933 F.3d 202 (2nd Cir. 2019), 17-2398 (L), 4 Pillar Dynasty LLC v. New York & Company, Inc.
|Docket Nº:||Docket 17-2398 (L), 17-2399 (XAP)|
|Citation:||933 F.3d 202|
|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|
Argued: August 28, 2018
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Appeal from the United States District Court for the Southern District of New York (Rakoff, J. )
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 attorneys 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 Courts judgment in these respects.
We vacate, however, the District Courts award of attorneys 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, 134 S.Ct. 1749, 188 L.Ed.2d 816 (2014), applies also to cases brought under the Lanham Act, see Sleepys 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.
Reflex Performance Resources Inc. ("Reflex"), a company owned by Behrooz Hedvat and his two brothers, designs and sells womens activewear under the registered trademark "Velocity." Reflexs 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 Reflexs products.
N.Y. & C is a specialty womens 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 N.Y. & C for trademark infringement, alleging that an N.Y. & C product line of womens 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 N.Y. & 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 N.Y. & Cs website. Appx 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. Appx 253. Hedvat testified that, acting through counsel, he demanded that N.Y. & C cease and desist from selling these products under the "NY & C Velocity" name and they had not done so.4
Hedvat conceded that Reflexs sales of Velocity products actually increased between 2014 and 2016, including during the
period after which he discovered N.Y. & Cs 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 N.Y. & C to be particularly important because it was "the big fish." Appx 275.
After Hedvat concluded his testimony, the parties stipulated on the record that Defendants gross profits from the sale of products bearing the N.Y. & C Velocity trademark were $1,864,337.29. Plaintiffs then rested their case, and Defendants unsuccessfully moved for judgment as a matter of law. Appx 444. In an unexpected development following the courts denial of their motion, Defendants rested their case without presenting any evidence or testimony, and the case went to the jury.
This turn of events would have surprised observers because, in his opening statement, Defendants counsel focused heavily on the expected testimony of two witnesses who would appear for N.Y. & C: Christine Munley, N.Y. & Cs head of merchandising, and Yelena Monzina, the companys creative director. Counsel previewed that Munley would testify to never having heard of Reflexs "Velocity" branded apparel despite her extensive expertise in the market. For her part, Monzina would testify that, before the "NY & C Velocity" product line was released, she conducted a search that turned up Plaintiffs Velocity trademark, as well as many other uses of the word "Velocity" in the apparel world. She would aver, however, that she saw no chance of consumer confusion between N.Y. & Cs and Reflexs product lines. During closing arguments, Defendants counsel offered the jury no explanation for the failure to call these— or any other— witnesses.5
The jury found that N.Y. & C had infringed Reflexs trademark. At the District Courts request, it also rendered an "advisory verdict" that N.Y. & Cs infringement was willful. Appx 522. In open court after these verdicts were rendered, the District Court announced its adoption of the willfulness verdict and advised that it would issue a written opinion setting forth its findings of fact and conclusions of law shortly. The court also informed the parties, without stating its reasoning, that it would direct that...
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