Free Order on Motion for Partial Summary Judgment - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 On February 7, 2003 Lorillard filed a complaint against several defendants seeking damages and injunctive relief based on the allegation that they were selling counterfeit NEWPORT cigarettes which infringed and diluted Plaintiff's federally registered trademarks and constituted unfair competition. (doc. # 1). Compl. LORILLARD TOBACCO CO., Plaintiff, vs. PLEW, et. al., Defendants. ) ) ) ) ) ) ) ) ) ) No. CIV 03-251 PHX RCB IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

O R D E R

On February 15, 2005 Lorillard filed a motion for

partial summary judgment against Samir Esmail Jado d/b/a Cigarettes R Us, one of the remaining defendants. Mot. (doc. # 103). Jado

filed a response in which he acknowledges liability, but asserts that Lorillard is not entitled to the monetary damages it seeks. Resp. (doc. # 113). Lorillard filed both a reply and a motion to

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strike portions of affidavits Jado submitted in support of his response to the motion for partial summary judgment. # 122); Mot. (doc. # 121). Reply (doc.

The Court has fully examined all the

arguments presented and now rules.1 I. Background Jado owned a business known as Cigarettes R Us located at 1422 N. 32nd St., Phoenix, Arizona between 2001 and 2004. Statement of Facts ("PSOF") (doc. # 104) ¶¶ 4-5. Plaintiff's

Jado's brother-

in-law Jorg Yousif operated the store on a day-to-day basis. Defendant's Statement of Facts ("DSOF") (doc. # 113) ¶ 2. Among

other things, Cigarettes R Us sold numerous brands of cigarettes, which it purchased from a variety of sources. ¶ 8. PSOF (doc. # 104)

Prior to August of 2002, Cigarettes R Us purchased NEWPORT DSOF (doc.

cigarettes from Sam's Club, CostCo, and Best Candy. # 113) ¶ 4.

In August 2002 the price of NEWPORT cigarettes at Id. ¶ 7. Therefore,

these stores rose too high to make a profit.

Jado and Yousif started purchasing NEWPORTs from gas stations and convenience stores when they were on sale but did not retain receipts. PSOF (doc. # 104) ¶ 12; DSOF (doc. # 113) ¶ 7. Jado

testified that the cigarettes were purchased from whatever business he could get them from for the cheapest price in order to maximize his profit. PSOF (doc. # 104) ¶ 10. However, Jado did not

authorize purchasing NEWPORTs "off the street," i.e. from street vendors or individuals who came into the store offering to sell

Lorillard requested oral argument on summary judgment pursuant to Local Rule of See Mot. (doc. # 103). The Court does necessary to the resolution of this motion. oral argument is denied. Case 2:03-cv-00251-RCB

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its motion for partial Civil Procedure 7.2(f). not deem oral argument Lorillard's request for

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cigarettes.

DSOF (doc. # 113) ¶ 3, 8.

On December 10, 2002, Mitchell Carsell, a Lorillard representative, visited Jado's store and observed that the NEWPORT cigarettes Jado was offering for sale appeared to be counterfeits. PSOF (doc. # 104) ¶ 18. Carsell replaced one carton with genuine

NEWPORT cigarettes and forwarded the suspected counterfeits to Lorillard's offices in Denver, Colorado for further examination. Id. Carsell informed Yousif that he replaced the carton because it Yousif Depo (doc. # 113) Ex. B at 30. He did not Id. During

was expired.

indicate his concern that they might be counterfeit.

the February 11, 2003, execution of the ex parte seizure order entered by this Court, another four cartons and seven individual packs of suspected counterfeit NEWPORT cigarettes were seized. PSOF (doc. # 104) ¶ 21. Jeffrey Haisten, a Lorillard

representative trained in detecting counterfeits bearing Lorillard trademarks, examined all of the suspected NEWPORT cigarettes taken from Jado's store. Id. ¶¶ 20, 23. He concluded that all of these

packs are counterfeits based on three difficult to detect differences between those packages and the packaging used for authentic NEWPORT cigarettes. Id. ¶¶ 24-31.

