February 28, 2014 - SDNY Intellectual Property Law

Case 1:13-cv-01629-LGS-SN Document 60 Filed 02/28/14 Page 1 of 20

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

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LEVITON MANUFACTURING CO.,

Plaintiff,

-against-

FASTMAC PERFORMANCE UPGRADES, INC. and TRUEPOWER, INC.,

Defendants.

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SARAH NETBURN, United States Magistrate Judge.

TO THE HONORABLE LORNA G. SCHOFIELD:

2/28/2014

13-CV-01629 (LGS)(SN)

INQUEST ON DAMAGES

On August 20, 2013, the Honorable Lorna G. Schofield referred this matter to my docket for an inquest on damages following an entry of default against defendants Fastmac Performance

Upgrades, Inc. (“Fastmac”) and TruePower, Inc. (“TruePower”). On October 16, 2013, plaintiff

Leviton Manufacturing Company (“Leviton”) submitted a Proposed Findings of Fact and

Conclusions of Law (“Proposed Findings”), a Memorandum of Law in Support of Judgment for

Monetary Damages (“Memorandum”), and the declarations of Adam M. Cohen and Gerard

Schiano-Strain. Defendants failed to respond. Because Leviton has provided the Court with a sufficient basis on which to award damages, the Court recommends an award of $6,054,720 plus pre-judgment and post-judgment interest and reasonable attorneys’ fees and costs.


BACKGROUND

I.

Factual Background

In light of defendants’ default, Leviton’s properly-pleaded allegations are accepted as true, except those relating to damages. See Cotton v. Slone, 4 F.3d 176, 181 (2d. Cir. 1993). The following findings of fact are based on the complaint’s allegations regarding liability.

Leviton was founded in 1906. It manufactures, promotes, advertises, distributes, and sells electrical wiring devices, network and data center connectivity solutions, and lighting energy management systems. For more than a century, Leviton has invested in research and development, manufacturing, distributing, and training to deliver the highest quality products with the highest safety ratings. Approximately nine out of ten homes in North America use

Leviton products, and industry professionals consistently rank Leviton wiring devices number one in brand performance. Leviton has approximately 25,000 products, with nearly 600 active

U.S. patents.

Leviton facilities, testing laboratories, and wiring products are certified. Its wiring products are designed to be installed and used according to the National Electrical Code

(“NEC”). The NEC requires that all electrical products be “Listed” with a Nationally Recognized

Testing Laboratory (“NRTL”). Underwriters Laboratories, Inc. (“UL”), which certifies Leviton’s testing laboratories and Leviton’s wiring products, is an NRTL. Leviton’s receptacles are Listed with UL and are in accordance with its standard for safety for receptacles – Safety UL-498.

Leviton’s products consistently meet or exceed industry standards for quality and safety.

Leviton’s leadership in the field has caused its name to be regarded as a symbol of quality craftsmanship and engineering.

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Leviton owns numerous trademarks, service marks, logos, taglines, and tradenames for its electrical wiring devices, network and data center connectivity solutions, and lighting management systems. Leviton is the trademark owner of the following registered or pending trademarks: Reg. Nos. 2594280, 1892953, 1004736, 2594280. These include the names

“Leviton” and “Decora.” Leviton has invested millions of dollars in advertising and promoting its electrical wiring devices, network and data center connectivity solutions, and lighting energy management systems under its trademarks. Leviton’s trademarks have become “strong and famous source identifiers for Leviton’s products in North America and throughout the world.”

(Compl. ¶ 21.)

Defendants create and manufacture “upgrade” products for “original equipment manufacturers” and sell directly to distributors, dealers, and end-users. (Compl. ¶ 23.) The U-

Socket is one of the upgrade products sold by the defendants. The U-Socket is a combination AC receptacle that has two built-in USB ports, which can charge compatible devices. The U-Socket is designed to replace an existing three-prong wall outlet.

To produce the U-Socket, the defendants obtain Leviton receptacles and wall plates bearing Leviton trademarks. Without permission, authorization, or proper certification, the defendants materially modify the Leviton products by adding non-Leviton voltage transforming circuitry and USB ports and by cutting holes in the wallplate to accommodate the modification.

These changes are made outside the oversight and “strict quality control standards and process” established by Leviton. (Compl. ¶ 33.)

These modifications may compromise the safety, integrity, and compliance of the incorporated Leviton products. The “piggy-backing” of the two USB ports with “the back-wire push-in contacts onto the genuine Leviton receptacle” affects the integrity of the Leviton product

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Case 1:13-cv-01629-LGS-SN Document 60 Filed 02/28/14 Page 4 of 20 as it modifies the intended use, quality, and safety of the products. (Compl. ¶ 28.) The Leviton receptacle was not designed, certified, or Listed for these modifications. The modification, therefore, violates the UL Listing and voids the Listing mark on the Leviton receptacle. As such, the installation of the U-Socket in locations that are regulated by the NEC constitutes a violation of the NEC.

