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United States District Court, S.D. New York

June 17, 2004.


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.


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.


  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 an additional 60 days to conduct discovery and re-amend his amended opposition, which the Court has denied. See supra, n. 3.


  A. Standard of Review

  Pursuant to Fed.R.Civ.P. 56(c), a district court must grant summary judgment if the evidence demonstrates that "there is no genuine issue as to any material fact and [that] the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250 (1986). "Summary judgment is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to `secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed.R.Civ.P. 1).

  In determining whether there is a genuine issue of material fact, a court must resolve all ambiguities and draw all inferences against the moving party. See United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987). However, the mere existence of disputed factual issues is insufficient to defeat a motion for summary judgment. Knight v. United States Fire Ins. Co., 804 F.2d 9, 11-12 (2d Cir. 1986), cert. denied, 480 U.S. 932 (1987). The disputed issues of fact must be "material to the outcome of the litigation" (id. at 11), and must be backed by evidence that would allow "a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts." Id. With respect to materiality, "substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson, 477 U.S. at 248. This standard applies with equal force in trademark infringement cases under the Lanham Act. See, e.g., Coach Leatherware Co., Inc. v. Ann Taylor, Inc., 933 F.2d 162, 166-67 (2d Cir. 1991); Lang v. Retirement Living Publ'g Co., Inc., 949 F.2d 576, 580 (2d Cir. 1991). B. Felizardo's Failure to Refute Material Facts

  Because Felizardo failed to submit any opposition to Philip Morris' 56.1 Statement, and in addition, failed to cite, in his memorandum, to admissible evidence in support of his arguments, Felizardo has failed to establish the existence of any material issues of disputed fact. Local Rule 56.1 of the Southern District of New York requires that all summary judgment motions be accompanied by what is now commonly referred to as a Rule 56.1 Statement, or a "short and concise statement of material facts as to which the moving party contends there is no genuine issue to be tried." L.R. 56.1(a). The 56.1 Statement serves as a road-map for the Court, outlining the material facts and marshaling the evidence submitted in support. The Rule requires the party opposing summary judgment to respond to the movant's 56.1 Statement, paragraph by paragraph, fact by fact, highlighting those facts about which it contends there exists a triable issue, and citing to admissible evidence in support of the alternate view. All material facts not controverted in the non-movant's Rule 56.1 Opposition are deemed admitted. L.R. 56.1(b) and (d). In this case, Felizardo has failed to submit anything even remotely resembling a 56.1 Opposition — and therefore the Court may deem admitted all of the material facts presented in Philip Morris' 56.1 Statement.*fn7

  However, because Felizardo, by virtue of his pro se status, lacks the legal training necessary to comprehend fully the concept of what is required at summary judgment, this Court declines to decide the motion on this basis alone. See, e.g., McDonald v. Head Criminal Court Supervisor Officer, 850 F.2d 121, 124 (2d Cir. 1988) ("[P]ro se litigants may in general deserve more lenient treatment than those represented by counsel."). Therefore, in the interests of justice, I have reviewed the substance of Felizardo's submissions — which consist of a legal memoranda and four exhibits — and have "interpret[ed] them to raise the strongest arguments that they suggest." McPherson v. Coombe, 174 F.3d 276, 279 (2d Cir. 1999) (internal citation omitted). Even after this searching examination, the Court finds no evidence to controvert the material facts presented by Philip Morris. Felizardo, in opposing summary judgment, "may not rest upon the mere allegations or denials of the adverse party's pleadings, but . . . must set forth specific facts showing that there is a genuine issue for trial." Id. While affidavits and depositions are admissible to denote "such facts as would be admissible in evidence" (id.), the "non-moving party may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). Unfortunately for Felizardo, "conclusory allegations" and "unsubstantiated speculation" are all that he provides.*fn8

