The Smiley Co. SPRL v. The Individuals, P'ships

1

THE SMILEY COMPANY SPRL., Plaintiff, v. THE INDIVIDUALS, PARTNERSHIPS AND UNINCORPORATED ASSOCIATIONS IDENTIFIED ON SCHEDULE “A,”, Defendants.

No. 23-CV-22352-SCOLA/GOODMAN

United States District Court, S.D. Florida, Miami Division

February 20, 2024

REPORT AND RECOMMENDATIONS ON PLAINTIFF'S MOTION FOR FINAL DEFAULT JUDGMENT AGAINST DEFENDANTS

JONATHAN GOODMAN UNITED STATES MAGISTRATE JUDGE

In this trademark infringement action, Plaintiff The Smiley Company SPRL

(“Plaintiff”) filed a motion for final default judgment against certain Defendants, the Individuals, Partnerships, and Unincorporated Associations identified on Schedule “A” [ECF Nos 82; 82-1 (collectively, the “Defaulting Defendants”)].^[1] The Defaulting Defendants did not file a response to Plaintiff's motion and the response deadline has now expired.

Senior United States District Judge Robert N. Scola, Jr. referred this motion to the Undersigned “for a report and recommendations, consistent with 28 U.S.C. § 636(b)(1), Federal Rule of Civil Procedure 72, and Rule 1 of the Local Magistrate Judge Rules.” [ECF No. 84]. As explained below, the Undersigned respectfully recommends that Judge Scola grant the Motion [ECF No. 82].

I. Background

Plaintiff filed a five-count Complaint alleging trademark counterfeiting and infringement pursuant to § 32 of the Lanham Act (15 U.S.C. § 1114) (Count I), false designation of origin pursuant to § 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) (Count II), common law unfair competition (Count III), common law trademark infringement (Count IV), and copyright infringement (Count V). [ECF No. 1].

Plaintiff owns multiple trademarks "which are valid and registered on the Principal Register of the United States Patent and Trademark Office (collectively the "Smiley Marks"). Id. at ¶ 25.^[2] Plaintiff "is also the owner" of multiple "copyrights registered in the United States [ ] (collectively the 'Copyrighted Works')". Id. at ¶ 32.^[3] Plaintiff contends that it has "all exclusive rights in and to the Copyrighted Works and control[s] all licenses to distribute, perform, and enforce its rights to the Copyrighted Works." Id. at ¶ 34.

The Complaint alleges that Defendants "are promoting and advertising, distributing, selling, and/or offering for sale counterfeit and infringing goods in interstate commerce using exact copies and confusingly similar copies of the Smiley Marks and Copyrighted Works through at least the Internet based e-commerce stores operating under the Seller IDs." Id. at ¶ 36. The Complaint further alleges that Defendants have willfully infringed on Plaintiff's intellectual property rights and engaged in unfair competition through the operation of their e-commerce stores:

37. Upon information and belief, Defendants' Counterfeit Goods are of a quality substantially and materially different than that of Plaintiff's genuine goods. Defendants, upon information and belief, are actively using, promoting and otherwise advertising, distributing, selling and/or offering for sale substantial quantities of their Counterfeit Goods with the knowledge and intent that such goods will be mistaken for the genuine high quality goods offered for sale by Plaintiff under the Smiley Marks and Copyrighted Works despite Defendants' knowledge that they are without authority to use the Smiley Marks and Copyrighted Works. The effect of Defendants' actions will cause confusion of consumers, at the time of initial interest, sale, and in the post-sale setting, who will believe Defendants' Counterfeit Goods are genuine goods originating from, associated with, or approved by Plaintiff.

38. Defendants advertise their Counterfeit Goods for sale to the consuming public via e-commerce stores on Internet marketplace websites using at least the Seller IDs. In so advertising these goods, Defendants improperly and unlawfully use one or more of the Smiley Marks and Copyrighted Works without Plaintiff's permission.

39. As part of their overall infringement and counterfeiting scheme, Defendants are, upon information and belief, employing and benefitting from substantially similar, advertising and marketing strategies based, in large measure, upon an illegal use of counterfeits and infringements of the Smiley Marks and Copyrighted Works. Specifically, Defendants are using counterfeits and infringements of Plaintiff's famous Smiley Marks and Copyrighted Works in order to make their e-commerce stores and websites selling illegal goods appear more relevant, authentic, and attractive to consumers searching for Plaintiff's related goods and information online. By their actions, Defendants are contributing to the creation and maintenance of an illegal marketplace operating in parallel to the legitimate marketplace for Plaintiff's genuine goods. Thus, upon information, these Defendants are the same person, related persons, or acting in concert with one another such as utilizing the same fraudulent marketing material and/or obtaining the counterfeit product from a common source. Defendants are causing individual, concurrent and indivisible harm to Plaintiff and the consuming public by (i) depriving Plaintiff and other third parties of their right to fairly compete for space within search engine results and reducing the visibility of Plaintiff's genuine goods on the World Wide Web, (ii) causing an overall degradation of the goodwill associated with the Smiley Marks and Copyrighted Works, and/or (iii) increasing Plaintiff's overall cost to market the Smiley Marks and Copyrighted Works, and educate consumers about their brand via the Internet.