The defendants sell these modified receptacles and wallplates with the original Leviton trademarks on them, falsely giving the impression that the modifications are made or approved by Leviton. The way defendants market these products is likely to create confusion by those who purchase or see the U-Socket. Consumers may believe that the U-Socket is authorized or approved by Leviton when it is not.

In a June 9, 2011 cease and desist letter, Leviton demanded that FastMac stop selling and distributing the modified products, marketing or advertising the modified products, or using any photos or images of the modified products. The defendants failed to respond to this letter. On

November 27, 2012, Leviton sent another letter reasserting its demand to cease and desist. The defendants again failed to respond to or comply with Leviton’s demands.

II.

Procedural Background

On March 12, 2013, Leviton filed this action against Fastmac and TruePower alleging trademark infringement, false designations of origin and dilution under 15 U.S.C. § 1051 et seq.

, as amended (the “Lanham Act”), and false and misleading commercial activities arising under

New York General Business Law §§ 349, 350, 360-k and 360-l and under the common law of the State of New York. The complaint was served on TruePower on March 19, 2013, and on

FastMac on March 26, 2013.

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On March 15, 2013, Leviton moved for a preliminary injunction enjoining FastMac and

TruePower from, inter alia , manufacturing, marketing, and selling the U-Socket with Leviton’s trademarks. On April 17, 2013, FastMac, through counsel, answered the complaint and opposed the motion for a preliminary injunction. On May 14, 2013, Judge Schofield granted Leviton’s motion for a preliminary injunction based on its claim for trademark infringement under the

Lanham Act and set a discovery schedule.

Thereafter, FastMac and TruePower both failed to respond to Leviton’s discovery requests and failed to appear for depositions. On June 11, 2013, FastMac’s counsel filed a motion to withdraw due, in part, to FastMac’s failure to comply with Judge Schofield’s May 14,

2013 Order. On July 8, 2013, Judge Schofield granted the motion to withdraw and directed

FastMac to obtain new counsel by July 24, 2013. Judge Schofield advised the parties that she would consider a motion for default against FastMac should it fail to obtain counsel by that date.

On August 2, 2013, Leviton filed an Order to Show Cause for a default judgment against

FastMac and TruePower. Neither defendant responded. On August 20, 2013, Judge Schofield granted Leviton’s motion for default and further enjoined defendants’ conduct.

On August 20, 2013, Judge Schofield referred this matter to my docket for an inquest on damages, attorneys’ fees, and costs. On September 16, 2013, I directed Leviton to file submissions supporting its request for a final judgment against defendants. The Order notified the parties that, absent a request from either side that the Court hold a hearing, the Court would conduct its inquest regarding damages based solely upon the parties’ written submissions. In response, Leviton submitted the Proposed Findings, a memorandum of law, and affidavits seeking to recover a total amount of $6,054,720 plus pre-judgment and post-judgment interest

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Case 1:13-cv-01629-LGS-SN Document 60 Filed 02/28/14 Page 6 of 20 and reasonable attorneys’ fees and costs. The Court gave defendants until November 16, 2013 to respond, but they did not. Neither party has requested a hearing on the issue of damages.

DISCUSSION

The Court of Appeals for the Second Circuit succinctly set forth the procedural rules applicable to the entry of a default judgment in City of New York v. Mickalis Pawn Shop, LLC:

“Federal Rule of Civil Procedure 55 is the basic procedure to be followed when there is a default in the course of litigation.” Vt. Teddy Bear Co. v. 1–800

Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004). Rule 55 provides a “two-step process” for the entry of judgment against a party who fails to defend: first, the entry of a default, and second, the entry of a default judgment. New York v.

Green, 420 F.3d 99, 104 (2d Cir. 2005). The first step, entry of a default, formalizes a judicial recognition that a defendant has, through its failure to defend the action, admitted liability to the plaintiff. . . . The second step, entry of a default judgment, converts the defendant’s admission of liability into a final judgment that terminates the litigation and awards the plaintiff any relief to which the court decides it is entitled, to the extent permitted by Rule 54(c).

