24. Although the Second Circuit has interpreted § 35 of the Lanham Act as permitting courts to increase a damages award only for remedial purposes, see Getty, 858 F.2d at 113, the Court pauses here to note two supporting rationales for trebling NYRA's damages award.
25. First, increasing NYRA's damages award may have a useful deterrent effect. Forcing Stroup to pay the royalty it would have had to pay had it executed sublicense agreements with Barker in 1993 and 1994 would do little to deter Stroup from infringing trademarks in the future. Given the choice between entering a sublicense agreement requiring a defendant to pay a fifteen per cent royalty on sales of trademarked goods and selling those goods without a license, but with the prospect of paying a fifteen per cent royalty if caught and held liable for infringement, an economically rational trademark infringer might well chose the latter course of action. See Playboy Enterprises, Inc. v. Baccarat Clothing Co., 692 F.2d 1272, 1274-75 (9th Cir. 1982).
26. Second, Stroup "utterly fail[ed] to raise a single meaningful argument contravening [NYRA's] rights in [its] mark" (Oral Arg. Trans. at 13-14), or evidence that Stroup infringed NYRA's marks willfully and continuously. See Gorenstein Enter., Inc. v. Quality Care-USA, Inc., 874 F.2d 431 (7th Cir. 1989) (stating that infringer's arguments were so weak and its infringement so deliberate that trial judge would have abused discretion by failing to award plaintiff treble damages, attorney fees, and prejudgment interest).
27. Section 1117(a) of the Lanham Act provides, in relevant part, that a plaintiff who establishes a violation of rights protected by the Act is entitled to recover from the defendant the costs of the action.
28. Having established that Stroup infringed its mark in violation of the Lanham Act, NYRA is entitled to recover from Stroup the costs it has incurred in connection with this action.
29. In order to recover its costs, NYRA must comply with the provisions of Local Rule 54.1(a).
C. Attorney Fees
30. Section 35(a) of the Lanham Act provides, in relevant part, that "The court in exceptional cases may award reasonable attorney fees to the prevailing party." The Second Circuit noted in Centaur Communications. Ltd. v. A/S/M Communications, Inc., 830 F.2d 1217, 1229 (2d Cir. 1987), that "deliberate and willful infringement can render a case 'exceptional' and thus support an award of attorneys' fees." See also Quaker State Oil Ref. Corp. v. Kooltone, Inc., 649 F.2d 94, 95 (2d Cir. 1981) (per curium).
31. The Centaur court went on to note that "although [the defendant] claims that it reasonably doubted the validity of Centaur's trademark, it failed to point to any investigation it [violated Centaur's trademark]." Similarly, despite Stroup's assertion that it sold unlicensed "SARATOGA" T-shirts beyond the 90-day period for disposal of stock provided for in the sublicense agreement, only after investigating the propriety of doing so, Stroup's "utter failure to raise a single meaningful argument contravening plaintiff's rights in the mark" strongly suggests that such an investigation never occurred. (Oral Arg. Tr. at 13-14.) What is more, when it entered the sublicense agreement, Stroup acknowledged "that all trademark rights to the name NYRA and such NYRA marks and designs as may arise . . . are wholly owned by NYRA, and all use of the NYRA marks shall inure to the benefit of NYRA." (Ps' Ex. 8 at P 7.) Stroup also promised, "after expiration . . of this Sublicense . . . to refrain from further use of the NYRA Marks . . . except as provided in [the disposal of stock provision]" and "recognized that irreparable injury would be caused by unauthorized use [of NYRA's mark]." (Id. at P 13.)
32. The abundance of evidence that Stroup deliberately and willfully infringed NYRA's mark, and the lack of any credible evidence to the contrary, places this matter in the "exceptional case" category and amply justifies an award to NYRA of its attorneys' fees.
