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Coach, Inc. and Coach Services, Inc v. Michael J. Mcmeins

March 9, 2012

COACH, INC. AND COACH SERVICES, INC., PLAINTIFFS,
v.
MICHAEL J. MCMEINS, INDIVIDUALLY AND DOING BUSINESS AS WWW.CARANISSTORE.COM, "CARANIS STORE," AND "CARANIS LITTLE STORE;": UNKNOWN WEBSITES 1-10; "JOHN DOES" 1-10; AND UNKNOWN ENTITIES 1-10, :: DEFENDANTS.



REPORT AND RECOMMENDATION TO THE HONORABLE BARBARA S. JONES, U.S.D.J.:

This is an action for trademark counterfeiting and infringement and unfair competition brought by Coach Inc. and Coach Services, Inc. (collectively, "Coach") against Michael J. McMeins, individually and doing business as www.carnisstore.com, Caranis Store, and Caranis Little Store; Unknown Websites 1-10; John Does 1-10; and Unknown Entities 1-10. Coach contends that by selling piratical copies of handbags and leather goods, the defendants violated the Lanham Trademark Act of 1946 (the "Lanham Act"), 15 U.S.C. §§ 1114, 1125(a), and 1125(c).

On May 27, 2011, Coach filed its complaint against the defendants. Two days later, Mr. McMeins was served with a copy of the Summons and Complaint, Temporary Restraining Order and all other supporting documents in this action. Despite initial communications between counsel for Coach and Mr. McMeins resulting in an entry of a Preliminary Injunction by Consent, this defendant failed to file an answer or respond to Coach's court-ordered discovery requests. On June 21, 2011, the Clerk of the Court issued a Certificate of Default against Mr. McMeins, and on November 7, 2011, the Honorable Barbara S. Jones, U.S.D.J., entered a default judgment and referred the case to me for an inquest on damages. That inquest was held on February 14, 2012, and although Mr. McMeins was provided with notice, he failed to appear. The following findings are therefore based on the evidence provided by the plaintiff.

Background

Coach manufactures and distributes high quality merchandise, including handbags, wallets, briefcases, footwear, apparel, and accessories. (Tr. at 7; Complaint, ¶ 7; Plaintiff's [Proposed] Findings of Fact and Conclusions of Law dated Dec. 16, 2011 ("Findings"), ¶ 6).*fn1 The company owns the trademark "COACH" in addition to several related trademarks, all of which frequently appear on the company's goods. (Tr. at 8-10; Complaint, ¶¶ 15, 16; Findings, ¶ 8). The plaintiff's trademarks have achieved a great deal of consumer recognition, not only in the United States but throughout the world, with global sales in the multi-millions of dollars. (Complaint, ¶ 14; Findings, ¶ 7 Affidavit of Tiffany Walden in Support of Plaintiff's Ex Parte Application for Temporary Restraining Order; Order to Show Cause Why a Preliminary Injunction Should not be Issued; Expedited Discovery Order; Asset Restraining Order; and Order Temporary Sealing the Court File dated May 23, 2011 ("Walden Aff."), ¶ 7). Coach's registered trademarks are symbols of its "quality, reputation and goodwill," and accordingly they have achieved a secondary meaning as identifiers of high quality merchandise. (Complaint, ¶¶ 20, 23, 24; Findings, ¶ 12, 15, 16).

In March 2011, Coach discovered the website, www.caranisstore.com ("the Website"), which was being used to promote and offer for sale handbags bearing couterfeits and infringements of the Coach Registered Trademarks. (Tr. at 4, 5; Complaint, ¶ 25; Findings, ¶ 17; Walden Aff., ¶ 14; Sample of Website Pages, attached as Exh. 2 to Walden Aff.). The Website never identified the bags as replicas but sold the infringing products at reduced prices. (Findings, ¶ 17; Walden Aff., ¶ 14).

Coach has provided substantial evidence that Mr. McMeins is the registrant, owner, operator, or controlling force behind the Website. (Complaint, ¶¶ 9, 10; Findings, ¶ 4). Coach conducted a reverse look-up using the phone number provided on the Website, which revealed that the registrant of the Website was Michael McMeins, located at "116 First Street, Nashua, MN 56565-6501." (Tr. at 5; Findings, ¶ 3; Walden Aff., ¶ 15). Coach also provided proof that Mr. McMeins is the owner, agent, and registrant of the stores doing business as "Caranis Store" and "Caranis Little Store," which are registered in the State of Minnesota at Mr. McMein's address. (Walden Aff. ¶ 16; Lexis Nexis Reverse Look-up, attached as Exh. 3 to Walden Aff.; Findings, ¶ 5).

