Omega SA v. 375 Canal, LLC

Citation984 F.3d 244
Decision Date06 January 2021
Docket NumberAugust Term 2019,No. 19-969-cv,19-969-cv
Parties OMEGA SA, Swatch SA, Plaintiffs-Appellees, v. 375 CANAL, LLC, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Christopher R. Noyes, Wilmer Cutler Pickering Hale & Dorr LLP, New York, New York (Thomas G. Saunders, Isley M. Gostin, and Robert J. Gunther, Jr., on the brief), for Plaintiffs-Appellees.

Misha Tseytlin, Troutman Sanders LLP, Chicago, Illinois (W. Alex Smith and Avi Schick on the brief), for Defendant-Appellant.

Before: Raggi, Lohier, and Menashi, Circuit Judges.

Judge Lohier concurs in part and dissents in part in a separate opinion.

Menashi, Circuit Judge:

After hearing evidence that Defendant landlord 375 Canal LLC ("Canal") knew of counterfeiting at its leased Manhattan property for years, a jury awarded $1.1 million in statutory damages to Plaintiff Omega SA, a watch company, for Canal's contributory infringement of Omega's trademarks. On appeal, Canal challenges the judgment entered on March 12, 2019, and amended on June 12, 2019, primarily on the ground that the district court (Crotty, J.) did not require Omega to identify a specific vendor to whom Canal continued to lease property despite knowing or having reason to know of counterfeiting by that same vendor.

At the outset, we reject Canal's attempt to raise this argument in the context of the district court's pre-trial denial of summary judgment. That interlocutory decision is not appealable. Furthermore, once the case proceeds to a full trial on the merits, the trial record supersedes the record existing at the time of the summary-judgment motion, and there is no basis for this court to review issues raised in a denied motion overtaken by trial.

We nevertheless reach the merits of Canal's trademark arguments via its appeal of the jury instructions, and we reject Canal's position as inconsistent with our precedent in Tiffany (NJ) Inc. v. eBay Inc. , 600 F.3d 93 (2d Cir. 2010). In Tiffany , we held that a defendant may be liable for contributory trademark infringement if it was willfully blind as to the identity of potential infringers—that is, under circumstances in which the defendant did not know the identity of specific infringers. Id. at 109-10. That holding precludes Canal's argument that Omega needed to identify a specific infringer to whom Canal continued to lease property. At trial, Omega pursued a theory of willful blindness, and the district court's jury instructions accurately captured Tiffany ’s requirements. We therefore reject Canal's challenges to those instructions.

Canal also challenges several of the district court's evidentiary and damages rulings, including the scope of the permanent injunction. We find no reversible error, and accordingly we affirm the judgment and injunction.

BACKGROUND1
I

Canal owns the property located at 375 Canal Street in Manhattan. The property has a long history of litigation alleging counterfeiting and trademark violations. In 2006, the City of New York sued Canal for nuisance resulting from the sale of counterfeited merchandise at 375 Canal Street. Canal settled, paid an $8,000 penalty, and agreed that 375 Canal Street could not be used in any way for "the sale and/or possession of trademark counterfeit merchandise or pirated merchandise." Stipulation of Settlement at 2, City of New York v. 375 Canal, LLC , No. 403028/06 (N.Y. Sup. Ct., Cnty. of N.Y. Sept. 20, 2006). Canal also agreed to unannounced warrantless searches by the police.

Also in 2006, Louis Vuitton Malletier sued Canal for counterfeiting activities at 375 Canal Street. Canal entered into a consent order permanently enjoining Canal from violating Louis Vuitton's trademarks, requiring Canal to post signs for two years stating that the sale and purchase of counterfeit Louis Vuitton items is illegal, and allowing walk-throughs by Louis Vuitton representatives. See Order for Permanent Injunction on Consent, Louis Vuitton Malletier v. Canal Assocs., L.P. , No. 1:06-cv-306 (S.D.N.Y.), ECF No. 4 (Jan. 17, 2006).

In 2009, the City of New York again sued Canal for nuisance resulting from the sale of counterfeit goods at 375 Canal Street. Canal again settled and agreed to a permanent prohibition against the "selling, facilitating the sale or possessing [of] trademark counterfeit merchandise." Stipulation of Settlement at 3, City of New York v. 375 Canal, LLC , No. 401522/09 (N.Y. Sup. Ct., Cnty. of N.Y. Aug. 14, 2009). Canal also agreed to dismantle all "hidden storage facilities" and again consented to unannounced, warrantless inspections. Id. at 4-5. Canal paid a $10,000 penalty and agreed that the premises would be immediately closed by the police in the event of another violation.