Before the February raid, Yousif had been informed by other convenience store owners that counterfeit NEWPORT cigarettes were being sold by some stores. DSOF (doc. # 113) ¶ 10. Yousif also

received complaints from customers that some of the NEWPORT packs they had purchased at Cigarettes R Us were stale. Id. Upon

receiving this information Yousif and Jado stopped purchasing NEWPORT cigarettes from gas stations and convenience stores. Yousif Depo. (doc. # 113) Ex. B at 39. Yousif also examined the

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stock of NEWPORT cigarettes and removed four cartons and seven packs from the storefront based on the package marks and Newport expiration dates. Id. ¶ 11. He placed these cigarettes in the Id. He attempted to

storeroom and did not offer them for sale.

get in touch with Carsell, the Lorillard representative, for purposes of asking him if there was anything wrong with these cartons and packs. Id. ¶ 12. Before Carsell got in touch with See id. All of the cartons and

him, the February raid occurred.

packs which Yousif had placed in the storeroom were seized and ultimately determined to be counterfeit, but all of the NEWPORT cigarettes which remained available for sale were genuine. ¶ 13. II. Lorillard's Motions to Strike Lorillard has filed a motion arguing that several paragraphs in the affidavits of Yousif and Jado must be struck. # 121). Mot. (doc. Id.

Some paragraphs are challenged on the basis that they

directly contradict the affiant's previous deposition testimony. Id. at 6-8, 10. Lorillard correctly points out that statements in

an affidavit which directly contradict previous deposition testimony of the same witness should be disregarded on a motion for summary judgement. See Foster v. Arcata Associates, 772 F.2d 1453

(9th Cir. 1985); Radobenko v. Automated Equip. Corp., 520 F.2d 540 (9th Cir. 1975). The first statement Lorillard challenges on this

basis is Yousif's statement that he asked Carsell, the Lorillard representative, to come to the store and examine the expired NEWPORT cigarettes Yousif had placed in the back of the store. Mot. (doc. # 121) at 6-7. Lorillard points out that this

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and left a message asking him to call back, but did not specify the reason for wanting to talk to him. Id. Jado acknowledges that

there is a minor discrepancy in the testimony which merits striking the portions of Yousif's affidavit which indicate that Yousif actually requested Carsell to examine the cigarettes. # 126) at 3-4. Resp. (doc.

Therefore, the Court will strike the statement

"I . . . asked him [Carsell] to visit the store to check these cigarettes and determine whether they were expired or no good" in paragraph 10 and the statement "I . . . requested that the Newport sales representative come to look at the expired cigarettes" in paragraph 14 of Yousif's March 17, 2005 affidavit. In their affidavits both Yousif and Jado stated that Yousif stopped working at the store in June of 2003. Jado Aff. (doc. Lorillard

# 113) Ex. C ¶ 7; Yousif Aff. (doc. # 113) Ex. D ¶ 12.

attempts to establish that these statements contradict Yousif and Jado's testimony at their depositions conducted in December of 2003. Mot. (doc. # 121) at 7-8, 10. However, at their depositions

neither Yousif nor Jado was directly asked when Yousif stopped working at the store or whether he was currently employed there. See Jado Depo. (doc. # 113) Ex. A; Yousif Depo. (doc. # 113) Ex. B. Lorillard relies on the fact that Yousif and Jado testified regarding Yousif's employment using the present tense as the equivalent of an explicit statement that Yousif was still employed at the store at the time of the depositions in December of 2003. Mot. (doc. # 121) at 7-8, 10. The Ninth Circuit has held that "the

non-moving party is not precluded from elaborating upon, explaining or clarifying prior testimony elicited by opposing counsel on deposition; minor inconsistencies that result from an honest -5Document 137 Filed 07/13/2005

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discrepancy, a mistake, or newly discovered evidence afford no basis for excluding an opposition affidavit." Messick v. Horizon The

Industries, Inc., 62 F.3d 1227, 1231 (9th Cir. 1995).

