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Strippit, Inc. v. Coffee

October 27, 2009

STRIPPIT, INC., PLAINTIFF,
v.
KEITH COFFEE, DEFENDANT.



The opinion of the court was delivered by: Richard J. Arcara Chief Judge United States District Court

DECISION AND ORDER

INTRODUCTION

Plaintiff Strippit, Inc. filed a complaint this case accusing defendant Keith Coffee of trademark infringement by running a website that used plaintiff's name without authorization. When defendant failed to answer the complaint, plaintiff requested an entry of default and filed a motion for default judgment. Through its motion papers and through an evidentiary hearing that this Court held on October 14, 2009, plaintiff submitted evidence of lost profit from replacement parts sales that it attributes to defendant's acts of trademark infringement. Given the allegations that defendant is deemed to have admitted by default, and given the evidence that plaintiff submitted with its motion papers and at the evidentiary hearing, the Court will grant the pending motion and award damages as described below.

BACKGROUND

This case concerns allegations of trademark infringement in violation of both federal and state law. Plaintiff is a manufacturer of machines and replacement parts for the sheet metalworking industry. Defendant worked previously for plaintiff, once as an employee and after that as an independent contractor. On May 28, 2009, plaintiff filed the complaint in this case. According to the complaint, plaintiff owns both registered trademark and common-law trademark rights in the name "Strippit." Plaintiff also owns the rights to the World Wide Web domain name "www.strippit.com" and uses that domain for its website, which features its trademark. At all times relevant to this case, according to plaintiff, defendant had actual and constructive notice of plaintiff's trademark rights under 15 U.S.C. § 1072. See id. ("Registration of a mark on the principal register provided by this chapter or under the Act of March 3, 1881, or the Act of February 20, 1905, shall be constructive notice of the registrant's claim of ownership thereof.").

At a time prior to September 18, 2006, defendant allegedly adopted and implemented a plan to engage in a business that he called "Strippit Parts Unlimited," which would sell products related to the sheet metalworking industry by way of the Web. To this end, according to plaintiff, defendant registered the domain "www.strippitparts.com" on or about September 18, 2006 and subsequently created a website that used plaintiff's trademark without authorization. Plaintiff alleged in its complaint that defendant willfully and intentionally infringed on plaintiff's trademark rights to create customer confusion and to create the false impression that he was selling sheet metalworking products that were either manufactured or endorsed by plaintiff. Defendant allegedly continued operating the website in question despite cease and desist letters sent by plaintiff on February 6, 2009, April 3, 2009, and April 9, 2009. The complaint concluded with 10 different claims: a claim for trademark infringement under 15 U.S.C. § 1114(a); a claim for false designation of origin under 15 U.S.C. § 1125(a); a claim for trademark dilution under 15 U.S.C. § 1125(c); a claim for deceptive trade practices under New York General Business Law § 349; a claim for unfair competition under New York common law; a claim for unjust enrichment under New York common law; a claim for trademark infringement under New York common law; a claim for trademark dilution under New York common law; a claim for palming off under New York common law; and a claim for an accounting under New York common law. According to the affidavit of service filed on July 1, 2009, defendant was personally served with the summons and complaint in this case on June 23, 2009.

Defendant did not answer the complaint within the time provided by Rule 12 of the Federal Rules of Civil Procedure ("FRCP"). Accordingly, plaintiff filed a request for an entry of default on July 17, 2009 pursuant to FRCP 55. The Clerk of the Court filed an entry of default on July 21, 2009. On August 10, 2009, plaintiff filed a motion for a permanent injunction based on defendant's default. After oral argument on August 18, 2009, the Court issued an order on August 24, 2009 that granted plaintiff's motion and permanently enjoined defendant from continuing in activities that would violate plaintiff's trademark rights.

On August 31, 2009, plaintiff filed a motion, pursuant to FRCP 55, for a default judgment with respect to money damages. At oral argument on September 16, 2009, the Court ordered an evidentiary hearing at which plaintiff would have the opportunity to provide testimony and exhibits confirming the damages amount calculated in its motion papers. As mentioned above, the evidentiary hearing occurred on October 14, 2009.

At the evidentiary hearing, Bruce Turner testified in plaintiff's behalf. For the last 11 years, Mr. Turner has been plaintiff's Vice President of Finance and its Chief Financial Officer. Mr. Turner testified that plaintiff seeks money damages for lost profits related only to its replacement parts business. Plaintiff does not seek damages related to its original machinery business. Mr. Turner confirmed that defendant worked for plaintiff as an employee from 1984--89, and then worked as a field service representative in the 1990s on an independent contractor basis. Plaintiff and defendant have had no relationship in this decade.

Mr. Turner then proceeded to offer testimony about the 14 exhibits that plaintiff entered into evidence at the hearing. These exhibits established plaintiff's sales figures, cost of sales, and profit margin for 2006, the year that plaintiff proposed as a baseline that could measure the impact of defendant's conduct. The exhibits then proceeded to establish that expected sales and profit fell in 2007 and 2008 compared to 2006 levels. For the 2009 year, plaintiff discounted its estimate of lost profit to account for economic conditions that prevailed during that time. In short, the exhibits presented at the evidentiary hearing documented the profit from replacement parts sales that plaintiff reasonably expected between October 2006, the first full month after defendant registered the domain for his website, and August 2009, when this Court issued the permanent injunction. The exhibits concluded with a calculation that plaintiff's reasonably expected lost profits resulting from defendant's trademark infringement totaled $1,186,382.29. This calculation corroborated both Mr. Turner's testimony and the arguments and calculations set forth in plaintiff's motion papers.

DISCUSSION

Liability

"Federal Rule of Civil Procedure 55 is the basic procedure to be followed when there is a default in the course of litigation. And it tracks the ancient common law axiom that a default is an admission of all well-pleaded allegations against the defaulting party." Vermont Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004) (citation omitted). Here, plaintiff's complaint alleged multiple violations of the Lanham Act and of state law pertaining to trademark infringement. Plaintiff's complaint alleged further that defendant had actual and constructive notice of plaintiff's trademark rights and proceeded anyway in a willful and intentional manner. All of these allegations ...


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