On April 8, 2011, Coach's agent purchased a Coach handbag from the Website for $74.98 through PayPal. (Tr. at 5; Findings, ¶ 19;

Affidavit of Benjamin Kwapisz in Support of Plaintiffs' Ex Parte Application for a Temporary Restraining Order; Order to Show Cause Why a Preliminary Injunction Should not be Issued; Expedited Discovery Order; Asset Restraining Order ("Kwapisz Aff."), ¶ 3; Walden Aff., ¶ 17). The confirmation of payment listed "Michael McMeins" as the merchant. (Findings, ¶ 19; Kwapisz Aff., ¶ 4; Walden Aff., ¶ 17). Upon examination, another Coach agent determined that none of the handbag's parts were of genuine Coach origin, that the bag contained four counterfeits and infringements of the Coach Registered Trademarks, and that the bag was of "very poor quality." (Tr. at 4, 13-15; Findings, ¶ 20; Complaint, ¶ 16; Trademark Electronic Search System (TESS), attached as Exh. 1 to Complaint; Kwapisz, ¶ 5; Photographs, attached as Exh. 2 to Kwapisz Aff.; Walden Aff., 19). Coach's representative testified that Mr. McMeins was not authorized to use these marks. (Tr. at 12; Complaint, ¶¶ 19, 29, 30).

At the hearing for damages, Coach's counsel stated that "Coach has been the victim of an unprecedented wave of counterfeiting, much like the other luxury brands." (Tr. at 4). As some indication of the actual damages involved, Coach's representative testified that the supposed list price, $259.95, displayed on the Website, was close to the suggested retail price of an actual Coach handbag. (Tr. at 11-12). The representative further testified that sale of counterfeit goods damages Coach because it displaces the company's own sales and devalues the Coach brand. (Tr. at 17).

Based on the default judgment, Coach seeks to recover statutory damages of $200,000 per trademark infringed by the defendants for a total award of $800,000 under the section 1117 of the Lanham Act.*fn2 (Tr. at 20; Findings, ¶ 29). The award requested includes attorneys' fees and punitive damages. (Tr. at 23). Discussion

A. Jurisdiction This court has subject matter jurisdiction over the plaintiff's trademark claim pursuant to 28 U.S.C. §§ 1331 and 1338(a) as well as 15 U.S.C. § 1121. There is personal jurisdiction over the defendant because he transacted business in New York through an interactive website in connection with the matter at issue. See Kaufhold v. Cyclopian Music, Inc., No. 10 Civ. 4588, 2010 WL 5094630, at *3, *4 (S.D.N.Y. Dec. 14 , 2010); A.W.L.I. Group, Inc. v. Amber Freight Shipping Lines, No. 10 Civ. 5464, 2011 WL 6130149, at *4-10 (S.D.N.Y. Dec. 9, 2011); Enderby v. Secrets Maroma Beach Riviera Cancun, No. 10 Civ. 1015, 2011 WL 6010224, at *4, *12-14 (S.D.N.Y. Dec. 1, 2011); Penguin Group (USA) Inc. v. American Buddha, 16 N.Y.3d 295, 301, 302, 304-07, 921 N.Y.S.2d 171, 173-77 (2011).

B. Liability Following a default, all factual allegations of the complaint, except those relating to damages, must be accepted as true. Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Gucci America, Inc. v. MyReplicaHandbag.com, No. 07 Civ. 2438, 2008 WL 512789, at *1 (S.D.N.Y. Feb. 26, 2008) (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)).

In connection with this inquest, the plaintiff has requested damages only for trademark infringements in violation of the Lanham Act, and therefore liability need only be considered with respect to that claim.*fn3 There are two elements necessary to establish trademark infringement under the Lanham Act: (1) the plaintiff's ownership of a valid trademark and (2) the likelihood of confusion from the defendant's use of that trademark without the plaintiff's permission. Chanel, Inc. v. Louis, No. 06 CV 5924, 2009 WL 4639674, at *10 (E.D.N.Y. Dec. 7, 2009). Here, the allegations in the Complaint clearly establish a valid claim of infringement. The plaintiff has demonstrated ownership of the four marks at issue and has not authorized the defendant to use these marks. Nevertheless, the defendant has produced and sold materials bearing these trademarked designs. And, because of the recognition of Coach as a brand, there is likely to be confusion between its products and the defendant's.

Furthermore, the defendant's failure to appear and defend this action permits an inference that he was willful in infringing upon the trademarks. See Malletier v. Apex Creative International Corp., 687 F. Supp. 2d 347, 354 (S.D.N.Y. 2010); Tiffany (N.J.) Inc. v. Luban, 282 F. Supp. 2d 123, 124 (S.D.N.Y. 2003). ...


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