Coty Inc. v. Excell Brands, LLC

Decision Date18 September 2017
Docket Number15–CV–7029 (JMF)
Citation277 F.Supp.3d 425
Parties COTY INC., et al., Plaintiffs, v. EXCELL BRANDS, LLC, Defendant.
CourtU.S. District Court — Southern District of New York

James W. Faris, Kilpatrick Townsend & Stockton LLP, Atlanta, GA, Olivia Anne Harris, Robert Nathan Potter, Lisa Pearson, Kilpatrick Townsend & Stockton LLP, New York, NY, for Plaintiffs.

Simon Joel Kasha Miller, Kenneth L. Bressler, Rebecca Avrutin Foley, Blank Rome LLP, New York, NY, for Defendant.

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

Imitation may well be the sincerest form of flattery, but if taken too far it can also be costly. Plaintiffs in this case—Coty, Inc., Coty B.V., Calvin Klein Trademark Trust, Calvin Klein, Inc., Calvin Klein Cosmetic Corporation, Vera Wang Licensing LLC, V.E.W., Ltd., and Ate My Heart Inc. (collectively, "Coty")—are the producers or distributors of high-quality fragrances associated with well-known brands, including Calvin Klein, Vera Wang, and Lady Gaga. Defendant, Excell Brands, LLC ("Excell"), seeking to capitalize on the success of Coty's well-known fragrances, produced cheap "versions" of Coty's fragrances, with similar names (for example, "Possession" for "Obsession") and nearly identical packaging. Compounding matters, Excell prominently included on its packaging Coty's own marks, albeit under words to the effect of "Our Version Of" in comparatively smaller text.

Embittered rather than flattered, Coty brought various intellectual property claims—for trademark infringement and unfair competition, trademark dilution, and false advertising, under federal and New York law—against Excell. In March 2017, the Court held a three-day bench trial on Coty's claims and Excell's defenses, after which the parties submitted additional post-trial materials. In this Opinion and Order, the Court provides its findings of fact and conclusions of law. At bottom, the Court concludes that Excell's imitation crossed the line from flattery to infringement, dilution, unfair competition, and false advertising—but did not cross the line far enough to constitute counterfeiting within the meaning of federal law. Further, the Court finds that Coty is entitled to both injunctive relief and monetary relief—in the form of Excell's profits—but not to enhanced monetary relief. Finally, the Court concludes that the case is not an "exceptional" one warranting attorney's fees and prejudgment interest.

FINDINGS OF FACT

Based on the evidence and testimony presented at trial, the Court makes the following findings of fact by way of background. The Court includes additional factual findings in the context of the legal analysis below.

A. Coty's Fragrances

Coty manufactures, distributes, and markets high-end fragrances and other beauty products. (Pls.' Ex. 252 ("Tuil–Torres Direct") ¶¶ 7, 10; Pls.' Ex. 82). To the extent relevant here, Coty is either the owner or the exclusive licensee of a fragrance portfolio that includes the Calvin Klein, Vera Wang, Lady Gaga, and Joop! fragrance brands. (Docket No. 91 ("Stipulated Facts") ¶¶ 6, 8–10; Pls.' Ex. 253 ("Conklin Direct") ¶¶ 2, 11). In total, there are twenty-one specific fragrances at issue in this case, each of which is branded with a house mark (such as Calvin Klein, Vera Wang, Lady Gaga, and Joop!), as well as a product mark (such as ETERNITY, Lovestruck, and FAME) that distinguishes the fragrances sold under a particular house mark. (Conklin Direct ¶ 11).1 In addition to the house and product marks, each of Coty's fragrances can be identified by its packaging features, or trade dress, which also serves to identify the source of the product. Collectively, the house mark, product mark, and trade dress indisputably serve as source identifiers for Coty's products.

Coty has invested—and continues to invest—a significant amount of time and money creating, branding, launching, and marketing each of the fragrances in its portfolio. (See Pls.' Ex. 251 ("Singer Direct") ¶¶ 4–29 (detailing the lengthy process for developing and launching a fragrance and its packaging)). For example, developing a fragrance's "juice"—the scented liquid applied to the skin—is a laborious process that involves sourcing the proper essential oils from fragrance houses and extensive laboratory testing. (Id. ¶¶ 15–16). In addition, development of a fragrance's packaging can be a multi-year process, as Coty tries to create new designs that will differentiate its fragrances from those of its competitors. (Id. ¶ 11). Once the fragrance and packaging are produced, Coty also engages in significant and expensive marketing and advertising campaigns for each of its fragrances. (Id. ¶¶ 18–24). For example, between 2002 and 2015, Coty spent over $658 million advertising and promoting its Calvin Klein fragrances, over $114 million advertising and promoting its Vera Wang fragrances, over $14 million advertising and promoting its Lady Gaga fragrances, and over $13 million advertising and promoting its Joop! fragrances. (Pls.' Ex. 78).

