Opinion
17 Civ. 6225 (JGK) (GWG)
01-02-2019
ELSEVIER INC., et al., Plaintiffs, v. SIEW YEE CHEW, et al., Defendants.
REPORT & RECOMMENDATION
GABRIEL W. GORENSTEIN, United States Magistrate Judge
Plaintiffs Elsevier Inc. ("Elsevier"), Pearson Education, Inc. ("Pearson"), Cengage Learning Inc. ("Cengage"), and McGraw-Hill Global Education Holdings, LLC ("MHE") brought this action against 16 defendants alleging federal copyright infringement, and trademark infringement and counterfeiting under the Lanham Act. The defendants have defaulted and now plaintiffs seek a judgment for damages and injunctive relief. For the following reasons, plaintiffs should be awarded a judgment of $6,200,000 along with injunctive relief.
These are: Kok Kit Lau; Siew Yee Chew; Lynette K. Chew; Akitrade Global Sdn Bhd; Shein Wei Choo; Yumi Wee Keng Yee; Lew Moy; Lim Sei Haw; Liao Wei Hao; Jiao Leng; Zheng Xiaohong; Lin Zhen Wei; Luo Zhihong; Jeremy Gould; Veronica Lemmons; and Biniam F. Tesfazghi.
See Order to Show Cause for Default Judgment and Permanent Injunction, filed July 24, 2018 (Docket # 55) ("Order to Show Cause"); Memorandum of Law in Support of Default Judgment and a Permanent Injunction, filed July 25, 2018 (Docket # 56) ("Pl. Mem."); Declaration of Kerry M. Mustico, filed July 25, 2018 (Docket # 57) ("July 25 Mustico Decl."); Certificate of Service, filed July 25, 2018 (Docket # 58); Plaintiffs' Proposed Findings of Facts and Conclusions of Law, filed Oct. 1, 2018 (Docket # 61) ("PFF"); Declaration of Kerry M. Mustico, filed Oct. 1, 2018 (Docket # 62) ("Oct. 1 Mustico Decl."); Certificate of Service, filed Oct. 2, 2018 (Docket # 63).
I. BACKGROUND
The plaintiffs, publishers of educational materials, initiated this action on August 17, 2017, against unknown defendants, alleging copyright and trademark infringement based on the defendants' sales of counterfeit copies of plaintiffs' works. See Complaint, filed Aug. 17, 2017 (Docket # 1). At the same time, they obtained an ex parte temporary restraining order, an expedited discovery order, and an order to show cause seeking a preliminary injunction. See Order to Show Cause, filed Aug. 18, 2017 (Docket # 6). The court eventually issued a preliminary injunction in favor of the plaintiffs. See Preliminary Injunction, filed Sept. 12, 2017 (Docket # 21) ("September 12 Order"). Pursuant to the court's ex parte order and the preliminary injunction, the plaintiffs served their complaint and ex parte application, and the court's ex parte Order and preliminary injunction on the defendants through the email addresses associated with defendants' online storefronts. See Certificate of Service, filed Aug. 28, 2017 (Docket # 16); Certificate of Service, filed Sept. 18, 2017 (Docket # 22).
After discovery, plaintiffs were able to identify the named defendants associated with each online storefront. See Declaration of Kerry M. Mustico, filed Feb. 2, 2018 (Docket # 41), ¶¶ 3-8. Plaintiffs amended their complaint on January 29, 2018, see First Amended Complaint, filed Jan. 29, 2018 (Docket # 28) ("FAC"), and served the amended complaint and summons on three of the defendants: Veronica Lemmons, Jeremy Gould, and Biniam F. Tesfazghi. See Docket ## 42, 47, 48. Plaintiffs also moved for authorization of alternate service of process as to the remaining defendants. See Notice of Plaintiffs' Motion for Alternate Service, filed Feb. 2, 2018 (Docket # 39). The court granted the motion, see Elsevier, Inc. v. Siew Yee Chew, 287 F. Supp. 3d 374 (S.D.N.Y. 2018), and the amended complaint and summons were served on the remaining named defendants by email on March 27, 2018, see Declaration of Service, filed March 27, 2018 (Docket # 46).
None of the 16 defendants responded to the complaint. See July 25 Mustico Decl. ¶ 8. Accordingly, the Clerk of Court entered defaults against each of the defendants on July 5, 2018. See Clerk's Certificate of Default, filed July 5, 2018 (Docket # 52). Plaintiffs moved for a default judgment by order to show cause. See Order to Show Cause. The Order to Show Cause, Certificate of Default, and plaintiffs' submissions to the court were served on defendants Lemmons, Gould, and Tesfazghi by email and first-class mail, and on the remaining defendants by email. See Certificate of Service, filed July 25, 2018 (Docket # 58). The Court ordered that plaintiffs file Proposed Findings of Fact and Conclusions of Law concerning all damages and any other monetary relief permitted under the entry of default. See Scheduling Order for Damages Inquest, filed Aug. 15, 2018 (Docket # 60) ("August 15 Order"). None of the defendants has since responded to the complaint or appeared to defend in this action. Plaintiffs now seek a default judgment for injunctive relief and statutory damages for the defendants' copyright and trademark infringement. Pl. Mem. at 27; PFF ¶¶ 73-75, 78.
Because the default order entered in this case establishes the defendants' liability, see Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995), the only remaining issue is whether the plaintiffs have supplied adequate support for the damages they seek, see Kuruwa v. Meyers, 823 F. Supp. 2d 253, 256 (S.D.N.Y. 2011), aff'd, 512 F. App'x 45 (2d Cir. 2013); accord GAKM Res. LLC v. Jaylyn Sales Inc., 2009 WL 2150891, at *2 (S.D.N.Y. July 20, 2009). The Second Circuit has held that a damages inquest may be held on the basis of documentary evidence alone "as long as [the court has] ensured that there was a basis for the damages specified in [the] default judgment." Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989); accord Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 508 (2d Cir. 1991). The August 15 Order notified the parties that the Court would conduct the inquest into damages based upon the written submissions of the parties unless a party sought an evidentiary hearing. See August 15 Order, ¶ 3. No party has requested an evidentiary hearing. Moreover, because the plaintiffs' submissions provide a basis for an award of damages, no hearing is required.
