Allstar Marketing Group, LLC v. Warm Your House Store, et.al.

Background

AllStar Marketing Group, LLC alleged that the defendants sold counterfeit versions of its Socket Shelf, a product with six outlets, two USB charging stations, and a shelf. AllStar alleged that it owned a federally registered trademark for Socket Shelf and several copyright registrations related to the product. Its claims included trademark counterfeiting and infringement, false designation of origin, passing off, unfair competition under the federal trademark statute, copyright infringement, and New York common-law unfair competition.

The defendants covered by the motion failed to answer the complaint, defend the action, or respond to the court’s order to show cause. The Clerk entered a certificate of default. The opinion states that AllStar served the defaulting defendants through alternative service authorized by the court. The court had previously entered a preliminary injunction after the defendants failed to appear at a hearing. The court did not grant default judgment against ALHOME$GLODCISTERN Store, La Favorita Flagship Store, or Shenzhen Clicks Technology Co., Ltd. because AllStar did not serve them with the order to show cause and related documents as required.

Liability

A default occurs when a party fails to defend the case. The court explained that, in that situation, it treats the complaint’s well-pleaded factual allegations about liability as true. The court then separately evaluated AllStar’s claims.

For the trademark claims, the court held that AllStar’s trademark registration showed that the Socket Mark was protected. Because AllStar alleged that the defendants’ products were counterfeits, the court concluded that the products’ use of the mark necessarily created consumer confusion. The court therefore held that AllStar was entitled to judgment on its trademark counterfeiting and infringement claims.

The court also held that establishing trademark infringement established AllStar’s claims for false designation of origin, passing off, and unfair competition under the federal trademark statute. For copyright infringement, the court found that AllStar’s copyright registrations created a presumption that its copyrights were valid. It also concluded that the allegations of striking similarity between the products established copying and substantial similarity. Finally, because the counterfeit trademark allegations supported the federal claims and created a presumption of bad faith, the court held that AllStar had also established its New York common-law unfair-competition claim.

Damages

AllStar sought $50,000 in statutory damages from each defaulting defendant for trademark counterfeiting and infringement. The federal trademark statute permits a plaintiff to choose statutory damages instead of actual damages, within specified statutory limits. In setting statutory damages, courts may consider factors such as the defendants’ profits, AllStar’s lost revenue, the value of the mark, the scale and willfulness of the infringement, the defendants’ cooperation, and deterrence.

The court deemed the infringement willful because of the defaults. It also considered the difficulty of determining profits and lost revenue because the defendants did not appear, the value of the Socket Shelf and related registrations, the scale of the infringement, and evidence that the defendants had made between one and five infringing uses of the Socket Marks. The court found the requested $50,000 award against each defaulting defendant appropriate and awarded post-judgment interest under 28 U.S.C. § 1961.

Permanent Injunction

AllStar requested a permanent injunction barring further counterfeiting and infringement, requiring delivery of infringing products for destruction, and restricting financial institutions and third-party service providers from assisting the defendants or moving related assets or evidence.

The court found that AllStar established the requirements for a permanent injunction: likely irreparable harm, inadequate monetary relief, a balance of hardships favoring AllStar, and consistency with the public interest. But the court found portions of the proposed injunction too broad. It added the word “active” before “concert” to track the rule governing which nonparties may be bound by an injunction. It struck provisions requiring retention of documents unrelated to the counterfeit products. It also struck the provision targeting financial institutions and third-party service providers because the court lacked authority to enjoin uninvolved third parties, could not give AllStar priority over other creditors’ possible rights to defendants’ assets, and could not prohibit services unrelated to the products at issue.

Disposition

Judge Torres granted AllStar’s motion for default judgment. She also granted AllStar’s motion for a permanent injunction with the stated modifications. The court directed that a separate judgment reflecting those modifications be entered.