SKYROCKET, LLC v. 5ATOY STORE

Background

Skyrocket, LLC, doing business as Skyrocket Toys LLC, sued 5ATOY STORE and numerous other defendants for allegedly selling counterfeit Pomsies interactive plush toy pets. Skyrocket asserted claims for trademark counterfeiting and infringement, false designation of origin, passing off, and unfair competition under the federal trademark statute; copyright infringement; violations of New York’s prohibitions on deceptive business practices and false advertising; and New York common-law unfair competition and unjust enrichment.

The court had previously issued a temporary restraining order and then a preliminary injunction. The defendants covered by this motion—the “Defaulting Defendants”—did not appear at the hearing, answer the complaint, otherwise defend the action, or respond to the later order to show cause. The Clerk entered a certificate of default. Skyrocket then moved for default judgment and a permanent injunction.

Liability

A default judgment is a judgment entered when a defendant fails to defend. The court treated the complaint’s well-pleaded factual allegations concerning liability as true, but still examined whether those allegations established each claim.

The court held that Skyrocket established its federal trademark claims because it submitted a federal registration showing that the Pomsies Mark was protectible and alleged that the defendants sold counterfeit products. Because counterfeit marks are identical or nearly identical to registered marks, the court concluded that consumer confusion was established without separately analyzing the usual confusion factors. The court therefore granted default judgment on the trademark counterfeiting and infringement claims.

The court also granted judgment on the federal claims for false designation of origin, passing off, and unfair competition, reasoning that establishing trademark infringement also established those claims. It granted judgment on the copyright-infringement claim because Skyrocket owned copyright registrations for Pomsies-related works and the alleged products were sufficiently similar to establish copying and substantial similarity.

The court denied default judgment on Skyrocket’s claims under New York General Business Law §§ 349 and 350. It explained that ordinary trademark infringement does not support those claims without a specific and substantial injury to the public beyond the infringement itself. The court granted judgment on the New York common-law unfair-competition claim because Skyrocket established the related trademark claim and the use of a counterfeit mark supported bad faith. It denied judgment on the unjust-enrichment claim, which the court said is generally unavailable in Lanham Act cases like this one.

Damages

Skyrocket requested $50,000 in statutory damages from each Defaulting Defendant for trademark counterfeiting and infringement. The trademark statute permits statutory damages instead of actual damages, within specified minimum and maximum amounts. The court found the requested awards appropriate based on the deemed willfulness resulting from the defaults, the difficulty of determining defendants’ profits and Skyrocket’s lost revenue, the value of the products and marks, and the scale of the alleged infringement. The court awarded $50,000 against each Defaulting Defendant and ordered post-judgment interest under 28 U.S.C. § 1961.

Permanent Injunction

The court granted Skyrocket’s motion for a permanent injunction, finding that the alleged counterfeiting and infringement threatened irreparable harm to Skyrocket’s business and goodwill, that monetary damages were inadequate, that the balance of hardships favored Skyrocket, and that an injunction served the public interest by preventing deception in the marketing of consumer goods.

The court modified the proposed injunction. It struck the reference to “successors and assigns” and required the phrase “active concert” to track Federal Rule of Civil Procedure 65(d)(2). It also struck provisions requiring retention of documents unrelated to the counterfeit products at issue. The court removed provisions directed at financial institutions and third-party internet-service providers because it lacked authority to enjoin nonparties that were not actively acting with the Defaulting Defendants. The court further rejected provisions that would freeze the defendants’ accounts or prohibit service providers from offering services unrelated to the products at issue.

Post-Judgment Asset Relief and Disposition

The court concluded that post-judgment enforcement was governed by New York law through Federal Rule of Civil Procedure 69, rather than by the federal provisions Skyrocket cited. Skyrocket could serve a restraining notice under New York Civil Practice Law and Rules § 5222 to prevent transfers of property in which the Defaulting Defendants had an interest. Relief under § 5225 was not proper because Skyrocket had not shown that the required notice had been given and had not identified particular property. The court therefore struck the proposed judgment’s post-judgment asset-restraint and transfer section.

In conclusion, the court granted Skyrocket’s motion for default judgment on its federal claims and New York common-law unfair-competition claim, and otherwise denied the motion. It granted the permanent-injunction motion with the stated modifications, ordered a separate judgment, and directed the Clerk to close the case.