645 F.3d 114, 128 (2d Cir. 2011). The Court of Appeals has noted that, while the “typical Rule

55 case [is one] in which a default has entered because a defendant failed to file a timely answer,” Brock v. Unique Racquetball & Health Clubs, Inc., 786 F.2d 61, 64 (2d Cir. 1986), “a district court is also empowered to enter a default against a ‘defendant [that] has failed to . . . otherwise defend.’” Mickalis Pawn Shop, 645 F.3d at 129 (quoting Brock,786 F.2d at 64). Here,

TruePower failed to file an answer or respond at all to Leviton’s complaint, and FastMac failed to defend by not responding to discovery and failing to obtain new counsel once its former counsel withdrew. See Jones v. Niagara Frontier Transp. Auth., 722 F.2d 20, 22 (2d Cir. 1983)

(noting that a corporation cannot proceed pro se ). See also Mickalis Pawn Shop, 645 F.3d at 130

(holding that entry of default was proper where a limited liability company failed to obtain counsel despite the court’s warning that such failure would result in default).

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I.

Liability

Courts evaluating damages in a default context first look to the complaint to determine whether the plaintiff has established a prima facie case for recovery. See Lenard v. Design

Studio, 889 F. Supp. 2d 518, 528 (S.D.N.Y. 2012) (the court must first determine whether the allegations in the complaint were sufficiently pleaded to establish liability); Eurosteel Corp. v.

M/V Koggegracht, 01 Civ. 7731 (DLC), 2003 WL 1872652, at *1 (S.D.N.Y Apr. 11, 2003)

(finding that a report and recommendation correctly concluded that plaintiff had established a prima facie case for recovery). Leviton filed federal claims for trademark infringement, false designation of origins, and dilution under the Lanham Act and New York state law causes of action.

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Leviton asserts a claim for federal trademark infringement in violation of 15 U.S.C. §

1114(1). “To succeed on . . . Lanham Act claims, [the plaintiff] must show that it has a valid mark that is entitled to protection under the Lanham Act and that [the defendant’s] actions are likely to cause confusion with [the plaintiff’s] mark.” Gucci Am., Inc. v. Tyrrell-Miller, 678 F.

Supp. 2d 117, 119 (S.D.N.Y. 2008) (quoting Sports Auth., Inc. v. Prime Hospitality Corp., 89

F.3d 955, 960 (2d Cir. 1996)). The allegations in the complaint establish a valid claim of infringement. Indeed, Judge Schofield has already granted Leviton an injunction against the defendants on this claim.

1 Because Leviton seeks damages and attorneys’ fees only under the Lanham Act, the Court does not address defendants’ liability for any asserted state law claims. Furthermore, although Leviton has asserted three claims under the Lanham Act—trademark infringement, pursuant to 15 U.S.C § 1114, trademark dilution, pursuant to 15 U.S.C. § 1125(c), and false designation of origin, pursuant to 15 U.S.C. §

1125(a)—it seeks damages only under the trademark infringement claim. Therefore, I address liability for that claim alone. See e.g., Coach, Inc. v. McMeins, 11 Civ. 3574 (BSJ)(JCF), 2012 WL 1071269, at *3 n.3 (S.D.N.Y. Mar. 9, 2012), rep. and rec. adopted, 2012 WL 1080487 (considering only one Lanham Act claim when plaintiffs sought only one set of statutory damages).

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First, Leviton owns at least four federally registered trademarks related to the claims in this action. These registered trademarks are “ prima facie evidence of the registrant’s exclusive right to use the mark in commerce on the product.” Id. (quoting Gruner + Jahr USA Publ’g v.

Meredith Corp., 991 F.2d 1072, 1076 (2d Cir. 1993)). Leviton’s federally registered trademarks thus satisfy the first prong under the Lanham Act.

Second, Leviton has pled facts demonstrating a likelihood of confusion from the defendants’ use of Leviton’s trademark. To determine the likelihood of confusion, courts in this circuit generally uses a multi-factor test set forth in Polaroid Corp v. Polarad Elecs. Corp: “the strength of his make, the degree of similarity between the two marks, the proximity of the products, the likelihood that the prior owner will bridge the gap, actual confusion, and the reciprocal of defendant’ good faith in adopting its own mark, the quality of defendant’s product, and the sophistication of the buyers.” Polaroid, 287 F.2d 492, 495 (2d Cir. 1961). It is not necessary, however, for the Court to perform a step-by-step analysis when the case involves counterfeit merchandise. See Cartier v. Aaron Faber, Inc., 512 F. Supp. 2d 165, 169 (S.D.N.Y.

2007). See also Gucci Am., Inc. v. Duty Free Apparel, Ltd., 286 F. Supp. 2d 284, 287 (S.D.N.Y.