33. Therefore, the Court will direct both parties to file with this Court affidavits and briefs setting forth the amount of attorneys' fees NYRA is entitled to recover in connection with this matter. The Court refers the attorneys to Donnell v. United States, 220 U.S. App. D.C. 405, 682 F.2d 240, 251 (2d Cir. 1982), cert. denied, 459 U.S. 1204, 75 L. Ed. 2d 436, 103 S. Ct. 1190 (1983), which instructs the Court "to determine only the prevailing market rate within its jurisdiction".
II. New York's Unfair Competition Law
34. "The law of trademarks is a part of the larger field of unfair competition." Safeway Stores, Inc. v. Safeway Properties, Inc., 307 F.2d 495, 497 n.1 (2d Cir. 1962) (citing Dell Pub. Co. v. Stanley Publications, Inc., 9 N.Y.2d 126, 211 N.Y.S.2d 393, 172 N.E.2d 656 (N.Y. 1961). As Judge Learned Hand wrote almost seventy years ago, the key principle underlying the intersection between the law of unfair competition and the law of trademarks is the avoidance of consumer confusion: "one merchant shall not divert customers from another by representing what he sells as emanating from the second." Yale Elec. Corp. v. Robertson, 26 F.2d 972, 973 (2d Cir. 1928). Generally, when a defendant represents its merchandise as "emanating" from the plaintiff, the "conduct that constitutes trademark infringement also constitutes unfair competition in violation of New York law." Getty Petroleum Corp. v. Island Transp. Corp., 878 F.2d 650, 655 (2d Cir. 1989); see also Safeway, 307 F.2d at 497 n.1; Dell, 211 N.Y.S.2d at 398.
35. Under New York law, a plaintiff in an unfair competition case can recover punitive damages if the "defendant's conduct has constituted 'gross, wanton, or willful fraud or other morally culpable conduct' to an extreme degree." Smith v. Lightning Bolt Prods., Inc., 861 F.2d 363, 371 (2d Cir. 1988) (quoting Borkowski v. Borkowski, 39 N.Y.2d 982, 387 N.Y.S.2d 233, 233, 355 N.E.2d 287 (N.Y. 1976)); see also Getty, 878 F.2d at 657. In Getty, the court found the standard for punitive damages satisfied where the defendant contributorily infringed the plaintiff's mark "knowingly, intentionally, and with callous disregard for the rights of [the plaintiff] in its trademark." 878 F.2d at 657.
36. When Stroup held out to the public and sold unlicensed "SARATOGA" T-shirts as licensed "SARATOGA" T-shirts, it violated the Lanham Act as well as New York's law of unfair competition.
37. As the Court previously discussed, the evidence before it strongly indicates that Stroup infringed plaintiff's marks knowingly, intentionally, and with callous disregard for NYRA's rights in its marks. Stroup failed to present any evidence to the contrary during the bench trial the Court held on the issue of damages. Thus, NYRA is entitled to punitive damages. In order to sanction Stroup for the obstinate and arrogant manner in which it continually violated NYRA's marks, and in order to deter Stroup and others who may have incentives to infringe trademarks knowingly and deliberately in the future, the Court will double the already-trebled profits and damages awards. This brings the total damages award to $ 34,418.28, exclusive of costs and attorneys' fees.
FOR THE FOREGOING REASONS, IT IS HEREBY ORDERED THAT:
For its deliberate infringement of NYRA's trademark, in violation of the Lanham Act and New York's law of unfair competition, defendant Stroup News Agency shall, within five (5) days of its receipt of this Order, remit to NYRA the sum of $ 34,418.28, which amount reflects Stroup's profits from its infringing activities, trebled, the actual damages Stroup's infringing activities caused NYRA, trebled, and a punitive award of twice the sum of these two amounts; and it is further ORDERED that
NYRA is entitled to recover the costs of this action from Stroup; and it is further ORDERED that
Within thirty (30) days of their receipt of this order, the parties shall, if they so choose, file affidavits, briefs, and, in NYRA's case, billing statements, on the basis of which the Court will determine the amount of attorneys' fees to which NYRA is entitled to recover from Stroup under the Lanham Act.
Dated March 9, 1996
at Binghamton, New York.
Thomas J. McAvoy