Skyrocket, LLC d/b/a Skyrocket Toys LLC v. 2791383638

Background

Skyrocket sued the listed defendants over alleged online sales of counterfeit Pomsies products, which the opinion describes as interactive plush toy pets for children. Skyrocket alleged trademark counterfeiting and infringement, false designation of origin, passing off, unfair competition under the federal trademark statute, copyright infringement, violations of New York General Business Law §§ 349 and 350, and New York common-law unfair competition and unjust enrichment.

The court had previously granted a temporary restraining order and then entered a preliminary injunction after the defendants failed to appear at a hearing. The Clerk later entered a certificate of default for the defendants who had not appeared. Those defaulting defendants also failed to answer the complaint, otherwise defend the action, or respond to the order requiring them to show why a default judgment should not be entered.

Liability

On a default, the court treats the complaint’s well-pleaded factual allegations about liability as true, but it still evaluates whether those allegations establish the asserted claims.

The court held that Skyrocket established its federal trademark claims because it submitted a federal registration for the Pomsies Mark and alleged that the defendants used counterfeit marks. The court reasoned that counterfeit marks are identical or nearly identical to registered marks and therefore inherently create consumer confusion. It also entered judgment on Skyrocket’s federal claims for false designation of origin, passing off, and unfair competition because those claims followed from the established trademark infringement.

The court also entered judgment on copyright infringement. Skyrocket alleged ownership of several registered copyrights relating to the Pomsies products. The court found that the alleged striking similarity between the defendants’ products and Skyrocket’s works supported copying and substantial similarity.

The court did not enter default judgment on the New York General Business Law claims for deceptive business practices and false advertising. It concluded that the alleged trademark infringement did not show the specific and substantial injury to the public interest required for those claims. It also denied default judgment on unjust enrichment because New York law generally does not provide that remedy where the alleged conduct is already covered by recognized trademark or tort claims. The court did enter judgment on the New York common-law unfair-competition claim, finding that the established counterfeit-trademark claim and the presumed bad faith satisfied that claim’s requirements.

Damages

Skyrocket requested $50,000 in statutory damages against each defaulting defendant for trademark counterfeiting and infringement. The court found that amount appropriate under the Lanham Act. In reaching that conclusion, it considered the deemed willfulness resulting from the defaults, the difficulty of determining the defendants’ profits and Skyrocket’s lost revenues, the value of the Pomsies products and related intellectual-property rights, and the scale of the alleged infringement. The court awarded post-judgment interest under 28 U.S.C. § 1961.

Permanent Injunction

The court granted Skyrocket’s request for a permanent injunction because it found likely irreparable harm to Skyrocket’s business and goodwill, inadequate monetary remedies, a balance of hardships favoring Skyrocket, and a public interest in preventing deception in consumer-goods marketing.

The court granted the injunction as modified. It struck references to successors and assigns, added the word active before concert to track Federal Rule of Civil Procedure 65(d)(2), and removed provisions requiring retention of documents unrelated to the counterfeit products. It also struck provisions that would have bound financial institutions and third-party internet service providers that were not before the court and were not shown to be acting in active concert with the defaulting defendants.

Post-Judgment Asset Relief and Disposition

The court struck the proposed post-judgment asset-restraint and transfer provisions. It concluded that post-judgment enforcement is governed by state law through Federal Rule of Civil Procedure 69. Under New York law, Skyrocket may serve a restraining notice under New York Civil Practice Law and Rules § 5222. The court found that relief under § 5225 was not proper because Skyrocket had not shown that the required notice had been provided and had not identified particular property.

The court’s final disposition was to grant the motion for default judgment on Skyrocket’s federal claims and common-law unfair-competition claim and otherwise deny it. It granted the motion for a permanent injunction with the stated modifications, directed entry of a separate judgment, and directed the Clerk to close the case.