This presentation covers the Coach v. Becka decision entered by the U.S. District Court for the Middle District of Georgia in November 2012.

1. Coach v. Becka: “Willful
Blindness” and Statutory
Damages Standards Applicable
to Counterfeit Infringing Marks
© 2012 Womble Carlyle Sandridge & Rice, LLP
by: Michael A. Cicero
Atlanta Office
Trademark Team Meeting
December 11, 2012
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2. DISCLAIMER
Womble Carlyle presentations are intended to
provide general information about significant
legal developments and should not be
construed as legal advice regarding any
specific facts and circumstances, nor should
they be construed as advertisements for legal
services.
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3. Decision Covered Here:
Coach, Inc. and Coach Svcs., Inc. v. Gail D.
Becka d/b/a Hair Cottage,
No. 5:11-CV-371 (MTT), 2012 U.S. Dist. LEXIS
157311 (M.D. Ga. Nov. 2, 2012)
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4. Examples of Coach Marks at Issue:
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5. Facts in Coach v. Becka
May 7, 2011
• Coach’s private investigators visit The Hair Cottage in
Macon, GA. There, they spotted “approximately [40-50]
Coach handbags on display, ranging in price from $275.00
to $449.00, as well as other Coach products, including
wallets and shoes,” and “observed alleged counterfeit
products from other luxury brands.”
• Becka gave PI Norman Johansen a guided tour through her
store, telling him “that she could sell her bags for lower
prices than other retailers because she had a ‘friend’ who
traveled to China and set her up to deal directly with a
factory.” Also said that once every 3 months her ‘friend’
traveled to China and returned with new inventory to sell.
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6. Facts in Coach v. Becka – (cont’d)
August 2011: The other PI, Genie Johansen, returns. During
that visit, she purchased a $150 purse bearing Coach TMs,
received from Ms. Becka “a Coach Registration card, Coach
Story Book, and Coach Care Instruction card, also bearing
counterfeit [TMs],” and “observed approximately [60-70] Coach
handbags, [25-30] Coach bracelets, and Coach shoes on display
for sale.”
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7. Facts in Coach v. Becka – (cont’d)
• Sept. 13, 2011
• Ms. Johansen returns one more time, serving Ms. Becka
with C&D letters from Louis Vuitton and Chanel, and
advised Ms. Becka that her Coach items were counterfeit,
and that Ms. Johansen was an authorized Coach
representative.
• Ms. Becka then surrendered all Coach 264 items in her
possession to Ms. Johansen. Items included 16 handbags,
12 pairs of shoes, 1 keychain, 3 pieces of jewelry, 70
registration cards, 70 storybooks, and 52 care cards.
• Sept. 16, 2011: Coach sues, asserting, inter alia, TM & ©
infringement and TM counterfeiting.
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8. Coach’s Motion for Summary Judgment
• After discovery, Coach filed MSJ on its TM & © infringement
and TM counterfeiting. The © claim failed for lack of proof of
copying.
• Coach asked Court to award it $2.4 million in statutory
damages, as well as a permanent injunction and attorneys’ fees.
• Ms. Becka failed to respond to the Statement of Material Facts
accompanying the MSJ, resulting in a finding that such facts
were admitted. This, combined with receipts proving the sales
of merchandise bearing Coach’s marks, spurred the court to
find no genuine dispute of material facts as to any of the TM
infringement elements.
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9. “Counterfeit”
• “A counterfeit mark ‘is a spurious mark which is identical with,
or substantially indistinguishable from, a registered mark.’ 15
U.S.C. § 1127. Coach has provided sufficient (and
uncontested) evidence that the Coach items sold by Becka
were, in fact, counterfeits.”
• “Generally, the sale or advertising of counterfeit goods causes
consumer confusion and precludes the need to undertake a
likelihood of confusion factor analysis.” RESULT:
MSJ on TM infringement count GRANTED.
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10. Riddle me this . . .
When is use of a counterfeit trademark . . .
. . . not “trademark counterfeiting”?
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11. Knowledge and “Willful Blindness”
• MD Ga: “To prevail on a trademark counterfeiting claim, a
plaintiff must show that the defendant violated 15 U.S.C.
§ 1114(1)(a) by infringing a registered trademark and that the
defendant’s use of the mark was intentional and with
knowledge that the mark was a counterfeit pursuant to 15
U.S.C. § 1117(b).” (emphasis added).
• Willful blindness can satisfy the knowledge requirement.
Under that doctrine, “‘knowledge can be imputed to a party
who knows of a high probability of illegal conduct and
purposefully contrives to avoid learning of it.’” Nike, Inc. v.
Variety Wholesalers, Inc., 274 F.Supp.2d 1352, 1369 (S.D.
Ga. 2003) (citation omitted).
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12. Knowledge and “Willful Blindness” – (cont’d)
• “[W]hether a defendant has been willfully blind will depend
on the circumstances and, like intent itself, will generally be
a question of fact for the factfinder after trial.” Chanel, Inc.,
v. Italian Activewear of Fla., Inc., 931 F.2d 1472, 1476
(11th Cir. 1991) (footnote omitted).
• “Willful blindness requires more than mere negligence or
mistake. . . . [T]he willful blindness standard is a subjective
one which asks what the defendant suspected, and what he did
with such suspicion.” Nike, 274 F.Supp.2d at 1370.
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13. Court’s Analysis of TM Counterfeiting Count
• Evidence is not so compelling as to warrant a finding of
“willful blindness” as a matter of law, even though Becka’s
knowledge of Chinese origin of her Coach goods “could
support an inference of willful blindness.”
