4 Pillar Dynasty LLC v. New York & Company, Inc., 080819 FED2, 17-2398 (L)

Docket Nº:17-2398 (L), 17-2399 (XAP)
Opinion Judge:Carney, Circuit Judge.
Party Name:4 Pillar Dynasty LLC, Reflex Performance Resources Inc., Plaintiffs-Appellees-Cross-Appellants, v. New York & Company, Inc., New York & Company Stores, Inc., Defendants-Appellants-Cross-Appellees.
Attorney:David H. Bernstein (Jared I. Kagan, on the brief), Debevoise & Plimpton, LLP, for Defendants-Appellants-Cross- Appellees. Aaron J. Solomon (Darren Oved, Michael Kwon, on the brief), Oved & Oved LLP, New York, NY, for Plaintiffs- Appellees-Cross-Appellants.
Judge Panel:Before: Lynch, Carney, and Droney, Circuit Judges.
Case Date:August 08, 2019
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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4 Pillar Dynasty LLC, Reflex Performance Resources Inc., Plaintiffs-Appellees-Cross-Appellants,

v.

New York & Company, Inc., New York & Company Stores, Inc., Defendants-Appellants-Cross-Appellees.

Nos. 17-2398 (L), 17-2399 (XAP)

United States Court of Appeals, Second Circuit

August 8, 2019

Argued: August 28, 2018

Defendants-Appellants-Cross-Appellees New York & Company, Inc., and New York & Company Stores, Inc. ("Defendants") appeal from a judgment of the United States District Court for the Southern District of New York (Rakoff, J.) awarding Plaintiffs-Appellees-Cross-Appellants 4 Pillar Dynasty LLC and Reflex Performance Resources Inc. ("Plaintiffs") the gross profits earned by Defendants from sales of yoga clothing and activewear that infringed Plaintiffs' "Velocity" trademark. Plaintiffs, in turn, cross-appeal from the District Court's decision, after post-trial briefing, to amend the judgment by removing the trebled portion of the profits award.

We discern no clear error in the District Court's determination that Defendants' infringement was willful and in its award to Plaintiffs of the gross profits derived by Defendants from their infringement. We rule further that the court did not err by amending the judgment to remove the trebled portion of the profits award. We also take the opportunity to clarify that, under our precedent in George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532 (2d Cir. 1992), a plaintiff prosecuting a trademark infringement claim need not in every case demonstrate actual consumer confusion to be entitled to an award of an infringer's profits.

We vacate, however, the District Court's award of attorney's fees and prejudgment interest to Plaintiffs and its determination that this was an "exceptional" case under the Lanham Act. While this appeal was pending, we held that the standard for determining an "exceptional" case under the Patent Act, see Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014), applies also to cases brought under the Lanham Act, see Sleepy's LLC v. Select Comfort Wholesale Corp., 909 F.3d 519 (2d Cir. 2018). Because the District Court was not in a position to apply this holding when it ruled on this issue, we remand the case to the District Court to allow it to apply the Octane Fitness standard in the first instance.

AFFIRMED in part and VACATED and REMANDED in part.

David H. Bernstein (Jared I. Kagan, on the brief), Debevoise & Plimpton, LLP, for Defendants-Appellants-Cross- Appellees.

Aaron J. Solomon (Darren Oved, Michael Kwon, on the brief), Oved & Oved LLP, New York, NY, for Plaintiffs- Appellees-Cross-Appellants.

Before: Lynch, Carney, and Droney, Circuit Judges.

Carney, Circuit Judge.

In this trademark infringement case brought under the Lanham Act, 15 U.S.C. § 1111 et seq., Defendants-Appellants-Cross-Appellees New York & Company, Inc., and New York & Company Stores, Inc. (collectively, "Defendants" or "NY & C") appeal from a judgment of the U.S. District Court for the Southern District of New York (Rakoff, J.), entered after a jury trial, awarding Plaintiffs-Appellees-Cross-Appellants 4 Pillar Dynasty LLC and Reflex Performance Resources Inc. (collectively, "Plaintiffs") an amount equal to Defendants' gross profits from sales of yoga clothing and activewear that infringed Plaintiffs' "Velocity" trademark.