Counterfeit handbags were not the only items sold at 375 Canal Street. During a police sting in December 2010, an individual identified as "Rahman" in police records sold a counterfeit Omega watch inside 375 Canal Street and was arrested.

In September 2011, counsel for Swatch SA (which owns Omega) sent a letter to Albert Laboz, one of Canal's owners, informing him of the December 2010 arrest at 375 Canal Street and stating, "As the owner of this premise [sic ] with the ability to oversee and control the tenants residing within, you can be found liable for the conduct of your tenants. This includes contributory and vicarious liability for the sale of counterfeit products." J. App'x 2681. Canal's counsel responded in October 2011 by email stating that the tenant in question had "apparently ... sublet the space to an entity that was selling counterfeit goods bearing your clients’ trademarks," and Canal claimed that it had "been informed that the tenant had the offending tenant removed." J. App'x 2692. At trial, however, Omega put forward evidence that the ejection may not have occurred until 2012 and that Canal did not act between 2010 and 2012 to stem counterfeiting, such as by posting anti-counterfeiting signs, conducting walk-throughs, or inspecting the property for hidden compartments that could contain counterfeit goods.

In May 2012, an Omega private investigator visited 375 Canal Street and documented his purchase of a counterfeit Omega Seamaster watch, which precipitated this lawsuit.

II

In September 2012, Omega sued Canal for contributory trademark infringement, alleging that Canal had continued to lease space at 375 Canal Street despite knowing that vendors at the property were selling counterfeit Omega goods.2

After discovery, Canal moved for summary judgment, contending that Omega had not identified a specific vendor to whom Canal continued to lease property despite knowing or having reason to know that the specific vendor was selling counterfeit goods. In opposition, Omega argued that it did not need to identify a specific vendor because Omega's primary theory was one of willful blindness: Canal could not avoid liability by shielding itself from learning the identities of the vendors who were selling counterfeits.

On December 22, 2016, the district court denied Canal's motion, agreeing with Omega that under this court's decision in Tiffany , 600 F.3d 93, Omega was not required to identify a specific vendor to whom Canal continued to lease its property despite knowledge of counterfeiting by that vendor. Omega SA v. 375 Canal, LLC , No. 12-CV-6979, 2016 WL 7439359, at *3 (S.D.N.Y. Dec. 22, 2016), reconsideration granted in part on other grounds , 324 F.R.D. 47 (S.D.N.Y. 2018) ; see also Omega SA v. 375 Canal, LLC , No. 12-CV-6979, 2013 WL 2156043, at *4 (S.D.N.Y. May 20, 2013) (addressing the same issue when denying an earlier motion to dismiss).

The case proceeded to trial by jury, which heard the evidence summarized above. Canal objected to the introduction of certain evidence at issue on appeal. Over Canal's hearsay objection, the district court admitted an email from a New York City police officer providing details on the December 2010 arrest of "Rahman" for selling a counterfeit Omega watch at 375 Canal Street. On the issue of calculating damages to deter further infringement, the district court also allowed (over Canal's objection) the jury to hear limited evidence that Canal's proprietors owned other buildings. The district court excluded (again over Canal's objection) evidence of Omega's actual losses, concluding that the jury would be confused by a discussion of actual damages because Omega had chosen to pursue only statutory damages. The jury nonetheless did hear testimony on the prices for both a real Omega watch and the counterfeit one sold in 2012.

At the close of Omega's evidence and also at the end of the trial, Canal moved under Rule 50 for judgment as a matter of law, and the court reserved its ruling (later denying the motions after the jury returned its verdict). The district court's jury instructions on contributory infringement stated that Omega would need to show that Canal "continue[d] to supply its services" even though it "either knew or had reason to know that a tenant, subtenant or other occupant of its premises was selling, offering for sale, or distributing products bearing counterfeits of Omega's trademarks." J. App'x 2630. The district court then explained that the scienter requirement could be satisfied by willful blindness: "Reason to know," the court said, "includes a concept known as willful blindness. Willful blindness means that ... Canal or its agents had reason to suspect that trademark infringing merchandise was being offered or sold but deliberately failed to investigate or looked the other way to avoid seeing such activity." J. App'x 2630. To determine whether willful blindness existed, the district court told the jury:

You may consider the nature and extent of the communication between 375 Canal and its tenants, subtenants or other occupants of the premises regarding the infringing acts. You may also consider the extent and nature of the alleged infringement of Omega's trademarks. If the infringement is serious and
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