AllStar Marketing Group, LLC. v. 178623

Background

Allstar Marketing Group, LLC. alleged that defendants operating merchant accounts on the Wish online marketplace advertised and sold counterfeit versions of Allstar’s MagicBax products. Allstar alleged that the defendants used copies or close imitations of its registered trademarks, product packaging, instruction manual, website, and commercial materials. The complaint asserted claims under the Lanham Act for trademark counterfeiting, trademark infringement, and false designation of origin; copyright infringement; and New York common-law unfair competition and unjust enrichment.

The defendants were served with the summons, complaint, and other papers, but none appeared or responded by the deadline stated in the opinion. The Clerk issued certificates of default. Allstar then moved for default judgment against the defendants who had not appeared. The court noted that it had personal jurisdiction over the defaulting defendants and that joining them in the action was appropriate, relying on substantially the same reasoning used in a prior related proceeding.

Default Judgment

Under Federal Rule of Civil Procedure 55, default judgment requires both an entry of default and a judicial determination that the complaint’s well-pleaded allegations establish liability. The court treated the factual allegations as admitted because of the defendants’ default, but it still examined whether those allegations were legally sufficient.

The court granted default judgment on Allstar’s first three claims under the Lanham Act. Allstar alleged ownership of a registered “MAGICBAX” trademark, and the defendants’ products allegedly used marks that were virtually identical or closely similar to Allstar’s marks. The court concluded that these allegations established counterfeiting, infringement, and a likelihood of consumer confusion.

The court also granted default judgment on copyright infringement. Allstar alleged ownership of registered copyrights covering its packaging, instruction manual, website, and commercial. The court concluded that the alleged similarities between Allstar’s works and the defendants’ products and packaging were sufficient to establish copying and substantial similarity.

For the New York common-law claims, the court granted judgment in part. It found that the allegations supporting the Lanham Act claims also established the elements of common-law unfair competition, including bad faith, misappropriation, and likely confusion. The court did not grant judgment on unjust enrichment because that claim duplicated the conventional trademark, copyright, and unfair-competition claims.

Remedies

The court approved a permanent injunction. It found that the alleged loss of control over Allstar’s trademark reputation showed irreparable harm, that legal damages alone were inadequate because the defendants were likely to continue infringing without an injunction, and that the balance of hardships and public interest favored the injunction.

The court approved Allstar’s request for statutory damages under the Lanham Act, subject to one modification. For each defaulting defendant in the first tier—those with fewer than 10 documented sales of counterfeit products—the award was $25,000. The court approved Allstar’s tiered damages structure for the other tiers based on the documented sales information described in the opinion. Post-judgment interest was awarded under 28 U.S.C. § 1961.

The court also granted relief under New York Civil Practice Law and Rules § 5222. The defaulting defendants were prohibited from selling, assigning, transferring, or interfering with property in which they had an interest, except as allowed by specified parts of that statute. The court dissolved the automatic stay under Federal Rule of Civil Procedure 62 and allowed immediate enforcement of the judgment.

The court declined to enter an asset-transfer order. It concluded that Allstar had not identified adequate legal authority for the requested order under Rule 64, the Lanham Act, or the court’s inherent powers. The court also denied the alternative request under New York Civil Practice Law and Rules § 5225 without prejudice because Allstar had not shown that it gave the required notice or identified specific property subject to turnover.

Disposition

The court granted Allstar’s motion for default judgment as to trademark counterfeiting, trademark infringement, false designation of origin, passing off, and unfair competition under the Lanham Act; copyright infringement; and New York common-law unfair competition. It approved a permanent injunction and statutory damages, granted the § 5222 relief, dissolved the Rule 62 automatic stay, declined to enter an asset-transfer order, and directed the Clerk to close the case. Judge Alison J. Nathan stated that a revised judgment would be entered separately.