registration on Principal Register); see also Krispy Krunchy Foods LLC v. Silco...