2003) (“[C]ounterfeits, by their very nature, cause confusion.”). Furthermore, “[a] product is deemed counterfeit if it contains an original mark that is likely to deceive the public as to its origin.” Cartier, 512 F. Supp. 2d at 169 (citing Cartier v. Symbolix, Inc., 386 F. Supp. 2d 354,

361 (S.D.N.Y. 2005)).

Here, defendants used a counterfeit mark, and therefore, the offending product should be considered inherently confusing. Leviton stated in its complaint that the defendants’ U-Socket contains parts bearing Leviton’s original trademark. Given this unauthorized use of the original

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Case 1:13-cv-01629-LGS-SN Document 60 Filed 02/28/14 Page 9 of 20 mark without sufficient labeling indicating the relationship between Leviton and the U-Socket, the product may be considered a counterfeit likely to deceive the public as to its origin.

Leviton has also independently pled facts sufficient to establish a likelihood of confusion considering the relevant Polaroid factors. Leviton alleged that the defendants used its original marks without authorization in a modified product. The modifications made to Leviton’s products in the production of the U-Socket affected the core function, design, quality, and integrity of Leviton’s products, thereby potentially reducing their quality and safety.

Furthermore, the defendants acted in bad faith by knowingly using Leviton’s trademarks despite warnings from Leviton that it did not authorize such use. Leviton stated that the presence of its trademark on the U-Socket falsely gives a consumer the impression that Leviton approved of or was responsible for the modified product. As to safety concerns, such use by defendants would confuse consumers by creating the impression that the U-Socket had been manufactured according to Leviton’s standards.

Given these facts, and Leviton’s nationally recognized name, Leviton has pled a prima facie case of trademark infringement under the Lanham Act. See e.g., Cartier, 512 F. Supp. 2d at

169-70 (finding that modified watches retaining the Cartier trademark without clear disclosure regarding any modification created a likelihood of confusion and constituted a trademark infringement); Coach Servs., Inc. v. K Ya Int’l, Inc., 09 Civ. 4656 (RMB)(JCF), 2010 WL

2771897, at *2 (S.D.N.Y. June 10, 2010) (given the recognition of the Coach brand, defendants unauthorized use of the Coach trademark was likely to cause confusion and established a valid claim for trademark infringement).

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II.

Inquest on Damages

Once liability is established, the sole remaining issue before the court is whether the plaintiff has provided adequate support for the relief it seeks. Transatlantic Marine Claims

Agency, Inc. v. Ace Shipping Corp., Div. of Ace Young Inc., 109 F.3d 105, 111 (2d Cir. 1997).

See also Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir.

1992) (“While a party’s default is deemed to constitute a concession of all well pleaded allegations of liability, it is not considered an admission of damages.”).

On an inquest for damages, the plaintiff bears the burden of proof and must introduce sufficient evidence to establish the amount of damages with reasonable certainty. Transatlantic

Marine, 109 F.3d at 111. See also Lenard, 889 F. Supp. 2d at 538 (awarding no damages because plaintiff failed to demonstrate the amount of fines incurred that were attributable to defendant);

Griffiths v. Francillon, 10 Civ. 3101 (JFB)(GRB), 2012 WL 1341077, at *2 (E.D.N.Y. Jan. 30,

2012) (recommending that no damages be awarded because motion papers alone were insufficient to support an award of damages), rep. and rec. adopted, 2012 WL 1354481

(E.D.N.Y. Apr. 13, 2012). A court may determine the appropriate damages on the basis of affidavits and other documentary evidence “as long as [the court has] ensured that there [is] a basis for the damages specified in the default judgment.” Transatlantic Marine, 109 F.3d at 111

(quoting Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d. Cir. 1989)). See Action

S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991) (leaving the decision of whether a hearing is necessary for determining damages to the discretion of the district court). See also

Fed. R. Civ. P. 55(b)(2).

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A.

Principal Amount

15 U.S.C. § 1117(a) provides the framework by which to calculate damages on a trademark infringement claim under the Lanham Act. A plaintiff may elect to seek defendant’s profits, damages sustained by the plaintiff, and the costs of the action. 15 U.S.C. § 1117(a). In assessing a defendant’s profits, the plaintiff is required to prove only the defendant’s sales; the defendant must prove costs or any claimed deductions. Id.; accord Am. Honda Motor Co. v. Two

Wheel Corp., 918 F.2d 1060, 1063 (2d Cir. 1990). In cases involving the intentional and unauthorized use of a counterfeit mark in commerce under § 1114(1)(a), the court must, unless it finds extenuating circumstances, enter judgment for three times defendant’s profits or plaintiff's damages, whichever is greater, plus reasonable attorneys’ fees. 15 U.S.C. 1117(b).

