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PHILIP MORRIS USA INC. v. FELIZARDO

June 17, 2004.

PHILIP MORRIS USA INC., Plaintiff,
v.
CARLOS FELIZARDO, Defendant.



The opinion of the court was delivered by: HAROLD BAER, JR., District Judge[fn1] [fn1] Graham O'Donoghue and Lauren Yates, Summer 2004 interns in my Chambers and upcoming second year law students at Columbia Law School and Cardozo School of Law, respectively, provided substantial assistance in the research and drafting of this Opinion.

OPINION & ORDER

Plaintiff Philip Morris USA Inc. ("Philip Morris") moves for partial summary judgment, pursuant to Federal Rule of Civil Procedure ("Fed.R. Civ.`P.") 56, on its First, Fourth, Eighth, Tenth and Eleventh claims for relief*fn2 against defendant Carlos Felizardo ("Felizardo").*fn3 Philip Morris seeks judgment, finding Felizardo in violation of (1) sections 32(1)(a) and 43(a) of the Lanham Act, 15 U.S.C. § 1114(1)(a) and 1125(a), respectively, in addition to (2) New York General Business Law ("N.Y. Gen. Bus.") § 349, and (3) New York common law claims of trademark infringement and unfair competition. Philip Morris also requests (a) enhanced statutory damages pursuant to section 35(c) of the Lanham Act, 15 U.S.C. § 1117(c), and (b) a permanent injunction, enjoining Felizardo from further counterfeit activity with regard to the Marlboro trademarks. For the following reasons, plaintiff's motion is granted-in-part.

I. BACKGROUND

  A. Factual Background

  This case involves the alleged infringement by Felizardo of two of Philip Morris' cigarette trademarks — the Marlboro® word mark and the Marlboro Roof Design Label® mark ("Marlboro Marks"), under which Marlboro® cigarettes are sold. (Declaration of David H. Katz ("Katz Decl.") ¶ 4; Pl. 56.1 ¶¶ 1-2.) As proof of its ownership of these trademarks, plaintiff submitted a copy of the registrations that it filed and recorded with the Secretary of the Treasury and Customs, in accordance with § 1526(a) of the Tariff Act, 19 U.S.C. § 1526(a) and § 42 of the Lanham Act, 15 U.S.C. § 1124. (Declaration of David E. Jones ("Jones Decl.") Exh. A.) Philip Morris argues, as established in prior California litigation over these same trademarks, that through its prolific use of these marks in its advertisements and promotions, "the marks have developed significant good will, have become distinctive, have acquired secondary meaning, are among the most valuable trademarks in the world, and are among the most widely recognized product symbols by consumers in the United States." (Jones Decl. Exh. C. (Philip Morris USA, Inc. v. Castworld Prods., 219 F.R.D. 494, 497 (C.D. Cal. 2003).)

  Felizardo freely admits that in or around 1996, he began importing and distributing valid Marlboro® and Marlboro Lights® cigarettes that were manufactured abroad, and imported to the United States through a duty-free zone — allowing for a substantial discount on domestic retail prices. The market for such imports is called the gray cigarette market. (Jones Decl. Exh. D (Def. Answer at 2).) Felizardo testified that in or around late February or early March 2002, in conjunction with this legal business, he ordered 300 cases of Marlboro Red® cigarettes from Jorge Abraham ("Abraham").*fn4 (Felizardo Dep. at 14:8-10.) After Felizardo paid Abraham for the cigarettes, Felizardo learned from Abraham that he would instead be receiving 250 cases of "number 2" Marlboro Lights® (Id. at 15:6-10.) Felizardo conceded that he knew that "number 2's" denoted "fake cigarettes" (id. at 16:23), and confirmed his supposition when the cigarettes arrived, packed in plain brown boxes, and bearing a peculiar smell. (Id. at 27:15-18; 27:21-28:6.) Armed with the knowledge that the cigarettes were counterfeit, Felizardo thought about "what [he was] going to do." (Id. at 18:18.) He then realized that he had two choices — either to "contact the authorities, say what was happening, lose the whole money, or just take the cigarettes and try to dispose of the cigarettes myself." (Id. at 16:16-19.) Unfortunately for his legal future, Felizardo admits that he ultimately made the "bad business decision [to keep] the cigarettes and not contact the authorities." (Id. at 18:18-20; 16:19-20.) Felizardo explained at his deposition that he then relayed the news that the expected cigarettes were counterfeit to Algis Bagdanos ("Bagdanos"), a co-financier, who had invested $25,000 or $30,000 toward the original (legal) order. (Id. at 17:7-16.) Felizardo testified that Bagdanos was also shocked when he learned that the cigarettes were counterfeit, but decided to keep his lot.*fn5

