Opinion
No. 06 Civ. 85 (LBS).
March 23, 2010
MEMORANDUM AND ORDER
On February 8, 2010, this Court granted summary judgment in favor of Plaintiffs Fendi Adele S.R.L., Fendi S.R.L., and Fendi North America (collectively known as "Fendi"), finding Defendants Burlington Coat Factory Warehouse Corporation and Cohoes Fashion, Inc., a wholly-owned subsidiary of Burlington Coat Factory, (collectively known as "Burlington") liable for trademark counterfeiting, trademark dilution, and common law unfair competition. Fendi Adele S.R.L. v. Burlington Coat Factory, No. 06 Civ. 85 (LBS), 2010 WL 431509, at *10 (S.D.N.Y. Feb. 8, 2010) ("February 2010 order"). We awarded treble damages for the counterfeit goods sold after the April 2004 cease and desist letter and referred the matter to the Magistrate Judge for a calculation of damages.
Now before this Court is Fendi's Motion for Partial Reconsideration. Fendi seeks to clarify the damages awarded, if any, with regard to counterfeit goods sold prior to the April 2004 letter. If the sale of Fendi-branded goods prior to the cease and desist letter is not found to be willful, the issue remains as to whether the bad faith requirement still exists. The courts in this District are currently divided as to whether a finding of bad faith is still required in order to award treble damages in light of the Trademark Amendments Act of 1999. In our February 2010 order, we found the April 2004 letter established willfulness and did not reach the question of whether the bad faith requirement survives the 1999 Amendments. Fendi, 2010 WL 431509, at *11. Fendi urges reconsideration of the issue of willfulness for the period prior to the April 2004 letter, or, if willfulness is not found, a determination as to whether the bad faith requirement survives the 1999 Amendments.
For the purposes of this motion, we assume familiarity with the facts.
Upon reconsideration, we find that Burlington willfully infringed for the entire period. The Court's February 2010 order is modified to award Fendi treble damages for all of the counterfeit goods at issue.
I. Standard of Review
The standard for willfulness is whether the defendant had knowledge that his or her conduct represented infringement or recklessly disregarded the possibility. Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283, 288 (2d Cir. 1999); see Koon Chun Hing Kee Soy Sauce Factory, Ltd. v. Star Mark Mgmt., No 04 Civ. 2293 (JFB), 2007 WL 74304, at *11 (E.D.N.Y. Jan. 8, 2007) (applying the willfulness standard in Kepner-Tregoe to claims brought under the Lanham Act); Nike, Inc. v. Top Brand Co., No. 00 Civ. 8179 (KMW), 2005 WL 1654859, at *6 (S.D.N.Y. July 13, 2005) (same). While caution must be exercised in granting summary judgment when state of mind is an issue, the summary judgment rule "would be rendered sterile" if the mere existence of an issue as to state of mind would automatically defeat an otherwise valid motion. Nora Beverages, Inc. v. Perrier Group of America, Inc., 269 F.3d 114, 125 (2d Cir. 2001). Where the defendant offers no probative evidence raising a genuine issue of material fact regarding willfulness, summary judgment is appropriate. Tanning Research Lab., Inc. v. Worldwide Import Export Corp., 803 F. Supp. 606, 610 (E.D.N.Y. 1992).
II. Willfulness of Pre-2004 Sales
"Willful infringement may be attributed to the defendant's actions where he had knowledge that his conduct constituted infringement or where he showed a reckless disregard for the owner's rights." Johnson Johnson Consumer Companies, Inc. v. Aini, 540 F. Supp. 2d 374, 396 (E.D.N.Y. 2008); see also Cartier Int'l B.V. v. Ben-Menachem, No. 06 Civ. 3917 (RWS), 2008 WL 64005, at *14 (S.D.N.Y. Jan. 3, 2008) (Conduct can be found to be willful where the defendant "recklessly disregarded the possibility" that his or her conduct constituted infringement.). Courts have repeatedly found willfulness where a defendant receives a cease and desist letter but continues the infringing conduct. See Fendi, 2010 WL 431509, at *10 (collecting cases). Courts have also found willful infringement where the infringing party was found liable and then did not alter or cease the infringing activity. See Burberry Ltd. v. Euro Moda, No. 08 Civ. 5781 (CM), 2009 WL 4432678, at *3 (S.D.N.Y. Dec. 4, 2009) (finding ample evidence of willfulness where a prior settlement put defendants on notice of the infringing activity, yet defendants persisted in the same conduct); Kepner-Tregoe, Inc., 186 F.3d at 288 (finding copyright infringement was willful where the defendant "chose to ignore the injunction [issued by a Texas district court and upheld by the Fifth Circuit] and continued to use the MPO program" that had been found to be infringing); Viacom Int'l Inc. v. Fanzine Int'l, Inc., No. 98 Civ. 7448 (RCC), 2001 WL 930248, at *4 (S.D.N.Y. Aug. 16, 2001) (where the defendant had been sued at least two times in the previous year, with one suit resulting in a default judgment against the defendant, the court found that the defendant's subsequent "strikingly similar conduct" suggests that the defendant "knew or should have known that its actions constituted [copyright] infringement.").
