Tangle Inc. v. Individuals
Tangle Inc. v. The Individuals, Corporations, Limited Liability Companies, Partnerships, and Unincorporated Associations Identified on Schedule A hereto
- Jesse Furman
- 1:21-cv-07024
- U.S. District Court · Southern District of New York
- 6
In Tangle v. BYLF, Judge Furman denied BYLF’s motion for damages and attorney’s fees after finding it was not wrongfully restrained.
2CA61 BYLF did not receive the damages or attorney’s fees it sought. Tangle’s claims against BYLF had already been voluntarily dismissed without prejudice, and the ruling determined that BYLF was not entitled to additional relief based on the temporary restraining order or preliminary injunction.
What happened
Tangle, Inc. sued BYLF and other defendants, alleging they offered counterfeit Tangle toys for sale online. The court issued temporary and preliminary orders blocking infringement and directing online platforms and a payment company to restrict defendants’ accounts. Tangle later dismissed its claims against BYLF without prejudice, and BYLF sought damages and fees.
The court denied BYLF’s motion. It found that BYLF had offered a counterfeit Tangle product for sale and therefore did not have the right to use Tangle’s trademarks or copyrights or sell the product. The court also rejected BYLF’s argument that the dismissal automatically entitled it to recover money, and it denied attorney’s fees because BYLF was not the prevailing party and the case was not exceptional.
Judge Jesse M. Furman ruled that BYLF was not wrongfully restrained or enjoined and was not entitled to damages or attorney’s fees.
The detailed version
- Tangle Inc. v. Individuals · No. 1:21-cv-07024
- Jesse Furman
- Nov. 14, 2022
Background
Tangle, a toy manufacturer and distributor, sued numerous defendants, including 2CA61 BYLF (BYLF), for alleged trademark and copyright infringement. Tangle alleged that the defendants offered for sale online or sold counterfeit Tangle toys.
When Tangle filed the case, it obtained a temporary restraining order blocking infringement, directing Amazon.com to disable the defendants’ online storefronts, and directing Payoneer, Inc. to attach the defendants’ accounts and freeze their funds. The court required Tangle to post $5,000 as security. The court later entered a preliminary injunction on similar terms. BYLF did not appear at the hearing for the preliminary injunction, but later appeared and moved to dissolve it. Before Tangle responded to that motion, Tangle voluntarily dismissed its claims against BYLF without prejudice.
BYLF then moved for damages and attorney’s fees, arguing that it had been wrongfully restrained or enjoined.
Rule 65(c) Damages
Federal Rule of Civil Procedure 65(c) permits a party affected by an injunction to recover against posted security if it was “wrongfully enjoined or restrained.” The court explained that this generally requires a finding that the restrained party had the right to do what the injunction prohibited. A voluntary dismissal does not automatically establish wrongful restraint; the defendant must still show that the restraint was wrongful.
The court denied BYLF’s request for damages. It found that BYLF was neither registered nor authorized to sell Tangle products. Tangle had submitted evidence that BYLF offered for sale a product using a unique identifier for one of Tangle’s products and described the product as a Tangle toy sold by BYLF. Although BYLF called its conduct a good-faith mistake, the court said that this effectively admitted that BYLF had offered a counterfeit Tangle product for sale.
The court therefore concluded that BYLF did not have the right to use Tangle’s trademarks or copyrights, or to offer counterfeit Tangle products for sale. The court rejected BYLF’s argument that damages were unavailable because there was no evidence that it completed an actual sale. The court said the law also prohibited offering counterfeit products for sale.
The court separately rejected BYLF’s challenge to the restrictions on its online storefront and funds. It stated that courts may freeze funds when a plaintiff seeks an accounting of profits and may restrain an online storefront after receiving proof that it is being used to sell infringing property. The possible effect of those restrictions on BYLF’s business did not establish entitlement to relief.
Attorney’s Fees
BYLF also sought attorney’s fees under 15 U.S.C. § 1117(a), a provision of the federal trademark law. The court explained that fees may be awarded only when the defendant is the prevailing party and the case is exceptional.
The court held that BYLF was not the prevailing party because Tangle dismissed its claims without prejudice. The court also held that BYLF had not shown that Tangle’s claims were frivolous or objectively unreasonable, or that the case involved the type of misconduct required for an exceptional-case fee award.
Disposition
The court held that BYLF was not wrongfully restrained or enjoined and was not entitled to recover damages from the security or elsewhere. Judge Jesse M. Furman denied BYLF’s motion for damages and fees.
Read the full 6-page opinion on CourtListener, the free public archive maintained by the Free Law Project.