  On April 11, 2002, Felizardo received a shipment of 230 cases of counterfeit Marlboro Lights® from Abraham. (Felizardo Dep. at 27:15 — 18, 21; 28:6.) As per Bagdanos' instruction, Felizardo then transferred 80 cases*fn6 to Bagdanos. (Felizardo Dep. at 16:22.) While Felizardo was attempting to sell the remaining 150 cases, and after he had already offered to sell the outstanding cigarettes to Bello — albeit, at too high a price to consummate a deal — agents from the Bureau of Alcohol, Tobacco, Firearms, and Explosives, and the New York State Tax Authority seized the counterfeit goods. (Id. at 16:25-17:15.) Felizardo subsequently pled guilty to trademark counterfeiting in the third degree under New York State law. (Id. at 37:15 — 38:8; 39:5 — 40:5.)

  Philip Morris alleges that subsequent to his indictment, Felizardo continued to deal in "suspicious cigarettes," namely through the attempted brokerage of a sale of 1,200,000 Marlboro® cigarettes that he claimed were "legitimate" but admitted to having never seen. (Pl. Mem. at 9; Felizardo Dep. at 145:1 — 148:24; 153:19-25.) With only Philip Morris' supposition that these cigarettes were counterfeit, and Felizardo's inability to document that they were legitimate, the Court has insufficient evidence to determine whether Felizardo in fact continued to transact in counterfeit cigarettes subsequent to his criminal indictment.

  It is uncontested that Felizardo's counterfeit cigarettes are of inferior quality to those manufactured and sold by Philip Morris under its brand name. (Felizardo Dep. at 27:15 — 27:18; 28:2 — 6; see also Castworld Prods., 219 F.R.D. at 497.) As a result, Philip Morris is damaged by the dissemination of counterfeit cigarettes, not only through the deprivation of legitimate sales, but also by the likelihood that consumers, believing the counterfeit product to be genuine, are likely to blame Philip Morris for the poor quality of the cigarette. See Castworld Prods., 219 F.R.D. at 497.

  B. Procedural History

  Philip Morris filed its complaint in this action on August 6, 2003. On November 13, 2003, with the parties' express consent, the Court issued a Pre-Trial Scheduling Order ("PTSO"), which set February 13, 2004, as the deadline for discovery, March 12, 2004, as the deadline for fully-briefed dispositive motions, and set the trial month at June 2004.

  On February 20, 2004, Philip Morris filed and served on Felizardo its motion for partial summary judgment. On March 3, 2004, Felizardo requested and received his first extension, from March 5 to March 19, 2004, of the deadline to submit his opposition. On March 4, 2004, Felizardo filed a second motion for extensions, requesting an additional 60 days for discovery and an additional 90 days to file his opposition. On March 11, 2004, over Philip Morris' objection, and despite Felizardo's failure to substantiate his need for more time, the Court granted Felizardo a second extension and postponed both the completion of discovery and Felizardo's deadline to submit his opposition, to April 12, 2004. On April 12, 2004, Felizardo filed his opposition, but again requested another 60 days to conduct discovery and to amend his opposition. After failing to join the telephone conference set-up by the Court to discuss Felizardo's request, Felizardo added another 30 days to his request for extensions. On April 27, 2004, despite the fact that the Court believed that Felizardo had already had ample time for discovery, and Philip Morris had already submitted its reply, the Court granted Felizardo a third extension, providing him until May 19, 2004, to complete discovery and amend his opposition.

  On May 10, 2004, Felizardo made a fourth request for an extension, seeking yet another 30 days to submit his opposition. On May 11, 2004, after Philip Morris graciously offered to coordinate expediting the transcription of its witness' deposition, the Court granted Felizardo's fourth extension, delaying Felizardo's deadline to re-oppose Philip Morris' motion to May 21, 2004. Finally, on May 21, 2004, when Felizardo filed his amended opposition, he included another request for ...


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