Leviton seeks three times FastMac’s profits. In a sworn declaration filed in opposition to

Leviton’s motion for preliminary injunction and dated April 17, 2013, 2 Abbi Vakil, founder and

President of FastMac, acknowledged that FastMac has sold approximately 68,000 U-Sockets incorporating the Leviton receptacle since the middle of 2011. Leviton provided documentation that the average price of the U-Sockets sold on Amazon.com is $29.63. None of the defendants have submitted any evidence regarding net revenue, the cost of manufacturing the U-Socket, or the basis for any other claimed deductions.

Where the plaintiff has met its burden by establishing the defendant’s sales, and the defendant has failed to produce any evidence of net revenue, costs, or deductions, the plaintiff is entitled to the defendant’s gross revenue. See Am. Honda Motor Co., 918 F.2d at 1063

(“Ordinarily, a plaintiff that has proved the amount of infringing sales would be entitled to that amount unless the defendant adequately proved the amount of costs to be deducted from it.”);

2 Although the declaration is dated April 17, 2012, it is plain from its file date – April 17, 2013 – that that date was in error and that the correct signature date is April 17, 2013. The Court is further assured of this typographical error because the declarant addresses a conference that occurred in September 2012.

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Harris v. Fairweather, 11 Civ. 2152 (PKC)(AJP), 2012 WL 3956801, at *4 (S.D.N.Y. Sept. 10,

2012) (“Because the ‘defendant must prove all elements of cost or deduction claimed,’ 15 U.S.C.

§ 1117(a), Harris is entitled to an award of Fairweather’s gross revenue . . . without reduction for

Fairweather’s expenses.”), rep. and rec. adopted, 2012 WL 5199250, at *4 (S.D.N.Y. Oct. 19,

2012); BeautyBank, Inc. v. Harvey Prince LLP, 10 Civ. 955 (DAB)(GWG), 2011 WL 671749, at

*5 (S.D.N.Y. Feb. 24, 2011) (“BeautyBank is entitled to the presumption that the total amount of sales alleged . . . reflects its profits.”), rep. and rec. adopted, 2011 WL 1483969 (S.D.N.Y. Apr.

18, 2011); Gucci Am., Inc. v. Rebecca Gold Enters., Inc., 798 F. Supp. 177, 182 (S.D.N.Y. 1992)

(“In stark contrast [to the plaintiff], the defendant must prove all elements of costs or deductions claimed.”) Because defendants have provided no information as to their costs or other deductions from the sale price, Leviton is entitled to the presumption that the total amount of sales alleged,

$2,018,240, reflects FastMac’s profits. Although this figure unquestionably represents an overstatement of FastMac’s profits, having failed to submit any evidence of net revenue, costs, or other deductions, FastMac cannot fairly complain. In addition, because the number of U-

Sockets sold was accurate only to April 17, 2013, FastMac has likely had additional sales, which are not reflected in this calculation.

Furthermore, defendants’ violation warrants treble damages for the intentional use in commerce of a mark known to be a counterfeit. 15 U.S.C. § 1117(b). First, the defendants’ default in this action is sufficient to deem defendants’ conduct intentional. Tiffany (NJ) Inc. v.

Luban, 282 F. Supp. 2d 123, 124 (S.D.N.Y. 2003) (finding defendant’s infringement willful by virtue of the default). See also All-Star Mktg. Grp., LLC v. Media Brands Co., Ltd., 775 F. Supp.

2d 613, 621-22 (S.D.N.Y. 2011) (citing cases). Furthermore, Leviton alleged that the defendants used a mark they knew to belong to Leviton without Leviton’s approval. Defendants engaged in

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Case 1:13-cv-01629-LGS-SN Document 60 Filed 02/28/14 Page 13 of 20 this conduct even after two warnings from Leviton through the “cease and desist” letters, the filing of this lawsuit, and a preliminary injunction.

Moreover and as briefly discussed above, the unauthorized use of the actual trademark rather than a similar or “fake” trademark may be considered a counterfeit mark. See Cartier, 512

F. Supp. 2d at 169 (finding a genuine Cartier watch that had been modified but still retained the

Cartier trademark to be a counterfeit under the Lanham Act); Cartier, 386 F. Supp. at 361. See also Westinghouse Elec. Corp. v. General Circuit Breaker & Elec. Supply Inc., 106 F.3d 894,

900 (9th Cir. 1997) (holding that reconditioned Westinghouse circuit breakers bearing the

Westinghouse trademark could qualify as “counterfeit” despite the fact that the trademark used was the actual Westinghouse trademark); Rolex Watch USA, Inc. v. Meece, 158 F.3d 816, 826-