statements in Yousif and Jado's affidavits merely clarify a point which was not explicitly explored during their depositions. Therefore, there is no reason to strike these statements. Lorillard also contends that the portions of Yousif's affidavit which contradict Jado's deposition testimony must be struck. Id. at 2-4. Lorillard supports this claim by pointing to

the proposition that a defendant cannot avoid summary judgment by submitting an affidavit which directly contradicts his previous deposition testimony. Id. Lorillard asserts that Yousif's

presence during Jado's deposition and failure during his immediately subsequent deposition to correct points of Jado's testimony which Yousif later contradicted in his affidavit merits striking all of those contradictory statements. Id. However,

Lorillard offers no legal support for such a position, nor is the Court aware of any. The fact that a sworn statement contradicts

evidence from a different witness is not a basis for granting a motion to strike at the summary judgment stage. The Court must

evaluate the merits of the summary judgment motion based on the evidence most favorable to the non-moving party and leave issues of credibility to the trier of fact. See Matsushita Elec. Co. v. Lorillard's failure

Zenith Radio Corp., 475 U.S. 574, 587 (1986).

to take this basic principle into account also dooms its argument that Yousif's statements which contradict Carsell's testimony should be struck. Once again, the mere incongruence between

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striking Yousif's testimony. In his affidavit Yousif states that the previous owner of Cigarettes R Us told him not to purchase cigarettes off the street. Yousif Aff. (doc. # 113) Ex. D ¶ 3. statement is inadmissible hearsay. Lorillard claims that this Mot. (doc. # 121) at 4. Jado

counters that the statement is not hearsay because it is submitted, not to prove the truth of the matter asserted, but to show the effect on Yousif's state of mind. is correct. Resp. (doc. # 126) at 2-3. Jado

The previous owner's statement is admissible to show

that Yousif had reason to believe that there might be a problem with cigarettes sold by individuals off the street. Evid. 801(c). See Fed. R.

Consequently, with the exception of portions of

paragraphs ten and fourteen of Yousif's affidavit, Lorillard's motion to strike is denied. When Jado responded to Lorillard's motion to strike he attached two supplemental affidavits. See Resp. (doc. # 126). In

it's reply, Lorillard moved to strike portions of those supplemental affidavits. Reply (doc. # 133). However, as the

forgoing discussion indicates, the Court did not rely on the supplemental affidavits in its resolution of the initial motion to strike. Therefore, Lorillard's motion to strike portions of the

supplemental affidavits is moot. III. Summary Judgment Standard To grant summary judgment, the Court must determine that the record before it contains "no genuine issue as to any material fact" and, thus, "that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In determining whether

to grant summary judgment, the Court will view the facts and -7Document 137 Filed 07/13/2005

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inferences from these facts in the light most favorable to the nonmoving party. See Matsushita, 475 U.S. at 587.

The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. 242, 247-48 (1986). See Anderson v. Liberty Lobby, Inc., 477 U.S. A material fact is any factual dispute that

might affect the outcome of the case under the governing substantive law. Id. at 248. A factual dispute is genuine if the

evidence is such that a reasonable jury could resolve the dispute in favor of the nonmoving party. Id. A party opposing a motion

for summary judgment cannot rest upon mere allegations or denials in the pleadings or papers, but instead must set forth specific facts demonstrating a genuine issue for trial. See id. at 250.

Finally, if the nonmoving party's evidence is merely colorable or is not significantly probative, a court may grant summary judgment. See, e.g., California Architectural Build. Prods., Inc. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir. 1987). IV. Counterfeiting and Trademark Infringement Lorillard's first cause of action is for counterfeiting and infringement of five of its federally registered trademarks which appeared on the counterfeit cigarettes taken from Jado's store. Compl. (doc. # 1) at 6-7. Section 32 of the Lanham Act applies to

federally registered trademarks and imposes liability upon any person who shall, without the consent of the registrant: use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, -8Document 137 Filed 07/13/2005

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or to deceive. . . 15 U.S.C. § 1114(1)(a). To recover for trademark infringement

under this statute a plaintiff must establish both ownership of a valid and protectable trademark and "that the alleged infringer's use of the mark is likely to cause confusion, or to cause mistake, or to deceive." KP Permanent Make-Up, Inc. v. Lasting Impression

I, Inc., 328 F.3d 1061, 1067 (9th cir. 2003) (internal citations omitted). Lorillard has established that there is no genuine issue of material fact regarding either of the elements of trademark infringement. Both sworn testimony and the registration

documentation has been submitted to establish that Lorillard owns five federally registered trademarks which appeared on the cigarettes at issue. PSOF (doc. # 104) Exs. 1, 2. Furthermore,

the likelihood of the cigarettes taken from Jado's store being confused with genuine NEWPORT cigarettes has never been disputed by Jado. In his response, Jado agrees that Lorillard has established Resp. (doc. # 113) at 5.

his liability on this cause of action.

