ZURU Inc. v. Individuals

Background

ZURU filed a renewed request for a temporary restraining order, preliminary injunction, and order restraining the transfer of assets under 15 U.S.C. § 1116, Federal Rule of Civil Procedure 65, and the All Writs Act. On March 9, 2023, the court issued a temporary restraining order (TRO) and restrained financial accounts used by the defendants. The court continued the preliminary-injunction hearing twice to allow time for service and responses. The show-cause hearing occurred on April 5, 2023.

ZURU filed proof of service for all but six Schedule A defendants: Defendants 58, 59, 60, 67, 75, and 81. ZURU used the alternative-service method authorized by the court. At the hearing, ZURU asked to extend the TRO as to those six unserved defendants. The court found good cause and granted that request. Defendant 82 also appeared and testified that the defendant had made no sales and had a low volume of inventory.

Court’s Findings

The court determined that it had personal jurisdiction over the Remaining Defendants because they had been served under the court’s alternative-service order. The court also found that the evidence showed those defendants targeted consumers in the United States, including New York, through interactive online stores where New York residents could purchase products allegedly bearing counterfeit versions of ZURU’s federally registered BUNCH O BALLOONS, BUNCHO, and FILL AND TIE UP TO 100 WATER BALLOONS IN 60 SECONDS! trademarks, collectively called the BoB Marks.

The court applied the preliminary-injunction standard under Rule 65 and found that ZURU had shown a likelihood of success on the merits, a risk of irreparable harm without an injunction, and that the balance of equities favored relief. The court concluded that ZURU had a strong probability of proving at trial that consumers would likely be confused by the defendants’ advertising, promotion, sale, offers for sale, or distribution of goods bearing counterfeits, reproductions, or confusingly similar versions of the BoB Marks. The court also found that the public interest favored protecting ZURU’s trademark interests and protecting consumers from counterfeit goods being passed off as genuine products.

The court further found that ZURU had reason to believe the Remaining Defendants might hide or transfer assets outside the court’s jurisdiction because of the deceptive nature of counterfeiting and the likelihood of violations of federal trademark law.

Order

The court granted the motion and entered a preliminary injunction against Schedule A Defendants 1–20, 22, 24–27, 29–36, 38–45, 48–57, 61–66, 68–80, 83–93, 95–104, 106–124, 126–135, and 137–144. Defendant 82 was excluded from the preliminary injunction. The order restrained the covered defendants, and persons acting with notice of the order, from manufacturing, importing, advertising, promoting, offering to sell, selling, distributing, or transferring products bearing the BoB Marks or confusingly similar marks, unless the products were actually made or distributed by ZURU.

The order also prohibited covered defendants from concealing, destroying, selling, transferring, or disposing of counterfeit products, related evidence, or assets and financial accounts covered by the order. They had to stop using the BoB Marks or confusingly similar marks in specified online-store listings, website code, domain-name extensions, metatags, webpages, advertising links, search-engine databases, and similar online uses. They could not transfer ownership of the identified seller accounts during the case and had to preserve related computer files, including attempting to retrieve deleted files.

After receiving notice, financial institutions, payment processors, banks, escrow services, money transmitters, and marketplace platforms identified in the order had to identify related accounts, restrain and divert covered funds to a court holding account, and provide information including account records, transactions, sales history, and defendants’ identities and contact information. Funds could not be transferred without the court’s authorization, although an affected defendant or account holder could ask the court to modify the asset restraint.

The preliminary injunction was to remain effective until further dates set by the court or agreed to by the parties. The court also continued the temporary restraints for the six unserved defendants. It found that ZURU’s $5,000 bond was sufficient and ordered that the bond remain with the court until final disposition or until the preliminary injunction was dissolved or terminated.