Following are the Court's findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52(a).
II. FACTS RELATED TO LIABILITY AND DAMAGES
In light of the defendants' default, the plaintiffs' properly pleaded allegations in the complaint, except those related to damages, are accepted as true. See, e.g., City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) ("It is an 'ancient common law axiom' that a defendant who defaults thereby admits all 'well-pleaded' factual allegations contained in the complaint.") (quoting Vt. Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)); Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) ("In light of [defendant's] default, a court is required to accept all . . . factual allegations as true and draw all reasonable inferences in [plaintiff's] favor.") (citation omitted). Thus, the Court's findings of fact are based on the allegations in the plaintiffs' amended complaint regarding liability and the admissible evidence contained in its submissions regarding damages.
As for damages, plaintiffs bear the burden of establishing their entitlement to the amount sought. Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); accord Trs. of Local 813 Ins. Tr. Fund v. Rogan Bros. Sanitation Inc., 2018 WL 1587058, at *5 (S.D.N.Y. Mar. 28, 2018). In the case of a default where the defendant has never appeared, "a court may base its determination of damages solely on the plaintiff's submissions." Trs. of Local 813 Ins. Tr. Fund, 2018 WL 1587058, at *5 (citing Fustok, 873 F.2d at 40). While a court must "take the necessary steps to establish damages with reasonable certainty," Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997), a court need not hold a hearing "as long as it ensure[s] that there [is] a basis for the damages specified in a default judgment," Fustok, 873 F.2d at 40. Again, no party has requested a hearing on damages and the record provides a basis for calculating an award of damages.
A. Facts Related to Liability
Plaintiffs are four of the largest purveyors of academic products and services in the academic marketplace, serving "secondary, post-secondary, and graduate-level students, teachers, and learning institutions," and providing them with "quality content, assessment tools, and educational services in all available media." FAC ¶ 31. Plaintiffs' products, which include physical textbooks, id. ¶ 33, are sold globally, often through online distributors, many of whom sell products on eBay, id. ¶ 31.
The plaintiffs sell their textbooks through various wholesale and retail channels, including on websites like eBay. Id. ¶ 4. Plaintiffs are also the owners of various copyrights issued by the United States Copyright Office, which cover many of plaintiffs' textbooks, FAC ¶ 37; see Table of Copyrights Infringed, annexed as Exhibit A to FAC ("Table of Copyrights Infringed"), and plaintiffs' textbooks bear trademarks, which are protected under the Lanham Act, FAC ¶ 38; see Table of Trademarks Infringed, annexed as Exhibit B to FAC ("Table of Trademarks Infringed"). Plaintiffs "publish their works under many imprints, or brands, that are well known and highly respected." Id. ¶ 32. Plaintiffs are heavily invested in publishing textbooks, and they therefore each year "incur substantial costs for author royalties and other costs of content creation or licensing, copyediting and proofreading, typesetting, layout, printing, binding, distribution, promotion, and for support of their editorial offices." Id. ¶ 34.
The defendants are individuals or corporate entities who, through online storefronts on eBay.com ("eBay"), sell and distribute counterfeit copies of plaintiffs' works throughout the United States, including New York. FAC ¶¶ 3, 53. All but three of the defendants — defendants Gould, Lemmons, and Tesfazghi — operate their storefronts from China or Malaysia. See id. ¶¶ 14-26. The other defendants were last known to reside in the United States. See id. ¶¶ 27-29. In operating their storefronts, the defendants shipped counterfeit textbooks to purchasers in the United States, thus infringing on plaintiffs' copyrights and trademarks. See ¶¶ 39, 45-46.
Plaintiffs, through discovery, have identified some of the counterfeit books the defendants have distributed. See FAC ¶ 47. Plaintiffs have not identified all online storefronts from which they received the counterfeit books. Id. Nor have they identified all textbooks that are being sold in violation of plaintiffs' copyrights and trademarks. Id. Rather, the plaintiffs have "limited this suit to the Storefronts from which Plaintiffs" have made "test purchases . . . , which confirm that Defendants distribute counterfeit copies of Plaintiffs' Books bearing Plaintiffs' Marks." Id. Through pre-litigation purchases, investigation, and discovery, plaintiffs were able to identify the storefronts through which the defendants sold and distributed the protected works. Oct. 1 Mustico Decl. ¶¶ 3-5; see Declaration of Dan Seymour, filed Aug. 24, 2017 (Docket # 10) ("Seymour Decl."), ¶¶ 14-18 (describing the process plaintiffs engaged in to make the test purchases). The defendants committed the following acts:
(1) Defendant Biniam F. Tesfazghi sold counterfeit copies of at least three of plaintiffs' works through an online storefront on eBay called "adonaisavesorg." FAC ¶ 46(a); see entries 8, 11-12 in Table of Copyrights Infringed.
(2) Defendants Liao Wei Hao and Jiao Leng sold counterfeit copies of at least seven of plaintiffs' works through an online storefront on eBay called "bb886500." FAC ¶ 46(c); see entries 3, 7, 9, 15, 17, 19, 28 in Table of Copyrights Infringed.
(3) Defendant Akitrade Global Sdn Bhd ("Akitrade") is operated by defendants Kok Kit Lau, Siew Yee Chew, and Lynette K. Chew, FAC ¶ 17, and also does business under the name Akitrade Global Enterprise, id. Kok Kit Lau, Siew Yee Chew, and Lynette K. Chew all "do[] business under multiple aliases and/or business names, including TYY Net, TYY Networks, and Akitrade Global." Id. ¶¶ 14-16. Kok Kit Lau does business under an additional alias or business name of "Justin Lau." Id. ¶ 14. These four defendants sold counterfeit copies of at least four of plaintiffs' works through three online storefronts on eBay called "bookbuzzi," "modelistajp," and "mystarbook." Id. ¶ 46(d), (k), (l); see entries 5, 33, 34, 35 in Table of Copyrights Infringed.
