Lane Crawford LLC v. Kelex Trading (Ca) Inc., 12 Civ. 9190 (GBD) (AJP)

LANE CRAWFORD LLC, Plaintiff, v. KELEX TRADING (CA) INC., KA WAI CHOI, HAVE FASHION, INC.,KENNETH KHANG and DOES 1-10, Defendants.

12 Civ. 9190 (GBD) (AJP)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

December 3, 2013

REPORT AND RECOMMENDATION

ANDREW J. PECK, United States Magistrate Judge:

To the Honorable George B. Daniels, United States District Judge:

Plaintiff Lane Crawford LLC brought this action against defendants alleging, inter alia, trademark infringement. (Dkt. No. 1: Compl.; Dkt. No. 8: Am. Compl.) On September 4, 2013, Judge Daniels granted Lane Crawford a default judgment against defendants Kelex Trading (CA) Inc. and Ka Wai Choi, and referred the matter to me for an inquest on damages, including attorneys' fees. (Dkt. No. 14: 9/4/13 Order; Dkt. No. 18: 10/31/13 Referral Order.)¹ For the reasons set forth below, the Court should award Lane Crawford $1,011,119.50.

BACKGROUND

Procedural History

Lane Crawford initiated this action against Kelex and Choi on December 18, 2012. (Dkt. No. 1: Compl.) Kelex and Choi answered, through counsel, on January 28, 2013. (Dkt. No. 5: Ans.) On February 1, 2013, Lane Crawford filed an amended complaint adding defendants Have Fashion, Inc. and Kenneth Khang. (Dkt. No. 8: Am. Compl.)² On July 17, 2013, Judge Daniels granted Kelex and Choi's counsel's request to withdraw, and held:

Because a "corporation is not allowed to appear in federal court except by a licensed attorney," corporate Defendant Kelex Trading (CA) Inc. may be subject to a default judgment if it does not retain counsel in the next 30 days. The answer of Individual Defendant Ka Wai Choi may be struck and he may be subject to default as well unless he obtains counsel or begins to actively represent himself in this litigation.

(Dkt. No. 11: 7/17/13 Order, citation omitted.)

On August 26, 2013, Lane Crawford reported that Kelex and Choi had "not filed notices to appear nor ha[d] otherwise participated in the defense of this action," and requested that Judge Daniels enter a default. (Dkt. No. 12: 8/26/13 Letter.) On September 4, 2013, Judge Daniels granted a default judgment against Kelex and Choi for their failure "to retain counsel or otherwise appear to defend this action after this Court granted Defendants' former attorneys' motion to withdraw as counsel of record." (Dkt. No. 14: 9/4/13 Order.)

Inquest

Judge Daniels referred this matter to me for an inquest. (Dkt. No. 14: 9/4/13 Order; see Dkt. No. 18: 10/31/13 Referral Order.) I ordered Lane Crawford and defendants to submit inquest papers by October 25 and November 8, 2013, respectively. (Dkt. No. 15: 10/4/13 Order.) Lane Crawford timely submitted its papers; defendants have not submitted anything in opposition. (See Dkt. No. 16: Dweck Aff.; Dkt. No. 17: Lane Crawford Br.)

In support of its request for $2,013,020 in statutory damages, costs and attorneys' fees, Lane Crawford submitted a brief and affidavit, totaling ten pages combined, and one-and-a-half pages of attorney billing records. (See Dweck Aff. ¶¶ 18, 20 & Ex. 3: Billing Records; Lane Crawford Br. at 4-5.) Lane Crawford seeks statutory damages in the maximum amount of $2 million under 15 U.S.C. § 1117(c)(2), as well as $350 in costs and $12,670 in attorneys' fees under 15 U.S.C. § 1117(a)-(b). (Dweck Aff. ¶¶ 16, 18, 20; Lane Crawford Br. at 4-5.) Additionally, without argument or authority, Lane Crawford requests equitable relief, including that defendants "be permanently enjoined from any future sales or distribution of counterfeit products or products bearing unauthorized reproductions of the Lane Crawford Trademarks." (Dweck Aff. ¶¶ 19, 21 & Ex. 4: Proposed Order ¶¶ 2(a)-(f); Lane Crawford Br. at 5.)

The Amended Complaint³

Lane Crawford manufactures and sells clothing, including its lines of Therapy and Kiss Therapy pants. (Dkt. No. 8: Am. Compl. ¶¶ 15-16.) Lane Crawford owns the registered trademarks for the Therapy and Kiss Therapy lines, which have been in use in commerce since 2005 and 2009, respectively. (Am. Compl. ¶ 16.) Choi formed Kelex, a California corporation doing business in New York, in approximately January 2011. (Am. Compl. ¶¶ 7, 17.) Kelex advertises and sells apparel bearing counterfeits of Lane Crawford's trademarks. (Am. Compl. ¶¶ 19-20.)

Lane Crawford sent a cease and desist letter to Kelex upon discovering the infringing conduct. (Am. Compl. ¶ 22.) When Kelex failed to respond, Lane Crawford purchased samples of Kelex's products, which included denim pants bearing counterfeits of Lane Crawford's Therapy and Kiss Therapy trademarks. (Am. Compl. ¶¶ 23-24, 45.)

