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Coach, Inc. v. Source II, Inc.

United States District Court, E.D. Michigan, Southern Division

February 1, 2017

COACH, INC. and COACH SERVICES, INC., Plaintiffs,
v.
SOURCE II, INC. and CERHUE ANDRE WALKER, individually and d/b/a SOURCE II, INC., Defendants.

          OPINION AND ORDER AWARDING STATUTORY DAMAGES

          ROBERT H. CLELAND UNITED STATES DISTRICT JUDGE

         This is a counterfeit product case. Already proven is the gross and intentional theft-by-infringement of the intellectual property rights of the owners of world-famous trademarks. All that remains for the court is to calculate the money damages due the lawful owners of the property in question.

         Plaintiffs Coach, Inc. and Coach Services, Inc. (collectively, “Coach”) brought this trademark infringement action to recover damages from Defendants Source II, Inc. and Cerhue Andre Walker, alleging that the Defendants offered for sale counterfeit Coach products. On September 13, 2016, the court granted in part Plaintiffs' Motion for Partial Summary Judgment as to Defendants' liability and denied Defendants' Motion for Summary Judgment. (Dkt. # 37.) In a subsequent informal status conference, Plaintiffs indicated to the court that they would be electing to recover statutory damages instead of actual damages as allowed under the Lanham Act, 15 U.S.C. § 1117(c), which provides:

In a case involving the use of a counterfeit mark (as defined in section 1116(d) of this title) in connection with the sale, offering for sale, or distribution of goods or services, the plaintiff may elect, at any time before final judgment is rendered by the trial court, to recover, instead of actual damages and profits under subsection (a), an award of statutory damages for any such use in connection with the sale, offering for sale, or distribution of goods or services . . . .

         In light of Plaintiffs' election, the court directed Plaintiffs to provide supplemental briefing addressing the statutory damages to which they believed they were entitled. (Dkt. # 39, Pg. ID 647.) In their brief, Plaintiffs request a finding that Defendants willfully infringed their marks, an award of $2, 000, 000, and a permanent injunction. (Dkt. # 40.) Defendants filed a response, (Dkt. # 43), to which Plaintiffs replied, (Dkt. # 45), and the court allowed Defendants a sur-reply (Dkt. # 47). The court has reviewed all the relevant briefing, and finds a hearing unnecessary. See E.D. Mich. LR 7.1(f)(2). For the following reasons, the court will determine that no additional fact-finding is necessary and will award Plaintiffs $300, 000.

         I. BACKGROUND[1]

         Unless otherwise noted, the following facts are undisputed. Coach is a venerable American business that manufactures and sells fine leather products and other accessories. (Dkt. # 24, Pg. ID 184). Coach owns an extensive portfolio of well-known, easily recognized, and federally registered trademarks. (Id.) Coach has expended substantial resources developing, advertising, and otherwise promoting these marks. (Id.) As a result, consumers readily identify merchandise bearing Coach marks as being of high quality and originating with Coach. (Id.)

         Defendant Cerhue Andre Walker is the sole member and owner of Defendant Source II, Inc., which operates the clothing and accessory store, The Source Apparel. (Dkt. # 24, Pg. ID 192.) Defendants are not licensed or otherwise authorized to use Coach's marks. (Dkt. # 8, Pg. ID 55.)

         Defendants' showroom, while simulating a legitimate business, was in fact a “front” for a hidden backroom where counterfeit apparel and accessories were displayed and offered for sale. (Dkt. #31-5, Pg. ID 544.) On December 4, 2014, law enforcement officials executed a search warrant at The Source Apparel and seized thousands of counterfeit handbags, wallets, and accessories worth approximately $1, 671, 040. (Dkt. # 23, Pg. ID 140; Dkt. # 24, Pg. ID 192-93.) Four counterfeit Coach purses were among the products seized. (Dkt. # 23-5, Pg. ID 164). James Schoenherr, a Coach investigator working with law enforcement examined the purses and concluded they were counterfeit. (Dkt. #23-1, Pg. ID 147-48.)

         II. DISCUSSION

         Thievery such as that proved in this case is a problem of apparently massive proportion. “In 2002, American copyright based industries sustained more than $9 billion in losses” from counterfeiting and piracy. See International Anticounterfeiting Coalition, White Paper: The Negative Consequences of Intellectual Property Theft: Economic Harm, Threats to the Public Health and Safety, and Links to Organized Crime and Terrorist Organizations (January 2005), at 4.[2] The Act authorizes the court to award statutory damages of “not less than $1, 000 or more than $200, 000 per counterfeit mark per type of good[] . . . offered for sale . . . as the court considers just[, ]” which increases to “not more than $2, 000, 000 per counterfeit mark per type of good” if the use of the counterfeit mark was “willful.” Id. The language of the provision places the amount of the award squarely within the discretion of the court. Id. Defendants request a finding of willfulness, an award of $2, 000, 000, and a permanent injunction. (Dkt. # 40.)

         A. The marks at issue

         The unusual record in this case presents a threshold issue. The court has already found that Defendants are liable for trademark infringement. (Dkt. # 37.) Defendant Source II, by failing to respond to Plaintiffs' requests for admission, has been deemed to admit that it offered for sale products, including “handbags and a wallet, ” bearing counterfeits of registered Coach trademarks. (Dkt. # 27-6.) Defendant Walker, however, did respond to the requests, and has provided a sworn affidavit stating that “no Coach wallets were on display and/or for sale” at the time of the raid. (Dkt. # 23-7, Pg. ID 178.) The court has not yet addressed the wallet issue-the purses alone were sufficient to find that Defendants were liable and “the degree of Defendants' liability is a damages question that remains unresolved.” (Dkt. # 39, Pg. ID 647.) However, the record lacks any evidence to show which and how many registered marks were on the purses.

         In a second affidavit, attached to Defendants' sur-reply on statutory damages, Defendant Walker states that he believes the wallet “was found at Source II[] well prior to the December 4, 2014 seizure by the confidential informant when Source II re-located from its previous location at Snyder Sales and was part of an accumulation of old goods stored in a bin and which was moved to the Source II location.” (Dkt. # 47, Pg. ID 744.) Indeed, according to the warrant affidavit, a confidential informant purchased twenty-eight items from Source II's prior location, including a Coach wallet, on February 21, 2014. (Dkt. # 27-2, Pg. ID 265.) Per the warrant ...


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