Otter Products, LLC v. 4PX Express USA Inc.

Background

Otter Products sued 4PX under the Lanham Act and Tariff Act. The amended complaint asserted five claims: trademark counterfeiting, trademark infringement, unfair competition and false designation of origin, federal trademark dilution, and unlawful importation of goods.

Otter Products alleged that 4PX imported, stored, distributed, and used in interstate commerce merchandise bearing counterfeit versions of Otter Products’ registered trademarks. After Otter Products discovered a counterfeit OtterBox cellphone case sold through eBay, it alleged that the case had been shipped by 4PX. Otter Products also alleged that 4PX said it had additional inventory from that seller and other accounts distributing counterfeit goods, and that 4PX continued shipping counterfeit merchandise after receiving notice of the problem.

4PX’s lawyer withdrew after the court denied 4PX’s motion to dismiss. The court gave 4PX time to obtain new counsel and explained that a corporation must appear through a licensed lawyer. 4PX did not obtain substitute counsel. The court then deemed 4PX in default and allowed Otter Products to seek default judgment. 4PX did not respond to the later order requiring it to explain why default judgment should not be entered.

Default-judgment standard

Because 4PX abandoned its defense, the court accepted the amended complaint’s well-pleaded factual allegations as true and drew reasonable inferences in Otter Products’ favor. The court did not automatically accept the allegations concerning damages. Otter Products still had to provide affidavits or other evidence establishing a basis for the damages it requested.

Damages

Otter Products requested $14,000,000 in statutory damages under Section 1117(c) of the Lanham Act—$2,000,000 for each of seven registered trademarks. The court considered factors including the infringer’s profits and expenses, Otter Products’ lost revenue, the value of the trademarks, deterrence, whether the conduct was willful, 4PX’s cooperation in providing records, and the need to prevent future misconduct.

The court found that several factors supported a substantial award. Otter Products had evidence that 4PX shipped thirteen counterfeit OtterBox products after the case began and estimated that 4PX had distributed counterfeit products in the tens of thousands. 4PX did not provide records concerning its profits or losses and refused to appear for a deposition. The court also found that 4PX was a willful infringer because it continued distributing counterfeit products after warnings, a prior related proceeding, and the filing of this action.

The court found the evidence insufficient to determine the value of Otter Products’ trademarks, making that factor neutral. It nevertheless concluded that statutory damages were appropriate. Rather than awarding the requested $2,000,000 per mark, the court awarded $125,000 per counterfeit mark, for a total of $875,000.

Permanent injunction

The court also granted a permanent injunction under the Lanham Act. It concluded that Otter Products had shown harm to its reputation and goodwill, that money damages were inadequate to prevent continued infringement, and that the balance of hardships and public interest favored an injunction.

The injunction permanently barred 4PX, its agents, employees, and specified persons acting with it from using counterfeit or infringing versions of Otter Products’ registered trademarks; importing, manufacturing, distributing, selling, advertising, or promoting unauthorized products bearing those marks; making false designations or descriptions suggesting an association with Otter Products; and engaging in other conduct infringing or weakening Otter Products’ marks, names, reputation, or goodwill.

Disposition

Judge Philip M. Halpern granted Otter Products’ motion for default judgment. The court awarded $875,000 in statutory damages and imposed the permanent injunction. It directed the Clerk to enter judgment and close the case.