Plaintiffs state that they purchased counterfeit copies of "five" different works from the online storefronts of these four defendants. PFF ¶ 28. However, the Table of Copyrights Infringed shows infringement of four distinct works.
(4) Defendant Lim Sei Haw uses multiple aliases including "Lim Sei Riang" and sold counterfeit copies of at least one of plaintiffs' works through an online storefront on eBay called "bukhstar." FAC ¶¶ 21, 46(f); see entry 34 in Table of Copyrights Infringed.
(5) Defendant Lew Moy, who also uses multiple aliases or business names including Moy Moy, Choo Hon Leng, Wei Lian, Choo Wei Lian, Ecoomerce Trading, Pro Trading, Promaxdeal, and ProDeal Trading, FAC ¶ 20, sold counterfeit copies of at least four of plaintiffs' works through an online storefront on eBay called "bookseller2221," id. ¶ 46(e); see entries 10, 24, 31, 35 in Table of Copyrights Infringed.
(6) Defendant Luo Zhihong sold counterfeit copies of at least three of plaintiffs' works through an online storefront on eBay called "cs4885." FAC ¶ 46(g); see entries 23, 25, 32 in Table of Copyrights Infringed.
(7) Defendants Zheng Xiaohong and Lin Zhen Wei sold counterfeit copies of at least three of plaintiffs' works through an online storefront on eBay called "gfro8866." FAC ¶ 46(h); see entries 6, 20, 29 in Table of Copyrights Infringed.
(8) Defendant Jeremy Gould sold counterfeit copies of at least three of plaintiffs' works through an online storefront on eBay called "greatwhite430." FAC ¶ 46(i); see entries 13, 16, 29 in Table of Copyrights Infringed.
(9) Defendant Veronica Lemmons, who uses the alias "Mark Bull," FAC ¶ 28, sold counterfeit copies of at least eight of plaintiffs' works through an online storefront on eBay called "marbul-4," id. ¶ 46(j); see entries 1-2, 4, 7, 9, 14, 17, 26 in Table of Copyrights Infringed.
(10) Defendant Shein Wei Choo is associated with multiple addresses in Malaysia and uses multiple aliases or business names, including "May Steven Choo, Uniasia Global Trading, and CSW Trading." FAC ¶ 18. Defendant Yumi Wee Keng Yee is also associated with multiple addresses in Malaysia and also uses multiple aliases or business names, including "Chris Yumi, Keng Yee Wee, Yumi Chris, Chris Chris, Uniasia Global Trading, and CSW Trading." Id. ¶ 19. These defendants sold counterfeit copies of at least five of plaintiffs' works through an online storefront on eBay called "saveout." Id. ¶ 46(n); see entries 18, 21, 27, 30, 33 in Table of Copyrights Infringed.
Plaintiffs state that they purchased counterfeit copies of "four" different works from the storefronts operated by these two defendants. PFF ¶ 67. However, the Table of Copyrights Infringed shows infringement of five distinct works.
"[M]any of the Defendants appear to be working collectively" because "many of the Counterfeit Books exhibit the same counterfeit traits and inferior qualities, and several of the Online Storefronts offer similar inventories." FAC ¶ 49. For example, the "Internet Protocol ('IP') addresses used to access Akitrade's PayPal accounts are identical to IP addresses used to access other PayPal accounts registered to Defendants Lim Sei Haw and Siew Yee Chew, as well as a Payoneer account registered to Lim Sei Riang (one of Lim Sei Haw's aliases)." Id. Several of the defendants have used fictitious names or addresses on eBay "in order to conceal their identities," id. ¶ 50, and have changed their names at various points, presumably in order to avoid detection, see id. ¶¶ 50-51 (citing specific examples).
Defendants knew or should have known that they were selling and distributing counterfeit books but ignored that fact in order to profit financially. See id. ¶¶ 56-57.
B. Facts Related to Damages
(1) Tesfazghi, through the storefront adonaisavesorg sold four counterfeit copies of three different works. See Table of Test Purchase Information (annexed to Seymour Decl. as Exhibit 2) ("Test Purchase Table"), at 1.
(2) Hao and Leng together sold 10 counterfeit copies of seven different works. Test Purchase Table at 1. Hao and Leng also took steps to hide their identities by changing the name of their storefront from bb886500 to loveyou2017 to avoid detection. Oct. 1 Mustico Decl. ¶ 8.
(3) Acting together, Akitrade, S. Chew, L. Chew, and Lau sold 11 counterfeit copies of four different works. Test Purchase Table at 1-2. These defendants often changed their names and aliases to avoid detection, "no less than three times each." Oct. 1 Mustico Decl. ¶ 11. "The most recent changes—from modelistajp to 'antminer99,' from mystarbook to 'blackmoonsball,' and from bookbuzzi to 'bussiebd08'—occurred on August 25, 2017, the same day Defendants were served with notice of this lawsuit." Id.; see id. ¶ 12. With this information, plaintiffs have been able to discover that these four defendants sell counterfeit textbooks through storefronts and online marketplaces other than those named in the amended complaint. See id. ¶ 13. Indeed, the plaintiffs identified, in addition to the addresses in Malaysia, a postal box and other addresses in the United Kingdom linked to these defendants. Id. ¶ 12. Plaintiffs also purchased additional counterfeits from the "online storefronts 'route99' on Abebooks.com and 'Edu2u' on Amazon.com," which were both linked to these four defendants as identified by the return address labels on the shipments. Id. ¶ 13. These four defendants also appear to be working with other named defendants inasmuch as they use shipping networks and IP addresses linked to other defendants. Id. ¶ 14.
