ALLSTAR MARKETING GROUP, LLC v. ALLSTAR_PLACE

Background

Allstar Marketing Group, LLC sued 39 individuals and businesses that allegedly used online marketplace accounts to manufacture, advertise, offer for sale, sell, and ship counterfeit Happy Nappers products to consumers in the United States, including New York. The complaint asserted trademark counterfeiting and infringement, false designation of origin, passing off, and unfair competition under the Lanham Act; copyright infringement; and related state and common-law claims.

The defendants did not appear. The court had previously entered a preliminary injunction against them, and the Clerk later entered certificates of default. Allstar Marketing Group then moved for default judgment, a permanent injunction, individual statutory damages under 15 U.S.C. § 1117(c), and asset-restraining notices. The motion sought default judgment only on the first two causes of action—trademark counterfeiting and infringement under 15 U.S.C. § 1114—while leaving the other claims in place.

Legal standard

Under Federal Rule of Civil Procedure 55, default judgment involves two steps: entry of default after a party fails to defend, followed by a court decision whether the well-pleaded allegations establish liability as a matter of law. A default admits well-pleaded factual allegations, but it does not admit legal conclusions. The court must therefore determine whether the pleaded facts establish a valid claim. A default judgment based on the allegations also does not automatically establish the amount of damages; damages must be supported by evidence.

Court’s analysis

The court held that Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1), protects registered trademarks and generally allows suit by the trademark registrant or certain persons treated as a registrant, such as a legal representative, predecessor, successor, or assignee. An exclusive licensee may sue only if the license effectively assigns sufficient ownership rights in the mark.

Allstar Marketing Group alleged that it received an exclusive license from Jay At Play International Hong Kong Limited, doing business as Jay At Play, but it did not allege that it was an assignee or otherwise plead facts showing that the license transferred the ownership rights required for standing. It also did not attach or describe the licensing agreement sufficiently for the court to determine its nature and scope. Because Allstar Marketing Group acknowledged that it was not the owner or registrant and did not establish that it was a legal representative, predecessor, successor, or assignee, the court concluded that it had not established standing to pursue the first two causes of action.

The court also explained that the statutory provisions concerning injunctions and damages do not create independent claims or provide additional standing.

Disposition

The motion for default judgment was DENIED without prejudice to renewal. The court permitted Allstar Marketing Group either to file an amended complaint alleging facts showing that it was a legal representative, predecessor, successor, or assignee of the relevant marks and works, or to seek default judgment based on the third through fifth causes of action. The court directed Allstar Marketing Group to take one of those steps within 30 days or show cause within 30 days why the complaint should not be dismissed for failure to prosecute. The opinion did not enter default judgment or decide the requested damages and permanent injunction.