The amended complaint alleges that Choi and Kelex "willfully and maliciously engaged in their counterfeiting and infringing activities" (Am. Compl. ¶¶ 38-40), and that their conduct confused and deceived consumers (Am. Compl. ¶¶ 26, 29-31, 34, 48, 61, 63, 85). Lane Crawford asserts claims for trademark counterfeiting, 15 U.S.C. § 1114 (Am. Compl. ¶¶ 46-50), trademark infringement, 15 U.S.C. § 1125(a) (Am. Compl. ¶¶ 51-66), and state law claims (Am. Compl. ¶¶ 67-90).

ANALYSIS⁴

I. STATUTORY DAMAGES

Pursuant to 15 U.S.C. § 1117(c)(2), Lane Crawford seeks $2 million in statutory trademark damages—the maximum amount allowed per counterfeit mark. (Dkt. No. 16: Dweck Aff. ¶ 18; Dkt. No. 17: Lane Crawford Br. at 4.)

Section 1117(c) provides:

(c) Statutory damages for use of counterfeit marks

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 of actual damages and profits under subsection (a) of this section, 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)(1)-(2).⁵

The rationale for § 1117(c) is the practical inability to determine profits or sales made by counterfeiters. See, e.g., Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 110 (2d Cir. 2012) ("In passing the Act, which allows trademark plaintiffs to elect to recover statutory damages in counterfeit cases in lieu of actual damages, Congress apparently sought to ensure that plaintiffs would receive more than de minimis compensation for the injury caused by counterfeiting as a result of the unprovability of actual damages despite the plain inference of damages to the plaintiff from the defendant's unlawful behavior."); Bus. Trends Analysts, Inc. v. Freedonia Grp., Inc., 887 F.2d 399, 406 (2d Cir. 1989) ("[W]here 'proof of damages or discovery of profits' is 'difficult or impossible,' Congress provided for statutory damages, an automatic measure of recovery to plaintiffs regardless of injury or profits."); Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1126 (2d Cir. 1989) ("Statutory damages are awarded when no actual damages are proven or they are difficult to calculate."); Union of Orthodox Jewish Congregations of Am. v. Am. Food & Beverage Inc., 704 F. Supp. 2d 288, 290 (S.D.N.Y. 2010) ("Subsection 1117(c) provides trademark holders an alternative remedy to actual damages because 'counterfeiters' records are frequently nonexistent, inadequate, or deceptively kept[,] . . . making proving actual damages in these cases extremely difficult if not impossible.'" (quoting S. Rep. No. 104-177, at 10 (1995))); Louis Vuitton Malletier, S.A. v. LY USA, 06 Civ. 13463, 2008 WL 5637161 at *1 (S.D.N.Y. Oct. 3, 2008) ("In enacting the statutory damages provision of the Lanham Act, Congress found, generally, that 'counterfeiters' records are nonexistent, inadequate or deceptively kept in order to willfully deflate the level of counterfeiting activity actually engaged in, making proving actual damages in these cases extremely difficult if not impossible.'"), aff'd, 676 F.3d 83 (2d Cir. 2012); Kenneth Jay Lane, Inc. v. Heavenly Apparel, Inc., 03 Civ. 2132, 2006 WL 728407 at *6 (S.D.N.Y. Mar. 21, 2006) (Daniels, D.J. & Fox, M.J.) ("In crafting the statutory damages provision of the Lanham Act noted above, Congress took into account that oftentimes, 'counterfeiters' records are nonexistent, inadequate or deceptively kept in order to willfully deflate the level of counterfeiting activity actually engaged in, making proving actual damages in these cases extremely difficult if not impossible.'").⁶

Defendants have defaulted (see page 2 above) and by virtue of their default are deemed to be willful infringers. E.g., Lucerne Textiles, Inc. v. H.C.T. Textiles Co., 12 Civ. 5456, 2013 WL 174226 at *3 (S.D.N.Y. Jan. 17, 2013) (Peck, M.J.), report & rec. adopted, 2013 WL 1234911 (S.D.N.Y. Mar. 26, 2013); CJ Prods. LLC v. Your Store Online LLC, 11 Civ. 9513, 2012 WL 2856068 at *3 (S.D.N.Y. July 12, 2012) (Peck, M.J.), report & rec. adopted, 2012 WL 4714820 (S.D.N.Y. Oct. 3, 2012) (Daniels, D.J.); Coach, Inc. v. O'Brien, 10 Civ. 6071, 2012 WL 1255276 at *14 (S.D.N.Y. Apr. 13, 2012); All-Star Mktg. Grp., LLC v. Media Brands Co., 775 F. Supp. 2d at 621.⁷

Accordingly, an award of statutory damages under § 1117(c)(2) is appropriate.

Besides setting the cap at $2 million per mark per type of good, and directing that courts award damages that are "just," § 1117(c)(2) does not provide guidance for determining the appropriate award in a case involving willful trademark violations. Louis Vuitton Malletier v. Carducci Leather Fashions, Inc., 648 F. Supp. 2d 501, 504 (S.D.N.Y. 2009).⁸ Thus, "courts often have looked for guidance to the...