  C. Violations of the Lanham Act

  Philip Morris claims that Felizardo violated sections 32(1) and 43(a) of the Lanham, 15 U.S.C. § 1114(1) and 1125(a), respectively, through his counterfeit cigarette activity. To prevail under section 32(1) of the Act, a plaintiff in a trademark infringement action must show that the defendant(1) "use[d] in commerce," (2) "any reproduction, counterfeit, copy, or colorable imitation of a registered mark," (3) in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use," (4) "is likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 1114(1)(a).*fn9 Since it is clear that Philip Morris did not consent to Felizardo's use of its Marlboro trademarks, Philip Morris must demonstrate that it has valid marks entitled to protection and that Felizardo's commercial use of those marks was likely to cause confusion. See Gruner Jahr USA Publ'g v. Meredith Corp., 991 F.2d 1072, 1075 (2d Cir. 1993).

  1. The Trademarks Are Protected

  Philip Morris has provided documentation — the same documents that it attached to its complaint — demonstrating that the Marlboro Marks were registered with the United States Patent and Trademark Office ("USPTO"). (Pl. Mem.Exh. A.) Because Philip Morris has utilized the marks continuously for more than the past five years, its right to use the marks is incontestable. 15 U.S.C. § 1605. Therefore, "the registration [of the marks] shall be conclusive evidence of the validity of the registered mark and of the registration of the mark, and of the registrant's ownership of the mark, and of the registrant's exclusive right to use the mark in commerce." 15 U.S.C. § 1115(b).*fn10 The marks in question are protected under the Lanham Act.

  2. The Counterfeit Marks Created a Likelihood of Confusion

  In this Circuit, the likelihood of confusion in trademark cases is governed by the eight-factor test set forth by Judge Friendly in Polaroid Corp. v. Polaroid Elecs. Corp., 287 F.2d 492, 495-96 (2d. Cir. 1961). However, in cases involving counterfeit marks, it is unnecessary to perform the step-by-step examination of each Polaroid factor because counterfeit marks are inherently confusing. See Gucci America, Inc., 286 F. Supp.2d at 287 ("[C]ounterfeits, by their very nature, cause confusion.") (citations omitted). Philip Morris, at the request of the New York authorities, confirmed by field inspection that the cigarettes and packaging (the "number 2's") seized from Felizardo were in fact counterfeits. (Pl. Mem. at 8 and Exh. A.) Felizardo concedes this point, admitting that "[t]he cartons were imitation of a carton of Philip Morris, but very horrible quality," and also that, "[w]hen you look at the cigarette packs themselves . . . you could see that it [sic] was fake cigarettes." (Felizardo Dep. at 239:11-17.) Therefore, Felizardo's conclusory assertion in his amended opposition that the nature or status of the cigarettes is disputed, citing generally to his deposition, is ineffective given his prior testimony.

  3. Felizardo Used the Counterfeit Marks in Commerce

  Thus, the remaining determination is whether Philip Morris has established that Felizardo used the marks "in commerce . . . in connection with the sale, offering for sale, distribution or advertising of any goods or services" upon which the marks appeared. 15 U.S.C. § 1114(1)(a). The evidence introduced by both sides establishes, beyond peradventure, that Felizardo "offer[ed] for sale" the counterfeit cigarettes. Felizardo freely admitted at his deposition that he offered to sell the remainder of the "number 2's" to Bello, who refused because Felizardo's price was too high. (Felizardo Dep. at 7:6-10.) The fact that Felizardo failed to consummate a sale with Bello is immaterial as the act of "offering for sale" suffices to impose liability. 15 U.S.C. § 1114(1)(a). Alternatively, it is possible, though difficult to determine from Felizardo's contradictory presentations, that Felizardo also offered the counterfeit cigarettes — only after learning of their counterfeit nature — to Bagdanos, who in fact purchased them.*fn11 However, because Felizardo later testified that Bagdanos had agreed to finance the cigarette transaction when he thought that he was financing a legitimate purchase, it is questionable whether Felizardo's providing Bagdanos with the cigarettes that he had already purchased (now known to be counterfeit) would result in a violation. Though interesting, it is unnecessary for this Court to resolve this factual conundrum because Felizardo's offer to Bello suffices to establish liability under the Lanham Act, and as damages are calculated per the number of marks used per type of item, not on the number of transactions in which the mark is used, no additional damages would result were this Court to find that the Bagdanos transaction gave rise to additional liability.*fn12 Therefore, through the Bello offer, Philip Morris has established that Felizardo violated section 32(1) of the Lanham Act.

