District Courts Adopting Middle Ground in Fashioning Statutory Damages Awards in Trademark Counterfeiting Cases

Two recent opinions, one from the Northern District of Illinois and another from the Southern District of New York, offer guidance to those electing statutory damages in lieu of actual damages and profits in trademark counterfeiting cases. The takeaway for litigators is that courts appear to be taking a middle ground in statutory damages awards, awarding $1 million per mark/good combination instead of the $2 million statutory maximum.

In Monster Energy Co. v. Meng Chun Jing, the plaintiff trademark owner and seller of popular energy drinks sued over four hundred defendants including individuals and business entities who were believed to be residents of the People’s Republic of China (PRC) or other foreign jurisdictions. (Second Am. Compl. 21). Many of these defendants operated AliExpress Internet Stores on aliexpress.com, id. 38-43, allegedly offering for sale and selling counterfeit Monster Energy products in the United States. The plaintiff moved for summary judgment on trademark infringement, counterfeiting and false designation of origin claims against individuals operating two online stores, seeking $2 million in statutory damages against each defendant (alleged to be counterfeiting one mark apiece). Under 15 U.S.C. § 1117(c)(2), a plaintiff may elect statutory damages of not more than $2 million per counterfeit mark per type of goods sold, offered for sale, or distributed if the court finds willful counterfeiting. The court granted the motions for summary judgment and entered a statutory damages award of $1,000,000 against each of the two defendants.

As to liability, the court determined that the plaintiff had twelve valid and federally-registered marks and that a likelihood of confusion existed as a matter of law, applying the factors delineated in Sorensen v. WD-40 Co. (7th Cir. June 11, 2015). As to remedies, the court, noting that district courts have “wide discretion” in awarding statutory damages, cut the requested damage award in half in light of what it characterized as mitigating factors –  (1) the lack of evidence that either online store was a “large-scale counterfeiting operation,” and (2) only “modest” assets seized from defendants’ PayPal accounts (almost $16,000 for one defendant and about $8,500 for another). The court further reasoned that although it had previously awarded statutory damages of $2 million against other defaulting defendants in the case, these defendants were “not in default.”

This decision can be contrasted with another recent opinion from the Southern District of New York, also involving internet sales. In North Face Apparel Corp. v. Moler (S.D.N.Y. July 16, 2015), three individual defendants had defaulted. The plaintiff sought maximum statutory damages of $2 million for eleven mark/good combinations totaling $22 million. The court found “significant evidence” of “extensive” counterfeiting. For example, one defendant in business for three years had apparently earned over $1.5 million in U.S. sales, and his business PayPal account reflected receipt of over $356,000. Another touted the fact that he had a “ton” of product in his warehouse. Nevertheless, just like the court in Monster Energy, the Moler court cut in half the requested maximum sought and instead, awarded $1 million for each of eleven mark/good combinations totaling $11 million.

In the face of wide discretion given to courts under section 1117(c)(2), district courts appear to be taking a middle ground in fashioning statutory damage awards. Gibbons P.C. will continue to monitor trends in statutory damages awards in trademark counterfeiting cases.