27 (5th Cir. 1998) (remanding to consider whether genuine Rolex watches modified with nongenuine parts were counterfeit). “When an original mark is attached to a product in such a way as to deceive the public, the product itself becomes a ‘counterfeit’ just as it would if an imitation of the mark were attached.” Westinghouse, 106 F.3d at 900. See also Cartier, 512 F. Supp. 2d at

169 (“A product is deemed counterfeit if it contains an original mark that is likely to deceive the public as to its origin.”). Therefore, given defendants’ knowing and intentional use of a counterfeit mark in the sale of its U-Sockets, the Court must award Leviton three times defendants’ profits, or $6,054,720, absent extenuating circumstances, which have not been shown.

Accordingly, I find that there is a basis for the damages requested in the Proposed

Findings of Fact and Memorandum of Law and reasonable certainty that Leviton is entitled to recover three times defendants’ profits for the sale of U-Sockets, or $6,054,720.

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B.

Pre-Judgment and Post-Judgment Interest

Leviton seeks pre-judgment interest from June 9, 2011 (the date of the first cease and desist letter) at New York’s statutory rate of nine percent per annum. It offers no legal argument in support of this request. The district court has substantial discretion in determining an award of pre-judgment interest.

The goal of crafting an appropriate prejudgment interest calculation is to address adequately the “circumstances of the individual case” by considering the “remedial purpose” of the judgment, the “fairness and the relative equities of the award,” and “the same considerations that inform the court’s decision whether or not to award interest at all.” Jones v. UNUM Life Ins.

Co. of Am., 223 F.3d 130, 139 (2d Cir. 2000). In addition, in measuring the benefit to defendants of the free use of the money, a court may consider the likely rate of return that defendants could have achieved by investing the funds. Id.

Pre-judgment interest on a defendant’s profits has been awarded in cases where the award was made pursuant to § 1117(b) for the sale of counterfeit goods. Section 1117(b) specifically authorizes an award of pre-judgment interest, presumably as part of its goal to “provide an adequate penalty for such [counterfeiting] conduct.” Joint Statement on Trademark

Counterfeiting Legislation, H.R.J. Res. 648, 98th Cong., 2d Sess., 130 Cong. Rec. H12076,

H12083 (daily ed. Oct. 10, 1984), quoted in Louis Vuitton S.A. v. Spencer Handbags Corp., 765

F.2d 966, 971 (2d Cir. 1985). As that court concluded, “it is clear that Congress intended [this section’s] effect to be punitive rather than compensatory.” Id. In contrast, section 1117(a) does not contain a specific authorization for pre-judgment interest, and cautions that awards thereunder “shall constitute compensation and not a penalty.” 15 U.S.C. § 1117(a).

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Having found that defendants have engaged in the sale of counterfeit goods, the Court elects to apply the federal statutory rate identified in 15 U.S.C. § 1117(b) (“In such a case, the court may award prejudgment interest on such amount at an annual interest rate established under section 6621(a)(2) of title 26, beginning on the date of the service of the claimant’s pleadings setting forth the claim for such entry of judgment and ending on the date such entry is made, or for such shorter time as the court considers appropriate.”). Accordingly, I recommend that any judgment include interest at the rate contained in 26 U.S.C. § 6621(a)(2), from March

26, 2013 (the date FastMac was served with the complaint), until the date judgment is entered.

“[P]ostjudgment interest is governed by federal statute,” Schipani v. McLeod, 541 F.3d

158, 165 (2d Cir. 2008) (citing 28 U.S.C. § 1961(a)), and is mandatory. Id. See also

Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96, 100-01 (2d Cir. 2004) (holding that the award of post-judgment interest was mandatory in a civil case recovered in a district court);

Donovan v. Sovereign Sec., Ltd., 726 F.2d 55, 58 (2d Cir. 1984) (“The allowance of postjudgment interest under 28 U.S.C. § 1961 is mandatory for any money judgment.”). As this civil case was filed in a federal district court, Leviton is entitled to post-judgment interest according to the requirements set forth in 28 U.S.C. § 1961(a).

C.

Attorneys’ Fees

An award of reasonable attorneys’ fees is provided for under 15 U.S.C. § 1117(b) when a counterfeit mark is used. In addition, pursuant to 15 U.S.C. § 1117(a), a court may award

“reasonable attorney fees” to the prevailing party in “exceptional circumstances.” “The Second

Circuit has understood this standard to mean instances of ‘fraud or bad faith’ or ‘willful infringement.’” Ahava (USA), Inc. v. J.W.G., Ltd., 286 F. Supp. 2d 321, 324 (S.D.N.Y. 2003).