On appeal, Defendants contend primarily that the District Court erred in substantially denying their post-trial motions. They argue that (1) the evidence adduced at trial was insufficient to show that Defendants acted willfully in their infringing actions, a prerequisite for an award of disgorgement of profits; and that (2) to obtain such an award, Plaintiffs were required and yet failed to demonstrate actual consumer confusion. Defendants further contend that the District Court abused its discretion by concluding that this was an "exceptional" case under certain provisions of the Lanham Act, see 15 U.S.C. § 1117(a), and awarding Plaintiffs attorney's fees and prejudgment interest on the disgorgement award. For their part, on their cross-appeal, Plaintiffs argue that the District Court abused its discretion by amending the first-entered judgment to eliminate the trebled portions of its profits award.

We conclude that the District Court did not clearly err in determining that the Defendants' infringing acts were willful, as well as when it amended the initially- entered judgment to remove the trebled portion of the profits award. We further reject Defendants' argument that Plaintiffs were required to demonstrate actual consumer confusion as a prerequisite to a profits award, and clarify that, under the Lanham Act, a district court may award to a plaintiff trademark holder the profits made by a willful infringer, without requiring that the plaintiff demonstrate actual consumer confusion. See George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532 (2d Cir. 1992). We therefore affirm the District Court's judgment in these respects.

We vacate, however, the District Court's award of attorney's fees and prejudgment interest to Plaintiffs and its determination that this was an "exceptional" case under the Lanham Act. While this appeal was pending, we held that the standard for determining an "exceptional" case under the Patent Act, see Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014), applies also to cases brought under the Lanham Act, see Sleepy's LLC v. Select Comfort Wholesale Corp., 909 F.3d 519 (2d Cir. 2018). Because the District Court applied a prior standard, under which a finding of willfulness determined the right to attorneys' fees absent mitigating circumstances, and was not in a position to apply our holding concerning Octane Fitness, we remand the cause to the District Court to allow it to apply the more flexible Octane Fitness standard in the first instance.

BACKGROUND[1]

Reflex Performance Resources Inc. ("Reflex"), a company owned by Behrooz Hedvat and his two brothers, designs and sells women's activewear under the registered trademark "Velocity." Reflex's offerings include a line of leggings, capris, sports bras, tank tops, and hooded sweatshirts. Acting through the related entity 4 Pillar Dynasty LLC ("4 Pillar"), 2 Hedvat applied to register the Velocity trademark with the U.S. Patent and Trademark Office ("USPTO") in 2012. In 2014, the USPTO approved the trademark for use in "clothing and performance wear."

Reflex does not operate any brick-and-mortar stores-rather, it sells its clothing wholesale to retailers such as TJ Maxx, Marshalls, Ross, and Foot Locker, and to customers online, through its own website and third-party sites such as Amazon. Reflex maintains a Manhattan showroom, where prospective wholesale buyers can view a "look book" and examine samples of Reflex's products.

NY & C is a specialty women's apparel retailer operating hundreds of retail stores across the United States. It sells branded clothing both through its stores and its website. In 2016, Reflex and 4 Pillar sued NY & C for trademark infringement, alleging that an NY & C product line of women's activewear that it labelled "NY & C Velocity" infringed the "Velocity" trademark controlled by 4 Pillar and licensed to Reflex.

The case went to a trial by jury.3 Plaintiffs called Hedvat as their sole witness. He testified that, at some point in 2015, a potential customer came to his office and asked him if he had licensed the "Velocity" mark to NY & C. Hedvat replied that he had not. He told the jury that he was "extremely surprised" by the question, and that it prompted him to visit NY & C's website. App'x 250.

There, Hedvat discovered the "NY & C Velocity" product line and formed the belief that the line infringed his companies' Velocity trademark. In his view, Defendants were selling the "exact" same type of products as his company; marketing them to the same demographic groups at a similar price; and unlawfully using the Velocity trademark to do so. App'x 253. Hedvat testified that, acting through counsel, he demanded that NY & C cease and desist from selling these products under the "NY & C Velocity" name and they had not done so.[4]

Hedvat conceded that Reflex's sales of Velocity products actually increased between 2014 and 2016, including during the period after which he discovered NY & C's allegedly infringing use. He further explained that, while other companies also had made arguably infringing use of the name, he was dealing with any possible infringement "one by one" and considered NY & C to be particularly important because it was "the big fish." App'x 275.

After Hedvat concluded his testimony, the parties stipulated on the record that Defendants' gross profits from the sale of products bearing the NY & C Velocity trademark were $1...

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