Spin Master Ltd. v. 158

• Decision Date: 28 May 2020
• Docket Number: 18-cv-1774 (LJL)
• Citation: 463 F.Supp.3d 348
• Parties: SPIN MASTER LTD. and Spin Master, Inc., Plaintiffs, v. 158, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

463 F.Supp.3d 348

SPIN MASTER LTD. and Spin Master, Inc., Plaintiffs,

v.

158, et al., Defendants.

18-cv-1774 (LJL)

United States District Court, S.D. New York.

Signed May 28, 2020

[463 F.Supp.3d 358]

Ashly Erin Sands, Jason M. Drangel, Brieanne Scully, Epstein Drangel LLP, New York, NY, for Plaintiffs.

OPINION & ORDER

LEWIS J. LIMAN, United States District Judge:

Plaintiffs Spin Master Ltd. and Spin Master, Inc. (collectively, "Plaintiffs" or "Spin Master") move for a default judgment pursuant to Fed. R. Civ. P. 55(b)(2) and for a permanent injunction pursuant to Fed. R. Civ. P. 65. See Dkt. Nos. 80-83. The Court held a conference on April 8, 2020 at which no defendants appeared.

For the following reasons, the motion is granted in part and denied in part.

BACKGROUND

Plaintiffs are two entities that are part of a larger, multinational toy and entertainment company started in 1994 that designs and sells innovative children's lifestyle products and toys ("Spin Master Products") under their own brands and under their licensed properties. See Dkt. No. 6 ("Compl.") ¶ 7. Plaintiff Spin Master Ltd. is a limited liability company organized in Canada with its principal place of business in Canada. Id. ¶ 4. Plaintiff Spin Master, Inc. is a Delaware corporation with its principal place of business in California and a registered office in New York; it is also Spin Master Ltd.’s wholly-owned subsidiary and exclusive United States licensee. Id. at 2; see id. ¶ 5. Plaintiffs sell their Spin Master Products throughout the United States and the world through major retailers, quality toy stores, department stores, and online marketplaces, as well as through Plaintiffs’ own website and websites dedicated to individual Spin Master Products. Id. ¶¶ 8-9.

This action concerns what is alleged to be one of Spin Master's most recent and successful products, Bunchems. Bunchems are colorful, quarter-sized plastic balls that can be connected and squished together to form different shapes, characters, and other creations ("Bunchem Products"). Id. ¶ 10. The Bunchem Products come with accessories to give each creation a unique look and can be recreated over and over again by pulling them apart and putting them together to form different and new creations. Id. The Bunchem Products retail from $5.99 to $29.99 depending on the size and features of the pack. Id. ¶ 14.

Spin Master is the owner of a trademark for the mark "BUNCHEMS" for a variety of goods ("Bunchems Marks"). Id. ¶ 16. It also owns both registered and unregistered copyrights in and related to the Bunchems Products ("Bunchems Works"). Id. ¶¶ 18-19. Plaintiffs have promoted the Bunchem Products through their website, nationwide television advertising campaigns, print and internet-based advertising and publicity, placement of the Bunchem Products at dozens of authorized major retail outlets, and participation in trade shows. Id. ¶ 21.

Defendants are 100 individuals and/or businesses who, using accounts with online

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marketplace platforms ("User Accounts"), operate one or more commercial businesses to manufacture, import, export, advertise, market, distribute, offer for sale and/or otherwise deal in products ("Merchant Storefronts") in wholesale quantities at significantly below-market prices to consumers worldwide, including those in the United States and specifically New York (collectively, "Defendants"). Id. ¶¶ 2(a)-(b), 31. One of these online marketplaces and e-commerce platforms is Wish.com (hereinafter, "Wish"). Id. ¶¶ 26, 30. Wish allows manufacturers and other third-party merchants, like Defendants, to advertise, distribute, offer for sale, sell, and ship retail products originating primarily from China, among other locations, directly to consumers worldwide, including those that reside in the United States. Id. ¶ 26. Wish is owned by ContextLogic, Inc. See id. ¶ 6; Dkt. No. 19 ¶ 3.

Wish claims a base of over 300 million users and has generated billions in sales worldwide. Compl. ¶ 27. Sales to the United States make up a significant percentage of business done on Wish. For example, online sales account for 8.6% of all retail transactions in the United States and nearly 8% of online shopping done by teenagers was performed using Wish, which is second only to Amazon.com. Id. On "Cyber Monday" of 2017, Wish accounted for 6.2% of teenager spending. Id. Plaintiffs allege that Defendants conduct business in the United States and other countries by means of their User Accounts and on their Merchant Storefronts on Wish, as well as potentially yet undiscovered additional online marketplace platforms. Id. ¶ 30.