See also GTFM, Inc. v. Solid Clothing, Inc., 215 F. Supp. 2d 273, 305-06 (finding willful

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Case 1:13-cv-01629-LGS-SN Document 60 Filed 02/28/14 Page 16 of 20 infringement, continued sales, and defendant’s poor conduct justified an award of reasonable attorneys’ fees); Gucci Am., Inc. v. Rebecca Gold Enters., 802 F. Supp. 1048, 1050-51

(S.D.N.Y. 1992). “Courts accept allegations of willful infringement when addressing an attorney’s fees motion alongside a default judgment motion.” Union of Orthodox Jewish

Congregations of Am. v. Queseria Fiesta, LLC, 12 Civ. 6059 (JPO), 2013 WL 1386965, at *2

(S.D.N.Y. Apr. 5, 2013) (citing Gen. Nutrition Inv. Co. v. Gen. Vitamin Ctrs., Inc., 817 F. Supp.

2d 66, 74-75 (E.D.N.Y. 2011)), rep. and rec. adopted, 2012 WL 5199250 (S.D.N.Y. Oct. 19,

2012).

Here, the allegations in the complaint of willful infringement, knowing use of a counterfeit, and the default of the defendants justify an award of attorneys’ fees. See Harris, 2012

WL 3956801, at *6 (finding that an award of attorneys’ fees was justified by allegations of willful infringement and default); see also Union of Orthodox Jewish Congregations of Am.,

2013 WL 1386965, at *2 (same); Sara Lee Corp. v. Bags of N.Y., Inc., 36 F. Supp. 2d 161, 170

(S.D.N.Y. 1999) (stating that “the sort of misconduct that supports an attorney fees award includes not only willful infringement, but also willful defiance and protraction of judicial processes attempting to stop the illegalities”); Gucci Am., Inc., 802 F. Supp. at 1051 (awarding attorneys’ fees as an exceptional case); Ahava (USA), Inc., 286 F. Supp. at 324 (same).

In support of its claim for attorneys’ fees, Leviton submitted the Declaration of Adam M.

Cohen, Chair of the Kane Kessler intellectual property department, billing invoices sent to

Leviton, and a list of unbilled fees. Four attorneys with Kane Kessler worked on this matter.

Adam Cohen was admitted to the New York Bar in 1989. He is also admitted to practice before the Southern and Eastern Districts of New York as well as the Court of Appeals for the Second

Circuit. His billing rate is $540.00 per hour. Dana Susman, a partner at Kane Kessler and lead

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Case 1:13-cv-01629-LGS-SN Document 60 Filed 02/28/14 Page 17 of 20 counsel in this case billed at a rate of $485.00 an hour. She has 17 years of state and federal litigation experience. Gerard Schiano-Strain, an associate in the litigation practice group who has been admitted to practice law in both the Southern and Eastern Districts of New York for more than 10 years, billed at a rate of $375.00 an hour. Brendan P. McFeely, an associate in the intellectual property department with 15 years of experience, billed at a rate of $400.00 an hour.

Over the course of approximately six months, Kane Kessler billed Leviton $101,394 in fees and

$25,494.69 in costs. The costs included, inter alia , Westlaw services, shipping costs, reproduction costs, court filings, and “attorney services.” Kane Kessler subsequently accrued over $9,000.00 in additional fees but agreed to cap the amount at $5,000.00.

The starting point in determining a reasonable fee award is the “lodestar” method by which fees are determined by multiplying the numbers of hours reasonably expended by a reasonable hourly rate. See Crescent Publ’g Grp., Inc. v. Playboy Enters., Inc., 246 F.3d 142,

150-51 (2d Cir. 2001). The Court of Appeals for the Second Circuit requires a party seeking attorneys’ fees to support that request with contemporaneous time records. See Heisman Trophy

Trust v. Smack Apparel Co., 637 F. Supp. 2d 146, 159 (S.D.N.Y. 2009) (an application for courtordered compensation must be accompanied by contemporaneous time records specifying the attorney, the date, the hours expended, and the nature of the work) (citing New York State Ass’n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983)).

