Spin Master Ltd. v. 13385184960@163.com

Background

Spin Master Ltd. and its wholly owned subsidiary, Spin Master, Inc., sued seventy-one defaulting defendants for copyright infringement and trademark infringement and counterfeiting involving Twisty Petz products. The complaint alleged that the defendants offered and sold counterfeit products through Wish.com to consumers in the United States, including New York. The defendants did not appear for the damages proceeding.

The court had previously entered an amended final default judgment and permanent injunction against the defaulting defendants. The matter was then referred to a magistrate judge to determine damages. The magistrate judge recommended awarding no statutory damages. Spin Master filed timely objections.

Statutory Damages

Spin Master requested a total of $17,625,000 in statutory damages. For most defendants, it proposed a tiered damages system under the Lanham Act, with amounts increasing according to the number of counterfeit-product sales. For four defendants, it requested $50,000 each under the Copyright Act based on one infringing use of the copyrighted work per defendant.

Judge Schofield agreed that Spin Master’s proposed damages method was internally inconsistent. The complaint alleged both copyright and trademark infringement against all defendants, but Spin Master did not explain why it sought damages under different statutes for different defendants or why similar sales figures produced different proposed awards. The court also noted that some courts in the district had disfavored the proposed tiered approach.

The court nevertheless rejected the recommendation to award no damages. It explained that statutory damages do not require proof of actual losses with reasonable certainty. Instead, the court considered factors including the defendants’ state of mind, saved expenses and profits, the plaintiffs’ lost revenue, deterrence, the defendants’ cooperation in providing evidence, and the parties’ conduct. Because the defendants defaulted, information about their state of mind and profits was unavailable, and the court resolved that uncertainty in Spin Master’s favor. The court also found that the alleged popularity and value of Twisty Petz supported an award, and that the defendants’ willful infringement, lack of cooperation, and the need for deterrence favored substantial damages.

The court determined that $50,000 per defaulting defendant was reasonable and appropriate. It therefore rejected the recommendation to award no statutory damages and awarded Spin Master $50,000 per defaulting defendant.

Post-Judgment Interest

The court awarded post-judgment interest on the damages. The amount is to be calculated under the statutory formula, beginning on the date judgment is entered and continuing until payment, with daily calculation and annual compounding as provided by law.

Transfer of Frozen Assets

Spin Master also requested authorization to transfer assets belonging to the defaulting defendants that had been frozen under earlier orders. The court granted that relief and authorized transfer of the frozen assets to Spin Master. Spin Master was directed to file a proposed order by May 29, 2020.

Disposition

Judge Lorna G. Schofield rejected in substantial part the magistrate judge’s recommendation to award no statutory damages. The court awarded $50,000 per defaulting defendant, plus post-judgment interest, authorized transfer of the frozen assets, and directed Spin Master to serve the opinion and order on the defaulting defendants and file proof of service by May 29, 2020.