These four defendants were defendants in a similar case in which they defaulted. See Cengage Learning, Inc. v. Globonline SDN, 2018 WL 1989574 (S.D.N.Y. Apr. 25, 2018).
(4) Haw, through the storefront bukhstar, has sold at least one counterfeit copy of one of plaintiffs' works. See Test Purchase Table at 1. Haw also has changed the name of his storefront on eBay. Oct. 1 Mustico Decl. ¶ 19. Lim Sei Riang, which appears to be one of Haw's aliases, is a defendant in another copyright/trademark lawsuit. Id. ¶¶ 19-20.
(5) Moy, through the storefront bookseller2221, sold five counterfeit copies of four different works. See Test Purchase Table at 1. Like other defendants, Moy has changed the name of his online storefront at various times, has several aliases, and has also been involved in similar litigations from 2014 and 2017. See Oct. 1 Mustico Decl. ¶¶ 23-24.
(6) Zhihong, through the storefront cs4885, sold three counterfeit copies of three different works. See Test Purchase Table at 1. Zhihong has taken measures to conceal his or her identity and has changed the name of the online storefront at various times and used several aliases. See Oct. 1 Mustico Decl. ¶¶ 28-31.
(7) Xiaohong and Wei together sold five counterfeit copies of three different works through the storefront gfro8866. Test Purchase Table at 2. These defendants also took steps to hide their identities. Oct. 1 Mustico Decl. ¶ 32.
(8) Gould, through the storefront greatwhite430, sold five counterfeit copies of four different works. Test Purchase Table at 2.
(9) Lemmons, through the storefront marbul-4, sold nine counterfeit copies of eight different works, Test Purchase Table at 2, and took steps to conceal her identify by using a fictitious name, Oct. 1 Mustico Decl. ¶ 37.
(10) Choo and Yee together sold five counterfeit copies of five different works through the storefront saveout. Test Purchase Table at 3. These defendants also took steps to hide their identities. Oct. 1 Mustico Decl. ¶¶ 40-41.
In light of the defendants' infringements on plaintiffs' legitimate copyrights and trademarks, plaintiffs seek statutory damages for copyright and trademark infringement under the Copyright Act, 17 U.S.C. § 504(c), and the Lanham Act, 15 U.S.C. § 1117(c). See Pl. Mem. at 15-25. Plaintiffs seek maximum statutory damages for willful infringement — that is, $150,000 per copyright infringed or $2,000,000 per trademark infringed, for all defendants with the exception of Biniam F. Tesfazghi and Jeremy Gould, for whom they seek damages of $30,000 per copyright infringed or $200,000 per trademark infringed. See PFF ¶ 75; Oct. 1 Mustico Decl. ¶¶ 45-49. Additionally, plaintiffs seek damages only "once per copyright (or textbook title) and per trademark for each Defendant or Defendant group." Pl. Mem. at 20-21; Oct. 1 Mustico Decl. ¶ 47. In other words, plaintiffs do not seek both copyright and trademark damages for the same act of infringement (i.e. the same textbook). PFF ¶ 76; see generally Oct. 1 Mustico Decl. ¶ 49 (plaintiffs' chart of type and amount of damages claimed per infringement).
III. DISCUSSION
A. Damages Under the Copyright Act
Under the Copyright Act, an infringer is liable for (1) the copyright owner's actual damages and any additional profits of the infringer or (2) statutory damages. 17 U.S.C. § 504(a); accord Brown v. Party Poppers, Inc., 2001 WL 1380536, at *4 (S.D.N.Y. July 9, 2001). Section 504(c) of the Copyright Act permits a court to award statutory damages "with respect to any one work . . . in a sum of not less than $750 or more than $30,000 as the court considers just." Id. § 504(c)(1). If the court finds willful infringement, "the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000." Id. § 504(c)(2). Within these statutory limits, the court has broad discretion in determining the appropriate statutory damages award. See Fitzgerald Publ'g Co., Inc. v. Baylor Publ'g Co., Inc., 807 F.2d 1110, 1116 (2d Cir. 1986); accord Noble v. Crazetees.com, 2015 WL 5697780, at *6 (S.D.N.Y. Sept. 28, 2015) (citations omitted).
No proof of actual damages or, in fact, any damages, is necessary for the award of statutory damages. All-Star Mktg. Grp., LLC v. Media Brands Co., 775 F. Supp. 2d 613, 626 (S.D.N.Y. 2011) (quoting Nat'l Football League v. PrimeTime 24 Joint Venture, 131 F. Supp. 2d 458, 472 (S.D.N.Y. 2001)). Where a defendant has defaulted, a complaint's allegations of willfulness may be taken as true. See Rovio Entm't, Ltd. v. Allstar Vending, Inc., 97 F. Supp. 3d 536, 546 (S.D.N.Y. 2015) (citing All-Star Mktg., 775 F. Supp. 2d at 621-22).
In calculating the appropriate statutory damages award, the Second Circuit has held that a court should consider the following factors:
(1) the infringer's state of mind; (2) the expenses saved, and profits earned, by the infringer; (3) the revenue lost by the copyright holder; (4) the deterrent effect on the infringer and third parties; (5) the infringer's cooperation in providing
evidence concerning the value of the infringing material; and (6) the conduct and attitude of the parties.Bryant v. Media Right Prods., Inc., 603 F.3d 135, 143-44 (2d Cir. 2010) (citation omitted); accord Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120, 127 (2d Cir. 2014); Hollander Glass Tex., Inc. v. Rosen-Paramount Glass Co., 291 F. Supp. 3d 554, 559 (S.D.N.Y. 2018); Broad. Music, Inc. v. Prana Hosp., Inc., 158 F. Supp. 3d 184, 197 (S.D.N.Y. 2016). "[W]illfullness in the context of statutory damages for copyright infringement means that the infringer either had actual knowledge that it was infringing the plaintiffs' copyrights or else acted in reckless disregard of the high probability that it was infringing plaintiffs' copyrights." Nat'l Football League, 131 F. Supp. 2d at 475 (internal quotation marks and citation omitted; alteration in original) (citing cases).