As a result of these efforts, Coty's fragrances are some of the most popular and recognizable in the fragrance market. Between 2002 and 2015, Coty's net sales for its Calvin Klein fragrances totaled over $2.2 billion, for its Vera Wang products over $296 million, for its Lady Gaga products over $28 million, and for its Joop! line over $188 million. (Pls.' Ex. 78). Coty's products have also received significant media attention. (See, e.g. , Pls.' Exs. 100–5 through 100–9, 122, 138–3). Some of Coty's products are so successful that the company has produced "flankers" for the products—that is, new fragrances that share certain characteristics and branding with the original fragrance. (Singer Direct ¶¶ 30–32). For example, Coty has produced flankers for several of Calvin Klein's pillar fragrances: Dark Obsession (flanking Obsession), Eternity Aqua (flanking Eternity), CK One Shock (flanking CK One), and CK Free Blue (flanking CK Free). (Id. ).

B. Excell's Fragrances

Excell's business model is, to put it mildly, a bit different. Until December 2016, Excell concededly manufactured and distributed knockoff fragrances. To the extent relevant here, one of its collections—designated the "Diamond Collection"—offered "versions" of Calvin Klein, Vera Wang, Lady Gaga, and Joop! fragrances. (Stipulated Facts ¶ 33). Excell did not receive authorization from Coty to sell any of its fragrances, and it has not paid Coty any royalties or other payments in connection with its sale of those fragrances. (Id. ¶¶ 29–30).

Excell explained the process by which it decided which branded fragrances to mimic for its Diamond Collection as follows: "First, it [sought] original fragrances with a high retail price to create a differential between the retail prices of its alternative fragrance and the original product. Second, it [sought] a product that [would] be understood by its customer base of 'lower income, sometimes ethnic customers.' " (Id. ¶ 38). After selecting a fragrance to emulate, Excell then chose a product name for its alternative fragrance that would evoke the name of the original fragrance. (Ferullo Dep. 107 ("We choose names that are similar but different obviously from the original, we want to have the customer understand what they are buying.")). In creating the juice for its alternative fragrances, Excell did not make any meaningful effort to replicate the scent of Coty's products. Instead, using only their own noses and reviews of the original fragrances, Excell employees made broad recommendations to the company's supplier in India, which then manufactured the alternative fragrances and packaging. (Ferullo Dep. 228 ("If an item is citrusee or if it is sweet we want the version of to be citrusee or sweet.")). Excell often sent its suppliers the original fragrance (or a picture of the fragrance) it sought to emulate along with instructions on how to emulate it. (Ferullo Dep. 33–36; Pls.' Exs. 190, 198). Before a fragrance went into production, however, Excell typically reviewed, revised, and approved the bottle, box, and juice. (Ferullo Dep. 130–31, 134). Indeed, the company frequently made changes to the products so that the packaging of its knockoffs would more closely resemble Coty's original branded fragrances. (See, e.g. , Pls.' Exs. 190, 194; Stipulated Facts ¶ 28). Notwithstanding its involvement in the process, however, Excell had no first-hand knowledge of the chemical composition or ingredients of its products; nor did it have any meaningful quality assurance program. (Docket No. 65 at 6–7, 10; Ferullo Dep. 181 ("The salespeople will decide whether or not the product matches the design that we had discussed, if the box has a nice appearance to it, if the bottle looks great, if the juice smells good. That is it really.")).

Appendix A depicts the packaging of each Diamond Collection fragrance at issue in this case alongside the packaging of the Coty fragrance Excell sought to emulate. Significantly, on the front of each of its Diamond Collection fragrance boxes, Excell included a legend stating that the fragrance was "Our Version Of" the relevant Coty product. (Stipulated Facts ¶ 20). For example, Excell's Serenity fragrance had the following legend on its front:

(Pl.'s Ex. 56). Relatedly, on the back of each Excell box appeared the words "Not Associated With The Makers Of," followed by reference to the relevant Coty product. (Stipulated Facts ¶ 39). Again, by way of example, the following is a picture of the text from the Serenity fragrance packaging:

(Pl.'s Ex. 56). Significantly, in both legends, Excell replicated Coty's relevant house and product marks. Moreover, Coty's marks were depicted more prominently than the other text. On the top of each box, in comparatively smaller lettering, Excell included its own brand name: Diamond Collection Luxurious Fragrances. (See id. ).

As a general matter, Excell did not advertise or market its products directly to consumers. (See Pls.' Ex. 174). Instead, the...

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