Kelly Toys Holdings LLC v. Pearlbuy Limited

Background

Kelly Toys Holdings, LLC makes and sells plush toys, including its Squishmallows products. It owns federal trademark registrations and registered copyrights related to those products. Kelly Toys sued Pearlbuy Limited, Pearlgo Technology Co., Limited, and Guangzhou Pearlgo Technology Co., Limited, alleging that the defendants operated websites selling counterfeit Squishmallows. The complaint asserted federal, state, and common-law claims involving trademark infringement, false designation of origin, and unfair competition.

The court first issued a temporary restraining order and gave the defendants opportunities to appear and oppose Kelly Toys’ request for a preliminary injunction. The defendants did not file an opposition or otherwise appear. Kelly Toys submitted additional evidence concerning service, its communications with defense counsel, and personal jurisdiction. The court issued an order granting the preliminary injunction on May 27, 2021, and this opinion explained the reasons for that order.

Court’s analysis

For personal jurisdiction—a court’s authority over the defendants—the court found that Kelly Toys had made a preliminary showing that the defendants shipped counterfeit products to New York, including through test purchases by counsel. The court also found that certificates of service had been filed. It concluded that the defendants were subject to personal jurisdiction under Section 302(a)(1) of New York’s long-arm statute and that exercising jurisdiction complied with constitutional due process.

To obtain a preliminary injunction, Kelly Toys had to show likely success on the merits, likely irreparable harm without an injunction, that the balance of hardships favored it, and that the injunction would not harm the public interest. The court concluded that Kelly Toys clearly showed likely success on its federal trademark claim. It also found likely irreparable harm because of the likelihood of customer confusion and the resulting loss of control over the reputation of Kelly Toys’ products. The court further found that the balance of hardships favored Kelly Toys and that the public interest supported an injunction.

Ruling

The court granted Kelly Toys’ motion for a preliminary injunction. The defendants were preliminarily restrained and enjoined from manufacturing, importing, exporting, advertising, marketing, promoting, distributing, displaying, offering for sale, selling, or otherwise dealing in the allegedly infringing products, including products bearing the Squishmallows marks or products confusingly similar to the Squishmallows plush toys.

The court also preliminarily restrained and enjoined the third-party service providers identified in Kelly Toys’ filings from facilitating sales of the defendants’ allegedly infringing products. The court ordered defense counsel to file a notice of appearance by July 21, 2021, and stated that failure to meet that deadline could result in sanctions, including monetary sanctions, preclusion of claims and defenses, and entry of a default judgment.