The Complaint broadly accuses each Defendant of violations in connection with selling or offering for sale "Counterfeit Products": trademark counterfeiting, trademark infringement, and false designation of origin, passing off and unfair competition under the Lanham Act, 15 U.S.C. §§ 1114, 1116(d), 1117(b) - (c), 1125(a) ; copyright infringement under the Copyright Act, 17 U.S.C. § 501(a) ; violations of New York General Business Law §§ 349, 350 ; unfair competition under New York common law; and unjust enrichment under New York common law.

Counterfeit Products are defined broadly to be products bearing or used in connection with the Bunchems Mark and/or Bunchems Works, and/or products in packaging and/or containing labels and/or hang tags bearing the Bunchems Mark and/or Bunchems Works, and/or bearing or used in connection with marks and/or artwork that are confusingly or substantially similar to the Bunchems Mark and/or Bunchems Works and/or products that are identical or confusingly or substantially similar to Bunchems Products. Id. ¶ 34. The Counterfeit Products are nearly indistinguishable from Spin Master's Bunchems Products, only with minor variations that no ordinary consumer would recognize. Id. ¶ 36.

Plaintiffs allege that through their Merchant Storefronts on Wish, Defendants offer for sale and/or sell Counterfeit Products and target and ship such products to customers located in the United States, including New York. Id. ¶ 31. Plaintiffs further allege that Defendants accept payments for Counterfeit Products in United States Dollars through Wish's own payment processing system or through accounts with the payment processing agency PayPal, Inc. Id. ¶ 38. Defendants have never been authorized to sell or copy Bunchems Products or to use the Bunchems Works or Bunchems Marks. Id. ¶ 35.

The Complaint provides helpful illustrations of three examples of Counterfeit Products offered for sale by three Defendants. Id. ¶¶ 39-41. The Bunchems Products in those particular examples typically sell for $19.99 but are being offered by

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those Defendants for half of that price. Id. The Complaint also attaches as Exhibit D, and incorporates by reference, the findings of a company that provides trademark infringement research services, New Alchemy Limited ("NAL"). Exhibit D contains listings for and/or checkout pages of Counterfeit Products for each of the Defendants, demonstrating that they offer for sale Counterfeit Products. Id. ¶ 38. Plaintiffs specifically retained NAL to investigate and research manufacturers, wholesalers, retailers and/or other merchants offering for sale and/or selling Counterfeit Products on Wish. Id. ¶ 33. NAL identified the Defendants in this action and verified that each Defendant offered for sale and can ship Counterfeit Products to New York. Id. ¶¶ 37-38; Dkt. No. 19 ¶ 18.

PROCEDURAL HISTORY

Plaintiffs initiated this action by complaint and order to show cause on February 27, 2018. Dkt. No. 81 ("Scully Aff." or "Scully Affidavit") ¶ 9. Subsequently, the Court, per the Honorable Paul A. Engelmayer, entered the temporary restraining order ("TRO") on February 28, 2018. Id. ¶ 11. The TRO specifically authorized service by electronic means. Id. ¶ 13. Pursuant to the TRO, Plaintiffs served Defendants on March 9 and March 12, 2018 with the Summons, Complaint, TRO and all papers filed in support of Plaintiffs’ application. Id. ¶ 14. On March 13, 2018, the Court held a show cause hearing, at which no Defendants appeared, and thereafter entered an order against all Defendants, mirroring the terms of the TRO and extending through the pendency of the action. Id. ¶¶ 16-17.

Between April 25, 2018 and March 5, 2020, Plaintiffs moved for voluntary dismissal of forty-five (45) Defendants pursuant to Fed. R. Civ. P. 41(a)(1)(A)(i) ("Dismissed Defendants").¹

On February 4, 2020, this case was reassigned to the undersigned.

On February 6, 2020, Plaintiffs filed an application for a Clerk's Certificate of Default against the remaining fifty-five (55) Defendants in the action ("Defaulting Defendants").² See Dkt. Nos. 76, 78. On February 20, 2020, the Court entered an order directing Plaintiffs to move for default

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judgment against the Defaulting Defendants by no later than March 5, 2020. See Dkt. No. 79. Plaintiffs filed the motion and supporting papers on March 5, 2020. See Dkt. Nos. 80-83. The Court scheduled a hearing for April 8, 2020. See Dkt. No. 85.

On its initial review of the motion for a default judgment, the Court identified a number of issues with respect to the motion (discussed below) and, accordingly, on April 7, 2020, it issued an order identifying 14 sets of questions that counsel for Plaintiffs should be prepared to address regarding the motion for default judgment and permanent injunction. Dkt. No. 87. On April 8, 2020, the Court heard oral argument from counsel for Plaintiffs. No Defendants appeared. On April 17, 2020, Plaintiffs submitted a supplemental memorandum in support of their motion for a default judgment and permanent injunction. See Dkt. No. 88.

DISCUSSION

A. Personal Jurisdiction

The Court previously determined there was personal jurisdiction at the TRO stage. Nonetheless, before this Court grants a motion for default judgment and imposes permanent injunctive relief, it is appropriate for the Court to assure...