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SARA LEE CORP. v. BAGS OF NEW YORK

January 28, 1999

SARA LEE CORPORATION PLAINTIFF,
v.
BAGS OF NEW YORK, INC.; NEW YORK NEW YORK HANDBAGS, INC.; EMIL SAYGH; AND NABIL HELOU A/K/A BILLY HELOU, DEFENDANTS.



The opinion of the court was delivered by: Motley, District Judge.

Opinion on Statutory Damages, Attorney Fees, and Costs

Plaintiff Sara Lee Corporation ("Sara Lee") filed this action claiming that the defendants produced and sold counterfeits of trademarked products of Sara Lee's Coach Leatherware ("Coach") division, in violation of the Trademark Act of 1946, codified as amended at 15 U.S.C. § 1051, et seq. ("Trademark Act"). The defendants failed to answer the complaint and the court entered a default judgment in favor of Sara Lee granting injunctive relief and retaining jurisdiction to determine damages. After hearing and review of the filings and record, the court awards Sara Lee $750,000 in statutory damages and $46,045.63 in attorney fees and costs.

I. Case Background

A. Complaint to Default Judgment

Sara Lee, through its Coach division, designs, produces, and sells distinctive handbags, wallets, briefcases, and similar goods. The bags all share features that distinguish them as "Coach" bags, such as their glovetanned leather, ornamental trim, and "Coach" hangtag suspended from a strap of the bag on a solid brass chain. These designs are trademarked and registered with the Patent and Trademark Office as United States Trademark Registration Numbers 751,493, 1,071,000, 1,070,999, 1,242,098, 1,309,779, 1,746,836, 1,846,801.

On January 7, 1997, Sara Lee filed a complaint alleging that defendants, makers and sellers of bags similar to those Coach markets, impermissibly used Coach trademarks to sell their own products, in violation of the Trademark Act and state law. Following defendants' failure to appear or defend, Sara Lee obtained a default judgment on September 3, 1997. See Order of Default Judgment dated Sept. 3, 1997 ("Default Judgment").

Citing the Trademark Act, the Default Judgment featured injunctive relief and a monetary award to be fixed by the court. It ordered the defendants to destroy all infringing articles, enjoined the defendants from using the Coach trademarks or trade dress, and enjoined the defendants from evading these prohibitions by any means such as assignments, transfers, or formations of new entities or associations. Id. at 3-4. It also ordered the defendants to pay, in an amount to be determined by the court: the greater of treble damages or profits; statutory damages of up to $1 million per violation; and reasonable attorneys' fees and costs. Id. at 4.

B. Damages Determination: Filings and May 19, 1998 Hearing

For its damages determination, the court on November 18, 1997 set a December 5, 1997 deadline for Sara Lee filings. Sara Lee sought the maximum statutory damages of $1,000,000 as well as attorney fees and costs. On April 16, 1998, after reviewing the Sara Lee filings on damages, the court scheduled a damages hearing for May 19, 1998. After hearing, the court set a July 2, 1998 deadline for Sara Lee to submit findings of fact and conclusions of law on damages.

1. Testimony of Nabil "Billy" Helou

At the May 19, 1998 hearing, defendant Nabil "Billy" Helou attended and testified under oath that, as illustrated by the following timeline, he and his corporate co-defendants no longer were in business. Since the early 1980s, Mr. Helou had been in the handbags business at the same location, though under different corporate names. Tr. May 19, 1998 ("Tr.") at 95-100. He and his relatives ran the "Helou Brothers" corporation for seven or eight years during the early and mid-1980s. In the late 1980s, when a family split led to the dissolution of Helou Brothers, Mr. Helou formed the "New York, New York Handbags" ("NYNYH") corporation. Soon after, Mr. Helou then changed the business name to "Bags of New York" ("BNY") by dissolving NYNYH and forming BNY as a new corporation.

Mr. Helou then dissolved BNY in 1996 or 1997. Tr. at 102-103. He sold BNY's assets for roughly $2,500 to $3,000 to his girlfriend, Blanca Hernandez, who continues to operate there. Tr. at 112-114, 119. Mr. Helou then was "not involved" in the business on the old BNY premises, Tr. at 121, 129, although at times he would visit Ms. Hernandez and "help her" with sales or with closing the shop at night. Tr. at 120. His main work consisted of freelance jobs for others in the industry. Tr. at 129-130. In the past two years, he has had little income, especially since he plead guilty to charges of trademark counterfeiting in September 1996. Tr. at 132. He had taxable income of roughly $20,000 in 1996 and no taxable income in 1997. Tr. at 131-132.