  D. Felizardo's Liability for State Law Claims

  1. Trademark Infringement under New York Common Law

  To prevail on its common law claim of trademark infringement, Philip Morris need only present evidence sufficient to establish a violation of section 32(1) of the Lanham Act. See Standard & Poor's Corp., Inc. v. Commodity Exch., Inc., 683 F.2d 704, 708 (2d Cir. 1982) ("The heart of a successful claim based upon . . . the Lanham Act . . . and common law trademark infringement is the showing of likelihood of confusion as to the source or sponsorship of defendant's products."); see also Major League Baseball v. Sed Non Olet Denarius, 817 F. Supp. 1103, 1117 (S.D.N.Y. 1993) ("In order to obtain relief for common law trademark infringement or violations of the [Lanham Act] for trademark infringement . . . plaintiffs were required to prove by a fair preponderance of the credible evidence either actual confusion or a likelihood of confusion."). Since Philip Morris has established liability under the Lanham Act, see supra, II.C, Philip Morris has also established Felizardo's liability under the common law of trademark infringement.

  2. Unfair Competition under New York Common Law

  To prevail on its common law claim of unfair competition, Philip Morris must couple its evidence supporting liability under the Lanham Act with additional evidence demonstrating Felizardo's bad faith. Saratoga Vichy Spring Co., Inc. v. Lehman, 625 F.2d 1037, 1044 (2d Cir. 1980) ("The essence of an unfair competition claim under New York law is that the defendant has misappropriated the labors and expenditures of another. Central to this notion is some element of bad faith.") (citations omitted); Girl Scouts of U.S.A. v. Bantam Doubleday Dell Publ'g Group, Inc., 808 F. Supp. 1112, 1131 (S.D.N.Y. 1992) ("Under New York law, common law unfair competition claims closely resemble Lanham Act claims except insofar as "the state law claim may require an additional element of bad faith or intent."), quoted in Weight Watchers Int'l, Inc. v. Stouffer Corp.; 744 F. Supp. 1259, 1283 (S.D.N.Y. 1990). Under New York law, a presumption of bad faith attaches to the use of a counterfeit mark. See Centaur Communications, Ltd. v. A/S/M Communications, Inc., 830 F.2d 1217, 1227 (2d Cir. 1987) ("[A]wareness [that a mark is in use] can give rise to an inference of bad faith."); accord Warner Bros., Inc. v. American Broadcasting Cos., 720 F.2d 231, 246-47 (2d Cir. 1983); Simon and Schuster v. Dove Audio, Inc., 970 F. Supp. 279, 299 (S.D.N.Y. 1997). Thus, the evidence Philip Morris proffers to demonstrate Felizardo's intentional use of the counterfeit marks, which notably includes Felizardo's own deposition testimony, also serves to establish Felizardo's bad faith under New York common law. Therefore, summary judgment is appropriate for Philip Morris on its claim of unfair competition under New York common law.