Courts have also used a substantially similar set of factors as set forth in Fitzgerald Pub. Co. v. Baylor Pub. Co., 807 F.2d 1110 (2d Cir. 1986). These are:
(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."McGraw-Hill Glob. Educ. Holdings, LLC v. Khan, 323 F. Supp. 3d 488, 498 n.3 (S.D.N.Y. 2018) (citing Fitzgerald, 807 F.2d at 1117); see, e.g., Sream, Inc. v. W. Vill. Grocery Inc., 2018 WL 4735706, at *3 (S.D.N.Y. Oct. 1, 2018) (same); BWP Media USA, Inc. v. Gossip Cop Media, Inc., 196 F. Supp. 3d 395, 410 (S.D.N.Y. 2016) (same).
B. Damages Under the Lanham Act
With respect to trademark infringement under the Lanham Act, trademark owners similarly may elect to receive statutory damages instead of actual damages. 15 U.S.C. § 1117(c). The Lanham Act provides:
In a case involving the use of a counterfeit mark . . . in connection with the sale, offering for sale, or distribution of goods or services, the plaintiff may elect, at any time before final judgment is rendered by the trial court, to recover, instead of actual damages and profits under subsection (a), an award of statutory damages for any such use in connection with the sale, or distribution of goods or services in the amount of— (1) not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just; or (2) if the court finds that the use of the counterfeit mark was willful, not more than $2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just.15 U.S.C. § 1117(c). Thus, the statute permits an award of between $1,000 and $200,000 per counterfeit mark. An award of up to $2,000,000 is be permitted if the violation is willful, and "[t]rademark infringement is deemed willful by virtue of a defendant's default." Rovio Entm't, 97 F. Supp. 3d at 546 (citing Keystone Global LLC v. Auto Essentials, Inc., 2015 WL 224359, at *6 (S.D.N.Y. Jan. 16, 2015) (collecting cases)).
Section 1117(c) was enacted to address the difficulty of calculating actual damages caused by counterfeiters. See, e.g., Pitbull Prods., Inc. v. Universal Netmedia, Inc., 2007 WL 3287368, at *3 (S.D.N.Y. Nov. 7, 2007); Rodgers v. Anderson, 2005 WL 950021, at *2 (S.D.N.Y. Apr. 26, 2005) ("The rationale for this section is the practical inability to determine profits or sales made by counterfeiters.") (citations omitted); Gucci Am., Inc. v. Duty Free Apparel, Ltd., 315 F. Supp. 2d 511, 520 (S.D.N.Y. 2004) ("'Congress added the statutory damages provision of the Lanham Act in 1995 because 'counterfeiters' records are frequently nonexistent, inadequate, or deceptively kept . . . , making proving actual damages in these cases extremely difficult if not impossible.'") (quoting S. Rep. No. 104-177, at 10 (1995)), amended in part, 328 F. Supp. 2d 439 (2004); Tiffany (NJ) Inc. v. Luban, 282 F. Supp. 2d 123, 124 (S.D.N.Y. 2003) (same).
Section 1117(c), however, "does not provide guidelines for courts to use in determining an appropriate award . . . as it is only limited by what the court considers just." Gucci Am., 315 F. Supp. 2d at 520 (internal quotation marks and citation omitted). Many courts have looked to the analogous provision in the Copyright Act for guidance, 17 U.S.C. § 504(c), and have considered the following factors in setting statutory damage awards under the Lanham Act: (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." Philip Morris USA Inc. v. A & V Minimarket, Inc., 592 F. Supp. 2d 669, 673 (S.D.N.Y. 2009) (quotation marks and citations omitted); accord Sream, Inc. v. W. Vill. Grocery Inc., 2018 WL 4735706, at *3 (S.D.N.Y. Oct. 1, 2018); Cengage Learning, Inc. v. Bhargava, 2017 WL 9802833, at *4 (S.D.N.Y. Aug. 22, 2017); Deckers Outdoor Corp. v. TKM Forest Hills, LLC, 2014 WL 4536715, at *7-8 (E.D.N.Y. Sept. 11, 2014) ("[c]ourts guided by 17 U.S.C, § 504(a) in awarding damages pursuant to Section 1117(c) have used the . . . factors[] based on Fitzgerald Publishing Company, Inc. v. Baylor Publishing Company, Inc.[] to determine the amount of statutory damages"). We agree that those factors should be considered.
C. Analysis of Factors
We now discuss each factor in relation to the defendants' conduct in order to reach an appropriate statutory damages award. Because the sets of factors that courts consider in calculating statutory damages for copyright and trademark infringement are largely the same, as are the underlying facts of each infringement in this case, we analyze each of the six factors articulated by the Second Circuit for copyright cases, see, e.g., Bryant 603 F.3d at 144; Psihoyos, 748 F.3d at 127, in order to reach an appropriate statutory damages award.