2. Testimony of Sara Lee Investigators

At the May 19, 1998 hearing, Sara Lee offered the testimony of Gladys Vargas and Roger Noakes, private investigators it hired to make undercover purchases from the defendants on the BNY premises. Tr. at 18-20, 63-64. Four times between June and September 1996, Ms. Vargas purchased counterfeit Coach bags from Mr. Helou at BNY, each time spending an average of 30 minutes there. Tr. at 34. The premises included both a showroom and factory. Tr. at 19. In the showroom, Ms. Vargas, during each of her visits, observed densely packed racks that were fully stocked with several thousand bags. Tr. at 19-20, 48. In the factory, Mr. Noakes, accompanying police during a September 5, 1996 search and seizure, observed two large press machines that cut leather, several sewing machines, and five or six workers on duty. Tr. at 72-74.

In all four of Ms. Vargas's purchases, Mr. Helou sold her counterfeit Coach-trademarked bags, holding them out as copies of specific Coach products. Tr. at 18, 34, 36. The showroom racks and the BNY catalog identified their bags by Coach style numbers. Tr. at 19, 29-31; Pl.'s Ex. 5 (catalog). The price list accompanying the BNY catalog explicitly stated that "all styles pictured in catalog are Coach look-a-likes." Tr. at 55; Pl.'s Ex. 6 (price list). Mr. Helou also showed customers Coach catalogs and explained that he sold those items. Tr. at 21, 27.

During each visit, Ms. Vargas saw three or four customers making similar purchases, either looking through Coach catalogs or picking up goods. Tr. at 34. When a customer placed an order, Mr. Helou instructed factory workers to stamp the Coach look-alike bags with Coach trademarks and serial numbers. He then gave the customer the finished counterfeit Coach bags, each with a matching counterfeit Coach-stamped leather tag. Tr. at 25-26, 32, 47.

The median price of a bag on the BNY price list was $42: $39 for the bag and $3 for the accompanying tag. Pl.'s Ex. 6 (bag price list); Tr. at 32, 38 (tag price). Mr. Helou did not consistently provide Ms. Vargas regular receipts for her purchases. For example, in an August 1996 purchase, he provided an actual receipt. Tr. at 37, 41; Pl.'s Ex. 7 (receipt). In contrast, in a June 1996 purchase, he only wrote the price on the back of a business card. Tr. at 31-32.

C. Ex Parte Seizure on May 28, 1998

Immediately after the May 19, 1998 damages hearing, Sara Lee applied for an ex parte seizure order, claiming continuing infringements. After a May 26, 1998 ex parte hearing, the court granted the order. On May 28, 1998, United States Marshals, accompanied by Sara Lee representatives, executed the order at the defendants' premises. The Marshals found Mr. Helou and his brother Fred Helou operating the business. Tr. June 1, 1998 at 3-8.

During the May 1998 seizure, the premises included not only finished counterfeits, but also Coach look-alikes and the stamping machinery to turn them into finished counterfeits. The Marshals seized the following: 174 counterfeit Coach handbags; 5,512 look-alike Coach handbags; 60 stamps and dies with Coach indicia for production of counterfeit Coach bags; and 996 look-alike and stamped Coach keyfobs. Decl. Brian W. Brokate Supp. Civil Contempt, June 16, 1998, ¶¶ 3-5; Tr. June 24, 1998 at 17-18; Tr. June 1, 1998 at 4. Mr. Noakes saw similar items during a September 5, 1996 police seizure: small leather tags and several stamps (dies) bearing various Coach trademarks that appeared on the tags. Tr. at 72, 78-80.

On June 1, 1998, the court held a hearing at which it ruled that the seizure should be confirmed. On June 16, 1998, the court issued a written seizure confirmation order. On July 15, 1998, the defendants moved to modify the seizure confirmation order, arguing changed circumstances and wrongful seizure because only 174 of the over 5,000 bags seized had a Coach logo stamped on them, while the rest only resembled Coach bags in ...


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