Juul Labs, Inc. v. Smoke Depot of Liu Inc.

Background

JUUL Labs, Inc. sued Smoke Depot of Liu Inc. over alleged trademark infringement, false designation of origin, unfair competition, and other claims under federal, New York, and common law. JUUL Labs alleged that one representative purchased counterfeit goods from Smoke Depot and that another later purchased gray-market products—genuine JUUL products authorized for sale outside the United States. JUUL Labs also alleged that it sent a cease-and-desist letter, but Smoke Depot did not contact its counsel or stop the conduct.

Smoke Depot did not answer the complaint by the deadline. The court clerk entered default, meaning that Smoke Depot was treated as having failed to defend the case. Smoke Depot also did not appear at the court’s hearing on JUUL Labs’ request for default judgment.

Default Judgment and Damages

The court granted JUUL Labs’ request for default judgment. JUUL Labs had requested $750,000 in statutory damages under the Lanham Act, calculated as $250,000 for each of three trademarks. The court found that the complaint and supporting materials supported a finding of willful infringement, including because the alleged infringement continued after the cease-and-desist letter and because Smoke Depot defaulted.

The court nevertheless awarded $60,000 in statutory damages, or $20,000 for each infringed mark. It reasoned that the requested amount was excessive in light of JUUL Labs’ inability to establish the scale of Smoke Depot’s operations or its lost profits, and because Smoke Depot was not alleged to be a large store. The court also awarded post-judgment interest at the federal statutory rate.

Permanent Injunction

The court granted JUUL Labs’ request for a permanent injunction. The injunction bars Smoke Depot and covered persons acting with it from continuing the alleged infringement, including marketing, selling, distributing, or dealing in counterfeit or unauthorized gray-market JUUL products; using JUUL Labs’ marks or other intellectual property without permission; falsely designating product origins; engaging in unfair competition; or otherwise harming JUUL Labs’ intellectual-property rights.

The court concluded that JUUL Labs had shown the prerequisites for injunctive relief. It found likely confusion between JUUL Labs’ products and the counterfeit and gray-market products, determined that money damages would not adequately address future harm, found that the balance of hardships favored JUUL Labs because continued sales threatened its reputation, goodwill, and brand, and concluded that an injunction served the public interest because the alleged products did not comply with Food and Drug Administration regulations.

Other Relief and Disposition

The court granted JUUL Labs leave to seek attorney’s fees. It stated that a separate default judgment would issue and directed JUUL Labs to mail a copy of the opinion to Smoke Depot and file proof of service. Judge Nelson S. Roman signed the opinion on September 12, 2022.