Id. at ¶¶ 37-39.

Plaintiff obtained a Clerk's Default [ECF No. 76] and now seeks the entry of a default judgment against the Defaulting Defendants. [ECF No. 82]. In support of the instant motion, Plaintiff submitted the declaration of its counsel, Javier Sobrado [ECF No. 82-4]. Moreover, Plaintiff's Motion repeatedly cites to the sworn declarations of Nicolas Loufrani, Plaintiff's Chief Executive Officer [ECF No. 7-2] and Richard Guerra, Plaintiff's legal counsel [ECF No. 7-5], to help substantiate its factual allegations.^[4]

II. Applicable Legal Standard

Federal Rule of Civil Procedure 55(a) states that “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” A party may then apply to the District Court for a default final judgment. Fed.R.Civ.P. 55(b)(2); Alfa Corp. v. Alfa Mortg. Inc., 560 F.Supp.2d 1166, 1173 (M.D. Ala. 2008).

A court may not enter a default final judgment based solely on the existence of a clerk's default. Id. at 1174. Instead, a court is required to examine the allegations to see if they are well-pleaded and present a sufficient basis to support a default judgment on the causes of action. Id. (citing Nishimatsu Constr. Co., Ltd. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)).^[5] Only those factual allegations that are well-pleaded are admitted in a default judgment. Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987).

The decision whether to enter a default judgment “is committed to the discretion of the district court.” Hamm v. DeKalb Cty., 774 F.2d 1567, 1576 (11th Cir. 1985). Default judgments are “generally disfavored” because this Circuit has a “strong policy of determining cases on their merits.” Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1244-45 (11th Cir. 2015). In addition to assessing whether the complaint adequately sets forth facts to support the plaintiff's claims, a court considering the entry of a valid default judgment must “have subject-matter jurisdiction over the claims and have personal jurisdiction over the defendant.” Osborn v. Whites & Assocs. Inc., No. 1:20-cv-02528, 2021 WL 3493164, at *2 (N.D.Ga. May 20, 2021) (citing Oldfield v. Pueblo De Bahia Lora, S.A., 558 F.3d 1210, 1215 & n.13 (11th Cir. 2009)).

A court may conduct a hearing on a motion for default judgment when, in order “to enter or effectuate judgment, it needs to: (A) conduct an accounting; (B) determine the amount of damages; (C) establish the truth of any allegation by evidence; or (D) investigate any other matter.” Fed.R.Civ.P. 55(b)(2); see also Tara Prods., Inc. v. Hollywood Gadgets, Inc., 449 Fed.Appx. 908, 911-12 (11th Cir. 2011) (noting that Rule 55(b)(2) “leaves the decision to hold an evidentiary hearing to the court's discretion”).

III. Analysis

“[B]efore entering a default judgment, the Court must ensure that it has jurisdiction over the claims and there must be a sufficient basis in the pleadings for the judgment entered.” Tissone v. Osco Food Servs., LLC, No. 19-CV-61358, 2021 WL 1529915, at *2 (S.D. Fla. Feb. 10, 2021), report and recommendation adopted, No. 19-61358-CIV, 2021 WL 870526 (S.D. Fla. Mar. 9, 2021) (citing Nishimatsu, 515 F.2d at 1206).

a. Subject-Matter Jurisdiction

The Complaint [ECF No. 1] alleges causes of action under the Lanham Act. Therefore, the Court has original subject-matter jurisdiction over the instant action. See Ethos Grp., Inc. v. JAB Media, LLC, No. 3:22-CV-485-TJC-LLL, 2023 WL 4187097, at *2 (M.D. Fla. May 25, 2023), report and recommendation adopted, No. 3:22-CV-485-TJC-LLL, 2023 WL 4181070 (M.D. Fla. June 26, 2023) (“Because this action arises under the Lanham Act, the Court has original subject-matter jurisdiction.” (record citation omitted)). The Court also has supplemental jurisdiction over Plaintiff's common law claims because they “are so related to” Plaintiff's federal law claims “that they form part of the same case or controversy under Article III of the United States Constitution.” 28 U.S.C. § 1367(a).

b. Personal Jurisdiction

In addition to subject-matter jurisdiction, ...