The hourly rate used in determining a fee award should be “what a reasonable, paying client would be willing to pay.” Arbor Hill Concerned Citizens Neighborhood Ass’n v. Cnty. of

Albany, 522 F.3d 182, 184 (2d Cir. 2007). The Court should consider rates approved in other cases in the District and any evidence offered by the parties. See Malletier v. Artex Creative Int’l

Corp., 687 F. Supp. 2d 347, 359 (S.D.N.Y. 2010). The hourly rates charged by Leviton’s counsel

17

Case 1:13-cv-01629-LGS-SN Document 60 Filed 02/28/14 Page 18 of 20 are reasonable based on the experience and specialization of the attorneys. See Ritchie v. Gano,

756 F. Supp. 2d 581, 583 (S.D.N.Y. 2010) (finding rates of $475 and $525 per hour for partners with over twenty years of experience in this district to be reasonable); Malletier, 687 F. Supp. 2d at 360 (approving rates between $400 and $540 for partners with twenty-five years of experience and $325 to $470 for associates, though recognizing that the rates were on the “high side”); Pyatt v. Raymond, 10 Civ. 8764 (CM), 2012 WL 1668248, at *6 (S.D.N.Y. May 10, 2012) (collecting cases approving $400 to $650 hourly rates for partners in copyright and trademark cases).

Leviton provided the Court with most of its attorneys’ contemporaneous time records.

The submitted records reflect an appropriate number of hours worked with sufficient specificity as to the individual tasks performed. Given defendants continued sale of U-Sockets and their failure to retain new counsel, Leviton was required to file not only a complaint, but a motion for injunctive relief and a motion for default judgment. The submitted documents, however, failed to include a detailed listing of contemporaneous time records for August 2013 and for September

2013. Nor were any details provided for the unbilled $5,000 in subsequent attorneys’ fees.

Accordingly, I find that those hours should not be included in an award of attorneys’ fees. See

Scott v. City of New York, 626 F.3d 130, 133-34 (2d Cir. 2010) (“[A]bsent unusual circumstances attorneys are required to submit contemporaneous records with their fee applications. . . . [This is] a strict rule from which attorneys may deviate only in the rarest of cases [e.g. fire or computer malfunction] . . . .”). I, therefore, recommend that the amount Kane

Kessler billed for August 2013 ($9,854.45), September 2013 ($2,110.52), and the unbilled subsequent fees ($5,000) be deducted from the requested attorneys’ fees and that Leviton be awarded reasonable attorneys’ fees in the amount of $91,182.40.

18


With respect to expenses, Kane Kessler submitted an invoice for total costs billed of

$25,494.69. Of this amount, apparently $21,014.06 is for “attorney services.” Nothing in the submission clarifies what attorney services are or why they were retained for this action.

3

Without a justification (or explanation) for this expense, the Court cannot determine whether these expenses are the kind reasonably “incurred by the attorney and which are normally charged fee-paying clients.” Reichman v. Bonsignore, Brignati & Mazzotta P.C., 818 F.2d 278, 283 (2d

Cir. 1987). See also Li Ping Fu v. Pop Art Int’l Inc., 10 Civ. 8562 (DLC)(AJP), 2011 WL

4552436, at *5 (S.D.N.Y. Sept. 19, 2011) (costs as to which “plaintiff has not provided supporting documentation” are “not recoverable”), rep. and rec. adopted in relevant part, 2011

WL 6092309 (S.D.N.Y. Dec. 7, 2011). Accordingly, I recommend that Leviton be awarded

$4,480.63 in costs, which excludes the $21,014.06 sought for “attorney services.”

CONCLUSION

Based on the evidence presented and the applicable case law, the Court recommends that

Leviton be awarded $6,054,720 in damages plus pre-judgment interest pursuant to 11 U.S.C. §

1117(b), and post-judgment interest pursuant to 28 U.S.C. § 1961(a). Finally, the Court recommends that Leviton be awarded reasonable attorneys’ fees in the amount of $91,182.40— reflecting a decrease based on the lack of itemization for August, September, and the additional unbilled services—and costs in the amount of $4,480.63.

* * *

3 An expense item on May 23, 2013 lists “attorney services” paid to Vivaldi Partners, Inc. in the amount of “($2,801.87).” This is the only reference the Court identified to attorney services.

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NOTICE OF PROCEDURE FOR FILING OBJECTIONS

TO THIS REPORT AND RECOMMENDATION

The parties shall have fourteen days from the service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed. R. Civ. P. 6(a), (d) (adding three additional days when service is made under Fed. R. Civ. P. 5(b)(2)(C), (D), (E), or (F)). A party may respond to another party’s objections within fourteen days after being served with a copy. Fed. R. Civ. P. 72(b)(2).

Such objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Lorna G. Schofield at the United States Courthouse, 40 Foley

Square, New York, New York 10007, and to any opposing parties. See 28 U.S.C. § 636(b)(1);

Fed. R. Civ. P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Schofield. The failure to file these timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a), 6(b),

72(b); Thomas v. Arn , 474 U.S. 140 (1985).

SO ORDERED.

DATED: New York, New York

February 28, 2014

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