  3. Violation of N.Y. Gen. Bus. § 349

  In order to state a claim under N.Y. Gen. Bus. § 349, a consumer protection statute, a plaintiff — who must be a consumer — must establish "(i) that [the defendant's] act or practice was misleading in a material respect, and (ii) that [he] was injured." Ortho Pharmaceutical Corp. v. Cosprophar, Inc., 32 F.3d 690, 697 (2d Cir. 1994) (quoting Coors Brewing Co. v. Anheuser-Busch Cos., 802 F. Supp. 965, 975 (S.D.N.Y. 1992)).*fn13 "A deceptive act or practice is not the mere invention of a scheme or marketing strategy, but the actual misrepresentation or omission to a consumer, by which the consumer is caused actual, although not necessarily pecuniary, harm. Solomon v. Bell Atl. Corp., 2004 N.Y. App. Div. LEXIS 6758, at *6 (1st Dep't 2004) (internal citations and quotations omitted). As Philip Morris has not established — and cannot establish — that (1) it consumed the counterfeit cigarettes or that (2) it suffered actual consumer harm, even if it could establish actual injury, for example, to goodwill, it is not the type of plaintiff that this law protects. Therefore, summary judgment is denied on Philip Morris' section 349 claim.

  E. Damages

  1. Statutory Damages

  Philip Morris has elected to pursue statutory damages, rather than actual damages, for Felizardo's infringement.*fn14 The Act provides that the plaintiff may recover "not less than $500 or more than $100,000 per counterfeit mark per type of goods or services sold, offered for sale or distributed, as the court considers just." Id. at 1117(c)(1). However, "if the court finds that the use of the counterfeit mark was willful,"*fn15 the plaintiff may recover "not more than $1,000,000 per counterfeit mark. . . ." Id. at 1117(c)(2). As Philip Morris has established that Felizardo's infringement was "willful," enhanced statutory damages are permissible here. However, because statutory damages provide adequate redress and effectuate sufficient deterrence, and further damages would likely be uncollectable, the Court declines to order enhanced damages.

  Philip Morris does not present any evidence regarding Felizardo's actual distribution of counterfeit Marlboros® to the public, and consequently, has failed to substantiate any actual loss of profit resulting from Felizardo's counterfeit operations.*fn16 However, statutory damages, and even enhanced statutory damages, under the Lanham Act are also aimed at deterrence of future counterfeiting — both by the bad actor in question and by other potential counterfeiters. See Sara Lee Corp. v. Bags of N.Y., Inc., et al., 36 F. Supp.2d 161, 170 (S.D.N.Y. 1999) ("Statutory damages give even greater weight [than actual damages] to the need to deter and punish . . ."). Philip Morris intimates that Felizardo continues to engage in questionable cigarette sales, and may benefit from the deterrent element of a statutory award, as would others contemplating counterfeit activities with regard to the Marlboro Marks. See Kepner-Tregoe, Inc., 186 F.3d at 288. Even if this contention is fair, the Court finds that an award of $62,500 — the amount that Felizardo stood to gain,*fn17 doubled, to account for his infringement of two separate marks, provides adequate relief.

  2. Permanent Injunction

  Philip Morris requests that the Court permanently enjoin Felizardo from any future infringement of the Marlboro Marks.*fn18 Section 34(a) of the Lanham Act provides courts with the "power to grant injunctions according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark Office." 15 U.S.C. § 1116(a).*fn19 "In a trademark infringement case, proof of a likelihood of confusion establishes both a likelihood of success on the merits and irreparable harm." Brennan's, Inc., 360 F.3d at 129 (internal citations omitted). As Philip Morris has established that Felizardo violated the Lanham Act through his counterfeiting activities, the Court finds that a permanent injunction is warranted.


  For the foregoing reasons, Philip Morris' motion for partial summary judgment is granted-in-part and denied-in-part. Philip Morris' motion for summary judgment on its claims under (1) Section 32(1) of the Lanham Act, (2) Unfair Competition, and (3) Trademark Infringement, are granted, and Philip Morris' motion for summary judgment on its claims under (a) Section 43(a) of the Lanham Act and (b) N.Y. Gen. Bus. § 349, are denied. Felizardo's motion for a continuance is denied. Felizardo is ordered to pay statutory damages of $62,500, and is permanently enjoined from future infringement, as delineated supra, n. 16. Unless I hear from the plaintiff, via pre-trial submissions, etc., on or before June 21, 2004, the case will be closed and the clerk instructed to remove this matter from my docket.


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