With respect to the first factor, "by virtue of their default," the defendants "are deemed to be willful infringers." Lane Crawford LLC v. Kelex Trading (CA) Inc., 2013 WL 6481354, at *3 (S.D.N.Y. Dec. 3, 2013) (citing cases); accord Rovio Entm't, 97 F. Supp. 3d at 546 ("Copyright infringement is deemed willful by virtue of a defendant's default.") (citing All-Star Mktg, 775 F. Supp. 2d at 621-22 (collecting cases)); Rovio Entm't, 97 F. Supp. 3d at 546 ("Trademark infringement is deemed willful by virtue of a defendant's default.") (citing Keystone Global, 2015 WL 224359, at *6 (collecting cases)). There is no question that the infringements in this case were willful. Indeed, for certain defendants, their wilfulness is expressed by the fact that they have been involved in other cases in which the same infringing conduct was at issue, see Oct. 1 Mustico Decl. ¶ 16 (defendants S. Chew, L. Chew, Lau, and Akitrade); id. ¶ 23 (Moy), and have attempted to change or conceal their identities to avoid detection, see id. ¶¶ 8, 11-12, 16, 19, 23-24, 28, 40; see also Cengage Learning, Inc. v. Shi, 2015 WL 5167775, at *5 (S.D.N.Y. Sept. 3, 2015) (willfulness found in part because "this [was] the second suit that the Plaintiffs . . . [had] brought against [defendant] for the same conduct" and because defendant "took extreme measures to conceal his identity as the operator of the Websites from the Plaintiffs"). A greater award is appropriate for such defendants.
In addressing factors two and three, we cannot determine from the record the full extent of the expenses saved or the profits earned by the defendants as well as the revenue lost by the plaintiffs. Plaintiffs bought 58 counterfeit textbooks from defendants ranging in price from $19.99 to $150, prices that are far less than the list price for legitimate copies of textbooks. See Test Purchases Table; Pl. Mem. at 22. However, "defendants have declined to participate in this lawsuit, and have thus deprived plaintiffs of the opportunity to make a meaningful assessment of the extent of their business, including volume of sales and profits earned." Polo Ralph Lauren, L.P. v. 3M Trading Co. Inc., 1999 WL 33740332, at *6 (S.D.N.Y. Apr. 19, 1999). For instance, although the plaintiffs made test purchases from the defendants' online storefronts, see generally Test Purchase Table, it appears that "[m]any of the Defendants are recidivist infringers and have provided eBay with fictitious names and/or addresses in order to conceal their identities." July 25 Mustico Decl. ¶ 13. For that reason, "[p]laintiffs were not able to conduct merits discovery, which would have identified other individuals involved and/or aliases used in the counterfeiting scheme." Id. Indeed, plaintiffs purchased counterfeit copies of their textbooks from additional storefronts on Abebooks.com and Amazon.com from accounts connected to business names associated with multiple defendants. See Oct. 1 Mustico Decl. ¶¶ 13, 20, 24; July 25 Mustico Decl. ¶¶ 11, 14.
Based on the test purchases conducted by plaintiffs, and the attempts by certain defendants to repeatedly conceal their identities, we agree that defendants have likely sold more counterfeit copies of plaintiffs' textbooks than is currently known. In any case, "it is clear that the Defendants profited substantially from their infringing conduct, while the Plaintiffs suffered losses" in part "because Defendants bore none of the costs of creating any of the copyrighted works, yet profited from their unauthorized sale." Cengage Learning v. Shi, 2015 WL 5167775, at *5; see also id. ("despite investing heavily in the creation of the copyrighted works, the Plaintiffs have seen no profits from the Defendants' sales").
The fourth factor regarding the deterrent effect on the infringer and third parties also weighs in the plaintiffs' favor. "[C]ourts have repeatedly emphasized that defendants must not be able to sneer in the face of copyright owners and copyright laws." Tu v. TAD Sys. Tech. Inc., 2009 WL 2905780, at *6 (E.D.N.Y. Sept. 10, 2009) (quoting New York Chinese TV Programs, Inc. v. U.E. Enterprises, Inc., 1991 WL 113283, at *4 (S.D.N.Y. June 14, 1991) (internal quotation marks omitted)). In the case of "coordinated . . . and extensive copyright infringement," a substantial statutory damage award can "act as a specific deterrent to the [defendants] and a general deterrent to other like-minded infringers." Cengage Learning v. Bhargava, 2017 WL 9802833, at *5; see also Coach, Inc. v. Allen, 2012 WL 2952890, at *11 (S.D.N.Y. July 19, 2012) (brackets omitted) (quoting S. Rep. No. 117 (104th Cong. 1995)) ("'The purpose of § 1117 of the Lanham Act is to take the incentive out of counterfeiting and strengthen the civil remedies against counterfeiters.'"); Burberry Ltd. v. Euro Moda, Inc., 2009 WL 4432678, at *4 (S.D.N.Y. Dec. 4, 2009) (quoting Malletier v. Carducci Leather Fashions, Inc., 648 F. Supp. 2d 501, 504 (S.D.N.Y. 2009) ("where, as here, a defendant is shown to have acted willfully, a statutory award should incorporate not only a compensatory, but also a punitive component to discourage further wrongdoing by the defendants and others"). Here, "[t]he need to deter other counterfeiters is particularly compelling given the apparent extent of counterfeit activity," including the claims brought against the defendants in this suit. Bumble & Bumble, LLC v. Pro's Choice Beauty Care, Inc., 2016 WL 658310, at *5 (S.D.N.Y. Feb. 17, 2016). Indeed, in certain instances, plaintiffs have determined that some of the infringers have made substantial sums — well over a million dollars — from their storefronts. See Oct. 1 Mustico Decl. ¶¶ 15, 25, 42; PFF ¶¶ 31, 44, 70. This suggests that for those defendants a high award is needed to achieve deterrence.
The last two factors weigh in plaintiffs' favor as well given that "defendants' default and subsequence [sic] silence shows a lack of cooperation in determining damages." Hollander Glass, 291 F. Supp. 3d at 559. In addition to making any damages calculation more difficult, the defendants' lack of cooperation in this matter has "prevented Plaintiffs from discovering [other] valuable information . . . such as the original source of the counterfeits (if not Defendants)." Pl. Mem. at 24.
As already stated, the above factors, set forth in Bryant, are substantially similar to the set of factors articulated in Fitzgerald Pub. Co. We note that factor three from Fitzgerald, "the value of the copyright," (not listed as a factor in Bryant) appears to weigh in the plaintiffs' favor, although plaintiffs do not supply this information to the Court. Nonetheless, we can "'infer from the well-known reputations'" for high-quality education content of the plaintiffs "'that [their copyrights and trademarks] are indeed valuable.'" Lane Crawford, 2013 WL 6481354, at *4 (quoting Polo Ralph Lauren, 1999 WL 33740332, at *6) (additional citation omitted).
