Tiffany (NJ) LLC v. Dong
| Decision Date | 09 August 2013 |
| Docket Number | 11 Civ. 2183 (GBD) (FM) |
| Parties | TIFFANY (NJ) LLC, et ano, Plaintiffs, v. ALICE DONG d/b/a TIFFANYINTHEBOX. COM, 925JEWELRYBOX.COM, TIFFANY 4GIRLS.COM, 925JEWELRYSALE.COM, PANDORAOUTLETS.COM, 925JEWELRY STORE.COM, 925STORE.ORG, JEWELRY SETSALE.COM, SILVERCHARM SALES.COM, XINGREN CO. LTD, GZ CHANG MIN NET S&T CO. BANGRUI INFORMATION AND TECHNOLOGY CO. LTD, SHANGHAI RONGJIAO ELECTRONIC BUSINESS CO., et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
REPORT AND RECOMMENDATION TO THE HONORABLE GEORGE B. DANIELS*
This trademark infringement action has been referred to me to conduct an inquest. (ECF No. 27). Plaintiffs Tiffany (NJ) LLC and Tiffany and Company (together, "Tiffany") allege that eleven individual defendants ("Seller Defendants"), doing business through a series of companies and websites, unlawfully manufactured, marketed, and sold counterfeit versions of trademarked Tiffany products over the internet, in violation of the Lanham Act, 15 U.S.C. § 1051, et seq. (See ECF No. 19 ("Amended Complaint" or "Am. Compl.")).1 Tiffany further alleges that three other defendants, doing business as 95epay (collectively, "95epay"), are liable for contributory trademark infringement under the Lanham Act because they knowingly helped the Seller Defendants engage in transactions involving counterfeit Tiffany goods by processing purchasers' credit card payments. (Id. ¶¶ 114-24). The Seller Defendants and 95epay are hereinafter referred to collectively as the "Defendants."
Tiffany seeks statutory damages under the Lanham Act and a permanent injunction which would, among other things, prohibit the Defendants from further infringing Tiffany's trademarks, require the Seller Defendants to transfer registration of their infringing domain names to Tiffany, and direct third-party financial institutions, including the Industrial and Commercial Bank of China ("ICBC") and China Merchant Bank ("CMB") (together, the "Banks"), to liquidate the Defendants' assets and turn them over to Tiffany. (ECF No. 23 ( ) at 2, 23). The only contested portion of the relief requested relates to the turnover order, which the Banks oppose on several grounds, including China's bank secrecy laws. Previously, the Court had entered a preliminary injunction restraining the Defendants' assets, a copy of which was served on the Banks.
For the reasons set forth below, I recommend that Tiffany be awarded statutory Lanham Act damages against the Defendants in the amount of $9 million, plus prejudgment interest at the rate set forth in 28 U.S.C. § 1961. I further recommend that Tiffany be granted an injunction permanently enjoining the Defendants from further infringements of the Tiffany trademarks, and directing the Seller Defendants to transfer to Tiffany the domain names of their infringing websites. Finally, I recommend that the Court decline to act on the request for a turnover order until the United States Court of Appeals for the Second Circuit has ruled in another case in which Tiffany seeks similar relief, but that the Court's prior asset freeze order remain in effect in the interim.
Tiffany's Amended Complaint and uncontested inquest papers establish the following:
A. Tiffany
Tiffany is a famous purveyor of luxury items, including jewelry, watches, sterling silver goods, personal accessories, fragrances, stationery, and home items. (Am. Compl. ¶ 28). Tiffany (NJ) LLC is the owner of several federally-registered trademarks, including eight marks at issue in this action: "T & CO," "TIFFANY & CO," "TIFFANY & CO.," "TIFFANY BLUE," the "TIFFANY BLUE BOX," the "TIFFANY BLUE SHOPPING BAG," and two "TIFFANY" marks2 (collectively, the "Tiffany Marks"). (Id. ¶¶ 7, 29). Tiffany and Company, d/b/a "Tiffany & Co.," is the exclusive licensee of the Tiffany Marks. (Id. ¶ 8).
Tiffany has devoted significant resources to advertise and promote its brand, Tiffany products, and the Tiffany Marks throughout the world. (Id. ¶ 32). Indeed, over the past decade, Tiffany has expended more than $750 million on such activities in the United States alone. During this same period, sales of goods bearing or marketed under the Tiffany Marks in the United States have exceeded $12.6 billion. (Id.). Consumers purchase these Tiffany products because of the quality and "goodwill" associated with the Tiffany Marks. (Id. ¶ 35).