• “If anything, Becka’s Answer considered as a whole indicates
that she was neither aware of a high probability of illegal
conduct nor purposefully contrived to avoid learning of it.
Becka stated that the website she ordered the goods from
‘looked legitimate’ and that she believed the bags to be real
because they had ‘numbers inside’ of them. . . . Becka also
stated that the company she ordered the goods from replaced
any bags with defects.” MSJ on this count DENIED.
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14. Statutory Damages: 15 U.S.C. § 1117(c)
• Under the Lanham Act, a plaintiff successfully establishing that
the defendant used a counterfeit trademark may, anytime before
final judgment in the trial court, elect to recover statutory
damages in lieu of an award of profits and actual damages.
• “The statute authorizes an award in the amount of ‘not less than
$1,000 or more than $200,000 per counterfeit mark per type of
goods ... as the court considers just.’”
• “For the willful use of a counterfeit mark, the statute
authorizes a maximum award of ‘$2,000,000 per counterfeit
mark per type of goods’ sold.”
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15. Coach’s Calculation of Statutory Damages
• Eight (8) registered marks were counterfeited [undisputed].
Therefore, Coach is entitled to 8 x $100,000 = $800,000,
which should be trebled to yield $2.4 million.
• Coach based its $100,000-per-mark figure solely upon a
statutory damage award it obtained in other litigation.
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16. Court’s Rejection of Coach’s Trebling
Argument
• Trebling not permitted because § 1117(b) only authorizes
the trebling of actual damages and profits under § 1117(a),
not the statutory damages available as an alternative award
under § 1117(c).
• Additionally, § 1117(c) already takes willful conduct into
account by allowing the judge to increase the per-mark
statutory damage award up to a maximum of $2,000,000
when the plaintiff proves such conduct.
Argument fails as a matter of law.
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17. Court’s Multifactor Approach re Statutory Damages
• “Because § 1117(c) provides little guidance on how to
determine statutory damages, district courts have broad
discretion in setting an amount.”
• The court observed three general guideposts regarding
statutory damages - they: (1) may exceed actual damages
and “serve deterrent as well as compensatory purposes”; but
(2) “should not ‘constitute a windfall for prevailing
plaintiffs’”; and (3) “are meant to serve as a substitute for
actual damages, so the Court will evaluate whether the
requested damages ‘bear some relation to the actual damages
suffered.’”
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18. Court’s Multifactor Approach re Statutory Damages
• “In assessing statutory damages under the Lanham Act, courts
often consider the Copyright Act’s analogous provision for
statutory damages.”
• “Under the Copyright Act, courts look to factors such as: (1)
the expenses saved and the profits reaped; (2) the revenues
lost by the plaintiff; (3) the value of the copyright; (4) the
deterrent effect on others besides the defendant; (5) whether
the defendant’s conduct was innocent or willful; (6) whether
a defendant has cooperated in providing particular records
from which to assess the value of the infringing material
produced; and (7) the potential for discouraging the
defendant.”
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19. Court’s Multifactor Approach re Statutory Damages
• Applying those factors in light of the 3 general guideposts
recited supra, the court first observed that Ms. Becka’s gross
revenue from sales of the counterfeit Coach merchandise
totaled only $12,400.14, and that her profits would have been
less than that total.
• Contrast this with Court’s view of Coach’s $100K-per-mark
figure: “The Court believes the amount of statutory damages
requested to be grossly disproportionate to any reasonable
estimate of actual damages.”
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20. Court’s Multifactor Approach re Statutory Damages
• The court then assessed Ms. Becka’s conduct, commenting
on: (1) the finding of the unintentional nature of the
infringement; (2) Ms. Becka’s voluntary surrender of the
counterfeit merchandise to Ms. Johansen upon learning of its
counterfeit nature; and (3) Ms. Becka’s cooperation in
responding to discovery requests.
• Finally, the court remarked: “Other courts have awarded
significantly lower awards to Coach for similar infringing
conduct, even when the conduct was willful.”
Court awards Coach $2,000 per mark, for total of $16,000.
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21. Permanent Injunction Granted
• Court had no trouble awarding Coach a permanent
injunction, citing precedent that in trademark cases, a
showing of infringement raises the presumption that: (1)
monetary relief alone would not be an adequate remedy and
(2) the trademark owner would suffer irreparable harm
absent an injunction.
• CAVEAT: “We reiterate here that there is a looming question
as to whether this presumption can co-exist with the Supreme
Court's recent holding in eBay Inc. v. MercExchange, L.L.C.,
547 U.S. 388, 392-93 [ ] (2006) . . . .” Peoples Fed. Sav. Bank
v. People’s United Bank, 672 F.3d 1, 9 n.11 (1st Cir. 2012).
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22. Attorneys’ Fees Denied
The court summarily refused Coach’s request for attorneys’
fees, holding that Coach failed to prove willful or deliberate
conduct on which to base a finding that the case was
“exceptional.”
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23. Take-Away Points
1. The mere fact that an accused mark may be “counterfeit” does
not, by itself, support a finding of “trademark counterfeiting.”
Intentional conduct must also be shown.
2. The bar to prove “willful blindness” is a high one. Courts
following the MD Ga’s approach will be reluctant to grant a MSJ
of trademark counterfeiting absent “smoking gun” evidence that
would establish “willful blindness” as a matter of law.
3. TM owner should take a multifactor approach in advocating a
calculation of statutory damages that at least approximates a
reasonable amount of actual damages. Don’t overreach!
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24. THE END
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