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Chanel, Inc. v. Kouzniakova

July 10, 2008

CHANEL, INC., A NEW YORK CORPORATION, PLAINTIFF,
v.
MARIA KOUZNIAKOVA A/K/A ALEX KOUZNIAKOVA, AN INDIVIDUAL, D/B/A YOURSECRETSOURCE.COM AND FASHION BOUTIQUE, INC., A NEW YORK CORPORATION, D/B/A YOURSECRETSOURCE.COM AND DOES 1-10, DEFENDANTS.



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

MEMORANDUM and ORDER GRANTING DEFAULT JUDGMENT

In January 2006, Chanel, Inc. commenced suit under the Lanham Act, 15 U.S.C. § 1051 et seq., alleging trademark counterfeiting and infringement, false designation of origin, and common law misappropriation and unfair competition against defendants Maria Kouzniakova a/k/a Alex Kouzniakova, d/b/a YourSecretSource.com, Fashion Boutique, Inc., and DOES 1-10 (the "defendants"). Plaintiff manufactures and distributes high quality scarves, hats, and other goods under the federally registered trademarks CHANEL and CC MONOGRAM (the "Chanel Marks").

Defendants failed to timely answer the complaint. After receiving plaintiff's motion for a default judgment, defendant Fashion Boutique appeared and requested an extension of time to answer. Magistrate Judge Matsumoto granted that request and permitted Fashion Boutique to answer. After Fashion Boutique answered, it failed to provide initial disclosures pursuant to Fed. R. Civ. P. 26(a). Fashion Boutique's attorney of record moved to withdraw as counsel, stating that he was unable to locate any cooperative corporate officers.

Thereafter, plaintiff moved to strike Fashion Boutique's answer as a sanction for the failure to provide Rule 26(a) disclosures, and moved for monetary sanctions pursuant to Fed. R. Civ. P. 11. By order dated July 31, 2006, this Court referred the motions to Magistrate Judge Matsumoto for a Report and Recommendation ("R&R"). Magistrate Judge Matsumoto recommended that this Court grant plaintiff's motion to strike Fashion Boutique's answer, but deny plaintiff's motion for Rule 11 sanctions. See Chanel, Inc. v. Kouzniakova, No. 06-CV-0068, slip op. at 12 (E.D.N.Y. Aug. 24, 2006). With no objections filed, this Court adopted Magistrate Judge Matsumoto's R&R, dated August 24, 2006, in its entirety. The Court also directed plaintiff to file an amended motion for default judgment. Plaintiff now moves for default judgment, injunctive relief, statutory damages and an award of attorney's fees and costs. Plaintiff's motion is granted in part, and denied in part.

BACKGROUND

Chanel is the owner of four federally registered trademarks, including the trademarks "CC Monogram" and "CHANEL," for use in connection with the manufacture and distribution of hats and scarves. In January 2004, Chanel discovered that defendants owned and operated an Internet website using the domain name "YourSecretSource.com" which sold hats and scarves bearing marks that were identical to, or substantially indistinguishable from, the registered Chanel Marks.

According to Chanel's submissions, plaintiff hired investigators who purchased defendants' products. Chanel alleges that defendants sold goods bearing exact copies of Chanel's marks, but that those goods differed substantially in quality. In support of the latter allegation, Chanel's Director of Legal Administration personally analyzed defendants' products and determined that the products were in fact counterfeit goods. Plaintiff argues that this Court should award "significant statutory damages" in light of the "large quantity of counterfeit products advertised, offered for sale, and/or sold by the Defendants, the significant number of federal registrations the Defendants were counterfeiting and infringing ...." (Amended Mot., pg. 11.)

Approximately two years prior to filing this action, Chanel sent a cease and desist letter by Certified Mail and Email to the defendants on February 10, 2004. The letter advised Defendant Kouzniakova that she was engaging in illegal activity via YourSecretSource.com. Chanel received a general automated Email that thanked the addressee for his interest and stated there would be a reply sent within twenty-four hours. So far as the Court can tell, plaintiff last checked YourSecretSource.com on March 12, 2004, showing and determined that the defendants continued to offer for sale hats and scarves bearing the Chanel Marks.

DISCUSSION

A. Liability

It is well-settled that, once a default judgment is granted, a defendant is deemed to have admitted all the well-pleaded allegations in the complaint pertaining to liability but not as to damages. Cotton v. Slone, 4 F.3d 176, 181 (2d Cir.1993). The following findings of fact and conclusions of law are based on the complaint's allegations regarding liability and the admissible evidence regarding damages in Chanel's submissions.

The Lanham Act prohibits the unauthorized "reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion." New York Stock Exchange, Inc. v. New York, New York Hotel LLC, 293 F.3d 550, 554 (2d Cir. 2002) quoting 15 U.S.C. § 1114(1)(a).

The allegations in the complaint establish the elements of liability required to state claims of trademark infringement and false designation of origin pursuant to the Lanham Act. Chanel alleges that it owns four federally registered trademarks and attaches copies of these registrations to its complaint. (Compl. Ex. A.) The defendants include Ms. Kouzniakova who resides and conducts business in Brooklyn, New York using the name YourSecretSource.com as an alias. (Compl.¶¶ 2-5.) Fashion Boutique, another defendant, also conducts business in Brooklyn, New York and engages in the sale of counterfeit products. (Compl. ¶¶ 4-5.) The Chanel Marks have never been assigned or licensed to any of the defendants. (Compl. ¶ 13.) Chanel alleges that defendants are manufacturing, importing, distributing, selling and/or offering for sale counterfeit hats and scarves bearing trademarks which are exact copies of the Chanel Marks.

Due to Chanel's advertising efforts, merchandise bearing the Chanel Marks have achieved secondary meaning as an identifier of high quality products, including hats and scarves. (Hahn Decl. ¶¶ 6-7.) Plaintiff has expended substantial time, money and other resources developing, advertising and promoting the CHANEL Marks. (Compl. ¶ 15.) The public readily identifies merchandise bearing the CHANEL Marks as high quality merchandise, such merchandise having acquired secondary meaning as an identifier of high quality products, including hats, scarves and other goods. (Compl. ¶¶ 17-18.) ...


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