B. Seller Defendants
All but one of the Seller Defendants has a home or business address in China.3 (Id. ¶¶ 9-20; ECF No. 11 (), ¶¶ 117-39). Through its ongoing investigations, Tiffany learned that the Seller Defendants were offering counterfeit Tiffany products for sale by means of at least seven websites without authorization, permission, or licenses from Tiffany. (Am. Compl. ¶¶ 2-3, 23, 38, 41, 45, 48; see ECF No. 10 (), ¶¶ 17, 19; Pepe Decl. ¶¶ 2-3). One of the Seller Defendants also has registered two additional, strikingly similar websites. (Am. Compl. ¶ 58). Although these sites had yet to be used for actual sales by the date this action was filed, counterfeiters frequently develop such sites to ensure that they have an alternative platform for sales if one of their websites is shut down. (Id.; Pepe Decl. ¶¶ 126-28). Indeed, the Seller Defendants previously shifted the business of TiffanyintheBox.com to 925JewelryStore.com for this reason. (Am. Compl. ¶ 58).
Collectively, the Seller Defendants' websites offer more than 10,200 products that replicate the ornamentation, design, and labeling of authentic Tiffany products, and most of them bear exact copies of one or two of the Tiffany Marks. (Id. ¶¶ 43, 51; see also Pepe Decl. ¶¶ 10-63 & Ex. 1 ()). These items are replicas of nine separate types of Tiffany products (bracelets, necklaces, earrings, rings, watches, jewelry sets, key rings, money clips, and cuff links). (Am. Compl. ¶¶ 43, 52; Pepe Decl. ¶ 9). For example, Tiffany sells a "Tiffany 1837" cuff bracelet in sterling silver that bears Tiffany's "T & CO" trademark. (Am. Compl. ¶ 40). Using a photograph copied from the official Tiffany website, the 925JewelryStore.com website offers a "Tiffany 1837 Cuff" in "sterling silver" that is virtually identical to the Tiffany product, including the "T & CO" trademark. (See id.). Similarly, the PandoraOutlets.com website sells a "Heart Tag Toggle Bracelet" in "[s]terling silver" that replicates the original sterling silver "Tiffany heart tag toggle bracelet," including the "TIFFANY & CO" trademark. (Id. ¶ 41). The Tiffany4Girls.com website also sells a "Tiffany 1837 Lock Charm and Necklace" that appears to be identical to a sterling silver "Tiffany 1837 Lock Pendant" with a "T & CO" trademark manufactured by Tiffany. (Id. ¶ 42).4 Through their websites, the Seller Defendants have shipped at least some counterfeit "Tiffany" products to customers in this District. (Am Compl. ¶ 38).
Between December 2010 and February 2011, investigators acting on behalf of Tiffany made numerous purchases from the Seller Defendants' websites. (Pepe Decl. ¶ 64). Included among these purchases were four "Tiffany" items that the investigators acquired from the TiffanyintheBox.com and PandoraOutlets.com sites. (Am. Compl. ¶¶ 49, 66; see Pepe Decl. ¶¶ 64-116). These items were described on the websites as a "Tiffany Round Tag Charm Bracelet," a "Tiffany Replica Key Ring," a "Tiffany 1837 Ring," and a bean-shaped necklace "from Tiffany & Co.'s Elsa Peretti collection." (Am. Compl. ¶ 49). Each of the products delivered pursuant to the Tiffany investigators' orders was inferior to its authentic Tiffany counterpart in quality and composition. (Id. ¶¶ 49-50; see Perrone Decl. ¶¶ 24-29 & Exs. 7, 8, 9, 10). Indeed, a laboratory analysis revealed that the replicas were composed of a white metal containing at most 4.75% silver, compared to Tiffany's authentic "sterling silver" products, which contain 92.5% silver. (Am. Compl. ¶ 49). The inferior quality of the Seller Defendants' counterfeit products thus is likely to damage Tiffany's reputation, goodwill, and sales. (Id. ¶ 79).
C. 95epay
95epay provides credit card processing services for online merchants engaged in "high risk industries," including those selling counterfeit "replica" merchandise. (Id. ¶¶ 4, 20, 63-64, 72, 73). The TiffanyintheBox.com and PandoraOutlets.com websites both used 95epay's services to accept credit cards as a form of payment for goods that they sold. (Id. ¶¶ 4, 56, 65). In fact, 95epay processed the credit card payments for three of the four purchases made by Tiffany's investigators from TiffanyintheBox.com and PandoraOutlets.com. (Id. ¶ 66; Pepe Decl. ¶¶ 66, 72, 111 & Exs. 2, 5, 30).
As the 95epay website indicates, in the course of its business, 95epay verifies and assesses the risk of both the merchant and the online shopper associated with each transaction and seeks to identify suspicious transactions. (Am. Compl. ¶¶ 4, 63). This process includes a review of the merchant's website. (Id. ¶ 67). 95epay then processes the transactions it approves. (Id.). Although 95epay has been served with copies of both the temporary restraining order and the preliminary injunction previously issued by this Court, it has continued to provide payment processing for several of the Seller Defendants' websites. (Id. ¶¶ 70-71). 95epay therefore has either knowingly facilitated the sale of counterfeit Tiffany products or been willfully blind to the illegality of the transactions it processes. (Id. ¶ 69).
In light of the Defendants' default, Tiffany's well-pleaded allegations concerning issues other than damages must be accepted as true. See Cotton v. Slone, ...
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