When Burlington took no action to comply with the 1987 Injunction and began violating the injunction as early as 1993, Burlington showed a reckless disregard for Fendi's trademark rights. Johnson Johnson, 540 F. Supp. 2d at 396. The 1987 Injunction, like a cease and desist letter or a finding of liability, put Burlington on notice that its behavior was potentially infringing on Fendi's trademark. In fact, the injunction was even more specific than a cease and desist letter or a finding of liability because it mandated a specific course of action to protect against future infringement — Burlington was not to sell any Fendi-branded merchandise without first obtaining permission from Fendi. Burlington did not implement any control mechanisms to ensure compliance with the injunction. (Pl.'s 56.1 ¶ 16.) Burlington's in-house counsel, Stacy Haigney, who was present in court when the 1987 Injunction was entered, admitted that he was not aware of a single piece of writing concerning any steps that the company took to comply with the injunction. Id.
Burlington's records have been a persistent obstacle in this litigation. At the time of our 2007 opinion, we believed Burlington's first sale of Fendi goods was in 2002. Subsequent discovery revealed that Burlington began selling Fendi-branded goods no later than 1993. Burlington has made no records available for the six years immediately after the injunction was entered. Fendi, 2010 WL 431509, at *24. As Magistrate Judge Dolinger noted in his Report and Recommendation, "while plaintiffs know a sale was made as early as 1993, it is possible that sales could have occurred even earlier, but impossible to confirm or refute that hypothesis." Id.
Burlington did not even comply with its own trademark protection policies in the years following the injunction. Burlington's policies required that buyers (1) speak with Haigney prior to purchasing trademarked merchandise from third-party vendors, (Def. Response to 56.1 ¶ 254; Genecin Dec. Ex. 37 ("Haigney Dep.") at 156:20-157:23); and (2) obtain authentication documents for purchases from third-party vendors. (Pl.'s 56.1 ¶ 266.) Burlington purchased Fendi-branded goods from the Vendors as early as 2000. Haigney testified that the first time a buyer approached him regarding purchasing Fendi-branded goods from a third-party vendor was not until 2003. (Haigney Dep. at 113:3-21.) No buyer ever sought approval from Haigney for any purchase of Fendi-branded goods from Ashley Reed. (Pl.'s 56.1 ¶ 261.) Burlington did not obtain authentication documents for any of its purchases from the Vendors. (Pl.'s 56.1 ¶ 268.) Burlington was aware of the risk associated with buying trademarked goods from third-party vendors, yet it did not buy from authorized distributers, (Genecin Dec. Ex. 38 ("Goldstein Dep.") at 143:21-144:9; Pl.'s 56.1 ¶ 255), or verify the authenticity of the goods purchased from third-party vendors, (Goldstein Dep. at 143:3-20).
Burlington has failed to offer any evidence raising a genuine issue of material fact regarding its willfully blind infringement. See Tanning Research, 803 F. Supp. at 610 ("[D]efendants have offered no probative evidence raising a genuine issue of material fact regarding their willfully blind violation."). Burlington concedes that it took no action to implement procedures in order to ensure compliance with the 1987 Injunction, and it has offered no evidence to demonstrate that it complied with its own trademark protection policies. Burlington argues that it forgot about the injunction; however, whether Burlington forgot about the injunction is irrelevant. The crucial time for the purpose of finding willfulness is immediately after the 1987 Injunction was entered. At that moment, Burlington was on notice that its conduct potentially infringed on Fendi's trademark, and in doing nothing, Burlington demonstrated a reckless disregard for the injunction and for its purpose — to prevent Burlington from infringing on Fendi's trademark in the future. See Burberry Ltd. v. Euro Moda, 2009 WL 4432678, at *3 ("In light of the prior June 30, 2005 settlement agreement where defendants admitted to selling scarves, hats and polo shirts with counterfeit Burberry marks, but stated it had ceased doing so in 2003 and promised not to do so in the future . . ., defendants obviously knew that selling such items with counterfeit Burberry marks infringed Burberry's registered trademarks."). Burlington's failure to alter its conduct in the wake of the 1987 Injunction and lack of compliance with its own minimal trademark compliance procedures establishes willfulness for the entire period at issue.
III. Conclusion
This Court's February 8, 2010 Memorandum and Order is amended. Upon reconsideration, we find Burlington acted willfully for the entire relevant period, and Fendi is awarded treble damages with regard to all counterfeit goods at issue.
SO ORDERED.
Dated: March 27, 2010 New York, NY