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This presentation covers the Coach v. Becka decision entered by the U.S. District Court for the Middle District of Georgia in November 2012.

This presentation covers the Coach v. Becka decision entered by the U.S. District Court for the Middle District of Georgia in November 2012.

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  • 1. Coach v. Becka: “Willful Blindness” and Statutory Damages Standards Applicableto Counterfeit Infringing Marks © 2012 Womble Carlyle Sandridge & Rice, LLP by: Michael A. Cicero Atlanta Office Trademark Team Meeting December 11, 2012 1 1
  • 2. DISCLAIMERWomble Carlyle presentations are intended toprovide general information about significantlegal developments and should not beconstrued as legal advice regarding anyspecific facts and circumstances, nor shouldthey be construed as advertisements for legalservices. 2
  • 3. Decision Covered Here:Coach, Inc. and Coach Svcs., Inc. v. Gail D.Becka d/b/a Hair Cottage, No. 5:11-CV-371 (MTT), 2012 U.S. Dist. LEXIS 157311 (M.D. Ga. Nov. 2, 2012) 3 3
  • 4. Examples of Coach Marks at Issue: 4 4
  • 5. Facts in Coach v. BeckaMay 7, 2011 • Coach’s private investigators visit The Hair Cottage in Macon, GA. There, they spotted “approximately [40-50] Coach handbags on display, ranging in price from $275.00 to $449.00, as well as other Coach products, including wallets and shoes,” and “observed alleged counterfeit products from other luxury brands.” • Becka gave PI Norman Johansen a guided tour through her store, telling him “that she could sell her bags for lower prices than other retailers because she had a ‘friend’ who traveled to China and set her up to deal directly with a factory.” Also said that once every 3 months her ‘friend’ traveled to China and returned with new inventory to sell. 5 5
  • 6. Facts in Coach v. Becka – (cont’d)August 2011: The other PI, Genie Johansen, returns. Duringthat visit, she purchased a $150 purse bearing Coach TMs,received from Ms. Becka “a Coach Registration card, CoachStory Book, and Coach Care Instruction card, also bearingcounterfeit [TMs],” and “observed approximately [60-70] Coachhandbags, [25-30] Coach bracelets, and Coach shoes on displayfor sale.” 6 6
  • 7. Facts in Coach v. Becka – (cont’d)• Sept. 13, 2011 • Ms. Johansen returns one more time, serving Ms. Becka with C&D letters from Louis Vuitton and Chanel, and advised Ms. Becka that her Coach items were counterfeit, and that Ms. Johansen was an authorized Coach representative. • Ms. Becka then surrendered all Coach 264 items in her possession to Ms. Johansen. Items included 16 handbags, 12 pairs of shoes, 1 keychain, 3 pieces of jewelry, 70 registration cards, 70 storybooks, and 52 care cards.• Sept. 16, 2011: Coach sues, asserting, inter alia, TM & © infringement and TM counterfeiting. 7 7
  • 8. Coach’s Motion for Summary Judgment• After discovery, Coach filed MSJ on its TM & © infringement and TM counterfeiting. The © claim failed for lack of proof of copying.• Coach asked Court to award it $2.4 million in statutory damages, as well as a permanent injunction and attorneys’ fees.• Ms. Becka failed to respond to the Statement of Material Facts accompanying the MSJ, resulting in a finding that such facts were admitted. This, combined with receipts proving the sales of merchandise bearing Coach’s marks, spurred the court to find no genuine dispute of material facts as to any of the TM infringement elements. 8 8
  • 9. “Counterfeit”• “A counterfeit mark ‘is a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.’ 15 U.S.C. § 1127. Coach has provided sufficient (and uncontested) evidence that the Coach items sold by Becka were, in fact, counterfeits.”• “Generally, the sale or advertising of counterfeit goods causes consumer confusion and precludes the need to undertake a likelihood of confusion factor analysis.” RESULT: MSJ on TM infringement count GRANTED. 9 9
  • 10. Riddle me this . . . When is use of a counterfeit trademark . . . . . . not “trademark counterfeiting”? 10 10
  • 11. Knowledge and “Willful Blindness”• MD Ga: “To prevail on a trademark counterfeiting claim, a plaintiff must show that the defendant violated 15 U.S.C. § 1114(1)(a) by infringing a registered trademark and that the defendant’s use of the mark was intentional and with knowledge that the mark was a counterfeit pursuant to 15 U.S.C. § 1117(b).” (emphasis added).• Willful blindness can satisfy the knowledge requirement. Under that doctrine, “‘knowledge can be imputed to a party who knows of a high probability of illegal conduct and purposefully contrives to avoid learning of it.’” Nike, Inc. v. Variety Wholesalers, Inc., 274 F.Supp.2d 1352, 1369 (S.D. Ga. 2003) (citation omitted). 11 11
  • 12. Knowledge and “Willful Blindness” – (cont’d)• “[W]hether a defendant has been willfully blind will depend on the circumstances and, like intent itself, will generally be a question of fact for the factfinder after trial.” Chanel, Inc., v. Italian Activewear of Fla., Inc., 931 F.2d 1472, 1476 (11th Cir. 1991) (footnote omitted).• “Willful blindness requires more than mere negligence or mistake. . . . [T]he willful blindness standard is a subjective one which asks what the defendant suspected, and what he did with such suspicion.” Nike, 274 F.Supp.2d at 1370. 12 12
  • 13. Court’s Analysis of TM Counterfeiting Count• Evidence is not so compelling as to warrant a finding of “willful blindness” as a matter of law, even though Becka’s knowledge of Chinese origin of her Coach goods “could support an inference of willful blindness.”• “If anything, Becka’s Answer considered as a whole indicates that she was neither aware of a high probability of illegal conduct nor purposefully contrived to avoid learning of it. Becka stated that the website she ordered the goods from ‘looked legitimate’ and that she believed the bags to be real because they had ‘numbers inside’ of them. . . . Becka also stated that the company she ordered the goods from replaced any bags with defects.” MSJ on this count DENIED. 13 13