D. Application of Factors
As previously noted, the plaintiffs do not seek relief under the Lanham Act and the Copyright Act as to any one work — a practice disapproved of by many courts. See, e.g., Cengage Learning v. Globonline, 2018 WL 1989574, at *3 (citing cases). Instead, they seek one Lanham Act damage award as to each plaintiff whose textbook was sold. For any additional textbooks beyond the first textbook, they seek a copyright award for that plaintiff. See PFF ¶ 78; Oct. 1 Mustico Decl. ¶¶ 47-48. We accept that the pursuit of such awards is appropriate given that there will not be a double recovery for any one infringed work.
We begin by treating separately defendants Biniam F. Tesfazghi and Jeremy Gould. The plaintiffs seek damages from defendants Tesfazghi and Gould of $30,000 each for copyright infringements and $200,000 each for trademark infringements. See Oct. 1 Mustico Decl. at 14, 17; PFF ¶ 75 & at 26, 29. As to these two defendants, plaintiffs do not contend that there is any evidence that they worked with other defendants, operated multiple storefronts, used aliases, attempted to hide their identities, or ignored prior court proceedings. See Oct. 1 Mustico Decl. ¶¶ 6-7, 35-36; PFF ¶¶ 17-20, 57-60. Thus, for these defendants, we do not find there is any justification for damages anywhere near the statutory maximums. See Hollander Glass, 291 F. Supp. 3d at 560 (finding that, as to willful infringement, "[c]ases where high statutory damages are awarded typically involve defendants who profit significantly despite repeated notices that they are infringing on the plaintiff's copyright"). In cases with facts more analogous to the conduct of these defendants, courts have awarded statutory damages of between $15,000 and $30,000. See Sream, 2018 WL 4735706, at *5 ("The Court finds that an award of $20,000 against Pinaz and $25,000 against Delancey would serve as a specific and general deterrent to others, while ensuring . . . Sream does not reap a 'windfall' against a small-scale infringer."); Hollander Glass, 291 F. Supp. 3d at 560 (awarding $25,000 in copyright damages for willful infringement involving the use of copyrighted images online); All-Star Marketing, 775 F. Supp. 2d at 624-27 (where there was no information about defendants' earnings or plaintiff's losses, awarding statutory damages of $25,000 to $50,000 per trademark, and $25,000 in copyright damages for use of website images); Burch v. Nyarko, 2007 WL 2191615, at *3 (S.D.N.Y. July 31, 2007) (awarding $15,000 per photograph published on infringer's website); Getaped.com , Inc. v. Cangemi, 188 F. Supp. 2d 398, 403 (S.D.N.Y. 2002) (awarding $30,000 for willful infringement of copyrighted website code). In light of these cases and our own assessment of the need for deterrence, we believe that an award of $25,000 is appropriate for each infringement, whether trademark or copyright, for these two defendants.
The other defendants stand on far different footing. For each of them, there is evidence of usage of multiple identities, working with other infringing defendants, efforts to hide their identities, disregard of prior court actions, and/or evidence of substantial profits earned from other websites. See, e.g., Oct. 1 Mustico Decl. ¶¶ 8, 11-14, 19, 20, 23-24, 28-31, 32, 37, 40-41; PFF ¶¶ 23-25, 27-32, 38, 42-45, 49, 54, 63, 69-70. As to these defendants, plaintiffs seek maximum statutory damages of $150,000 per copyright infringement and $2,000,000 per trademark infringement. See Oct. 1 Mustico Decl. at 14-19; Pl. Mem. at 21. Given the substantial evidence of defendants' conduct, we believe an award greater than that awarded for Tefghazi and Gould is appropriate. Based on our review of case law, however, we find that a substantial sum far short of the statutory maximum is appropriate for a copyright infringement as to a single textbook. See, e.g., Rovio Entm't, 97 F. Supp. 3d at 546 ($100,000 per infringement awarded for copyright violations relating to a popular video game); Dweck v. Amadi, 2011 WL 3809907, at *5 (S.D.N.Y. July 26, 2011) ($100,000 for willful copyright infringement of plaintiff's popular photographic image). Based on our review of the case law, and our own view as to the need for deterrence and the other Bryant factors, we conclude that $100,000 per infringement for copyright is a fair figure.
With respect to trademark damages, we find the requested $2,000,000 figure to be excessive. First, this is a case where plaintiffs have provided no evidence regarding the value of their trademark. Nor have they provided any specific evidence regarding the trademark harm that results from the sale of counterfeit textbooks. As one case notes,
[m]ost judges have issued awards far below the statutory maximum ($2 million per infringed mark), on a per mark basis, where the defendant willfully infringes on the plaintiff's mark and fails to stop such behavior after being put on notice by the plaintiff or the court, but where there is no concrete information about the defendant's actual sales figures and profits and the estimate of plaintiff's lost revenue.All-Star Mktg., 775 F. Supp. 2d at 624 (citing cases). While we are aware of both lower and higher awards, we note that courts have granted awards per trademark infringed ranging from $100,000 to $250,000 for willful defendants. See Off-White LLC v. ^_^ Warm House ^_^ Store, 2018 WL 4927905, at *5 (S.D.N.Y. Oct. 11, 2018) (collecting cases). Given the duplicitous conduct on the part of this set of defendants, we find that an award of $250,000 per trademark is appropriate.