  • 14. Statutory Damages: 15 U.S.C. § 1117(c)• Under the Lanham Act, a plaintiff successfully establishing that the defendant used a counterfeit trademark may, anytime before final judgment in the trial court, elect to recover statutory damages in lieu of an award of profits and actual damages.• “The statute authorizes an award in the amount of ‘not less than $1,000 or more than $200,000 per counterfeit mark per type of goods ... as the court considers just.’”• “For the willful use of a counterfeit mark, the statute authorizes a maximum award of ‘$2,000,000 per counterfeit mark per type of goods’ sold.” 14 14
  • 15. Coach’s Calculation of Statutory Damages• Eight (8) registered marks were counterfeited [undisputed]. Therefore, Coach is entitled to 8 x $100,000 = $800,000, which should be trebled to yield $2.4 million.• Coach based its $100,000-per-mark figure solely upon a statutory damage award it obtained in other litigation. 15 15
  • 16. Court’s Rejection of Coach’s Trebling Argument• Trebling not permitted because § 1117(b) only authorizes the trebling of actual damages and profits under § 1117(a), not the statutory damages available as an alternative award under § 1117(c).• Additionally, § 1117(c) already takes willful conduct into account by allowing the judge to increase the per-mark statutory damage award up to a maximum of $2,000,000 when the plaintiff proves such conduct. Argument fails as a matter of law. 16 16
  • 17. Court’s Multifactor Approach re Statutory Damages• “Because § 1117(c) provides little guidance on how to determine statutory damages, district courts have broad discretion in setting an amount.”• The court observed three general guideposts regarding statutory damages - they: (1) may exceed actual damages and “serve deterrent as well as compensatory purposes”; but (2) “should not ‘constitute a windfall for prevailing plaintiffs’”; and (3) “are meant to serve as a substitute for actual damages, so the Court will evaluate whether the requested damages ‘bear some relation to the actual damages suffered.’” 17 17
  • 18. Court’s Multifactor Approach re Statutory Damages• “In assessing statutory damages under the Lanham Act, courts often consider the Copyright Act’s analogous provision for statutory damages.”• “Under the Copyright Act, courts look to factors such as: (1) the expenses saved and the profits reaped; (2) the revenues lost by the plaintiff; (3) the value of the copyright; (4) the deterrent effect on others besides the defendant; (5) whether the defendant’s conduct was innocent or willful; (6) whether a defendant has cooperated in providing particular records from which to assess the value of the infringing material produced; and (7) the potential for discouraging the defendant.” 18 18
  • 19. Court’s Multifactor Approach re Statutory Damages• Applying those factors in light of the 3 general guideposts recited supra, the court first observed that Ms. Becka’s gross revenue from sales of the counterfeit Coach merchandise totaled only $12,400.14, and that her profits would have been less than that total.• Contrast this with Court’s view of Coach’s $100K-per-mark figure: “The Court believes the amount of statutory damages requested to be grossly disproportionate to any reasonable estimate of actual damages.” 19 19
  • 20. Court’s Multifactor Approach re Statutory Damages• The court then assessed Ms. Becka’s conduct, commenting on: (1) the finding of the unintentional nature of the infringement; (2) Ms. Becka’s voluntary surrender of the counterfeit merchandise to Ms. Johansen upon learning of its counterfeit nature; and (3) Ms. Becka’s cooperation in responding to discovery requests.• Finally, the court remarked: “Other courts have awarded significantly lower awards to Coach for similar infringing conduct, even when the conduct was willful.” Court awards Coach $2,000 per mark, for total of $16,000. 20 20
  • 21. Permanent Injunction Granted• Court had no trouble awarding Coach a permanent injunction, citing precedent that in trademark cases, a showing of infringement raises the presumption that: (1) monetary relief alone would not be an adequate remedy and (2) the trademark owner would suffer irreparable harm absent an injunction.• CAVEAT: “We reiterate here that there is a looming question as to whether this presumption can co-exist with the Supreme Courts recent holding in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392-93 [ ] (2006) . . . .” Peoples Fed. Sav. Bank v. People’s United Bank, 672 F.3d 1, 9 n.11 (1st Cir. 2012). 21 21
  • 22. Attorneys’ Fees DeniedThe court summarily refused Coach’s request for attorneys’fees, holding that Coach failed to prove willful or deliberateconduct on which to base a finding that the case was“exceptional.” 22 22
  • 23. Take-Away Points1. The mere fact that an accused mark may be “counterfeit” does not, by itself, support a finding of “trademark counterfeiting.” Intentional conduct must also be shown.2. The bar to prove “willful blindness” is a high one. Courts following the MD Ga’s approach will be reluctant to grant a MSJ of trademark counterfeiting absent “smoking gun” evidence that would establish “willful blindness” as a matter of law.3. TM owner should take a multifactor approach in advocating a calculation of statutory damages that at least approximates a reasonable amount of actual damages. Don’t overreach! 23 23
  • 24. THE END 24 24