We accept as accurate the tables provided for each defendant or set of defendants as set forth in defendants' submissions. See PFF ¶ 78. Accordingly, we find the following awards to be appropriate: Brian F. Tesfazghi: $75,000 Jeremy Gould: $75,000 Liao Wei Hao and Jiao Leng: $1,150,000 Siew Yee Chew, Lynette K. Chew, Kok Kit Lau, and Akitrade: $700,000 Lim Sei Haw: $250,000 Lew Moy: $700,000 Luo Zhihong: $450,000 Zheng Xiaohong and Lin Zhen Wei: $750,000 Veronica Lemmons: $1,250,000 Shein Wei Choo and Yumi Wee Keng Yee: $ 800,000
The sum of all damages is $6,200,000.
D. Injunctive Relief
In addition to monetary damages, the plaintiffs seek a permanent injunction enjoining defendants from further infringing or otherwise violating their copyrights or trademarks. Pl. Mem. at 25-26. "A court may issue an injunction on a motion for default judgment provided that the moving party shows that (1) it is entitled to injunctive relief under the applicable statute and (2) it meets the prerequisites for the issuance of an injunction." Kingvision Pay-Per-View Ltd. v. Lalaleo, 429 F. Supp. 2d 506, 516 (E.D.N.Y. 2006) (internal quotation marks and citation omitted). To obtain a permanent injunction, a plaintiff must show:
(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (citations omitted); Salinger v. Colting, 607 F.3d 68, 77-78 (2d Cir. 2010); accord Rovio Entm't, 97 F. Supp. 3d at 547 (citations omitted); Laboratorios Rivas, SRL v. Ugly & Beauty, Inc., 2013 WL 5977440, at *11 & n.11 (S.D.N.Y. Nov. 12, 2013); Koon Chun Hing Kee Soy & Sauce Factory, Ltd. v. Kun Fung USA Trading Co. Inc., 2012 WL 1414872, at *5 (E.D.N.Y. Jan. 20, 2012).
[T]he Copyright Act authorizes a court to "grant . . . final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." 17 U.S.C. § 502(a). Similarly, the Lanham Act provides that federal courts "have power to grant injunctions, according to the principles of equity" in trademark infringement cases. 15 U.S.C. § 1116(a).Cengage Learning v. Shi, 2015 WL 5167775, at *6. In this case, the eBay factors weigh in the plaintiffs' favor of granting an injunction. "In a trademark case, irreparable injury is established where there is any likelihood that an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question." Lobo Enters., Inc. v. Tunnel, Inc., 822 F.2d 331, 333 (2d Cir. 1987) (citation and internal quotation marks); see Malletier v. Burlington Coat Factory Warehouse Corp., 426 F.3d 532, 537 (2d Cir. 2005) ("In trademark disputes, a showing of likelihood of confusion establishes . . . irreparable harm.") (citation and internal quotation marks omitted). And "courts routinely find the harm suffered by plaintiffs in copyright cases to be 'irreparable' on the theory that lost sales or diminished reputation can be difficult if not impossible to measure." See, e.g., Broad. Music, 158 F. Supp. 3d at 195. Accepting their allegations as true, the plaintiffs have alleged a likelihood of confusion in the marketplace that could lead to diminished reputation and loss of sales.
The alleged conduct suggests that the defendants here "might continue to engage in infringing activities and counterfeiting unless enjoined by the Court, demonstrating the danger that monetary damages will fail to fully provide [the plaintiff] with relief." Rovio Entertainment, 97 F. Supp. 3d. at 547; accord Broad. Music, 158 F. Supp. 3d at 195 ("Courts in this Circuit have consistently found monetary damages inadequate where the defendant poses a significant threat of future infringement.") (citing cases). Thus, the second factor weighs in plaintiffs' favor.
"As to the balance of hardships, '[i]t is axiomatic that an infringer . . . cannot complain about the loss of ability to offer its infringing product.'" Rovio Entm't, 97 F. Supp. 3d at 547 (quoting WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 287 (2d Cir. 2012)) (alteration in original). Finally, "'the public has an interest in not being deceived—in being assured that the mark it associates with a product is not attached to goods of unknown origin and quality.'" Id. (quoting N.Y.C. Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F. Supp. 2d 305, 344 (S.D.N.Y. 2010)); accord Broad. Music, 158 F. Supp. 3d at 196 (internal quotation marks, alterations, and citations omitted) ("injunctive relief here will advance the public's compelling interest in protecting copyright owners' marketable rights to their work so as to encourage the production of creative work").
The Court has already entered a preliminary injunction with provisions designed to prevent the defendants from further infringing. See September 12 Order. The terms of the preliminary injunction should be continued on a permanent basis.
IV. CONCLUSION
For the foregoing reasons, the plaintiff publishers' motion for a default judgment should be granted as to the defendants as follows: Brian F. Tesfazghi: $75,000 Jeremy Gould: $75,000 Liao Wei Hao and Jiao Leng: $1,150,000 Siew Yee Chew, Lynette K. Chew, Kok Kit Lau, and Akitrade: $700,000 Lim Sei Haw: $250,000 Lew Moy: $700,000 Luo Zhihong: $450,000 Zheng Xiaohong and Lin Zhen Wei: $750,000 Veronica Lemmons: $1,250,000 Shein Wei Choo and Yumi Wee Keng Yee: $800,000
The sum of all damages is $6,200,000.
Also, the Court should grant plaintiffs' request for a permanent injunction.
PROCEDURE FOR FILING OBJECTIONS TO THIS
REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file any objections. See also Fed. R. Civ. P. 6(a), (b), (d). A party may respond to any objections within 14 days after being served. Any objections and responses shall be filed with the Clerk of the Court, with copies sent to the Hon. John G. Koeltl at 500 Pearl Street, New York, New York 10007. Any request for an extension of time to file objections or responses must be directed to Judge Koeltl. If a party fails to file timely objections, that party will not be permitted to raise any objections to this Report and Recommendation on appeal. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72; Fed. R. Civ. P. 6(a), 6(b), 6(d); Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010). Dated: January 2, 2019
New York, New York
/s/_________
GABRIEL W. GORENSTEIN
United States Magistrate Judge