His only argument is addressed to the appropriate remedy which the Court will discuss below. Since neither of the elements is

disputed, the Court grants summary judgment in Lorillard's favor on count one of the complaint. V. Unfair Competition A. Federal statute

Count two of the complaint states a cause of action for unfair competition under federal law. Compl. (doc. # 1) at 7. Section

43(a) of the Lanham Act imposes liability upon: (1) Any person who, on or in connection with any goods or -9Document 137 Filed 07/13/2005

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services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which ­ (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person. . . 15 U.S.C. § 1125(a). To establish a cause of action pursuant to

this provision Lorillard must show that Jado was using a mark "confusingly similar to a valid protectable trademark." See

Brookfield Comms. v. West Coast Entertainment Corp., 174 F.3d 1036, 1046 (9th Cir. 1999). The analysis of whether a defendant's mark

is likely to cause confusion under 15 U.S.C. § 1125(a) is the same analysis as is used in the context of trademark infringement claims brought pursuant to 15 U.S.C. § 1114. Id. at 1046-47, n.8. As

previously discussed, Lorillard has established that it has valid protectable marks and that the marks on the cigarettes in Jado's store were confusingly similar to Lorillard's protectable marks. See supra Section IV. Since these are the only requirements of

unfair competition under federal law, Lorillard has met its summary judgment burden on count two of the complaint as well. acknowledges this point. B. State statute Resp. (doc. # 113) at 5. Jado

Count six of the complaint states a cause of action for unfair competition under the Arizona statutory unfair competition provision which prohibits the knowing and intentional sale, distribution, display, advertisement or possession of any item which bears a counterfeit mark. A.R.S. § 44-1453(A). The

definition of a counterfeit mark includes a trademark "that is - 10 Filed 07/13/2005

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affixed to any item that is knowingly sold, offered for sale, manufactured or distributed." added). A.R.S. § 44-1453(M)(1)-(2) (emphasis

Lorillard does not seek summary judgment on this count.

Mot. (doc. # 101) at 2. C. Common law unfair competition

Lorillard's fifth cause of action is for common law unfair competition. The general purpose of the common law doctrine of

unfair competition is to prohibit business conduct which is "contrary to honest practice in industrial or commercial matters." Fairway Constructors, Inc. v. Ahern, 193 Ariz. 122, 124 (Ct. App. 1998). "The central tort in unfair competition at common law . . .

consists in a false representation tending to induce buyers to believe that the defendant's product is that of the plaintiff." Id. (internal quotations omitted). Furthermore, liability for

common law unfair competition "is determined by an evaluation of the probable consequences of the actor's conduct and does not depend upon the actor's subjective intent." the Law of Unfair Competition § 4, comt. d. Lorillard has submitted evidence that Jado offered cigarettes for sale which were not manufactured by Lorillard, but which were packaged in a way to make consumers believe they were genuine NEWPORT cigarettes manufactured by Lorillard. # 104) ¶¶ 18-24. See PSOF (doc. Restatement (Third) of

Since Jado's subjective intent is not relevant to

the common law unfair competition claim, Lorillard's ability to show that Jado knew the cigarettes were counterfeit when they were available for sale is irrelevant to this cause of action. Jado has

provided no response to Lorillard's evidence making out a prima facie case for common law unfair competition. - 11 Filed 07/13/2005 See Resp. (doc.

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# 113); Reply (doc. # 122) at 10.

Accordingly, Lorillard is

entitled to summary judgment on this claim. VI. Dilution A. Federal law

Count three of the complaint states a cause of action under federal law for dilution of Lorillard's trademarks. # 1) at 7-8. Compl. (doc.

Section 43(c) of the Lanham Act prohibits the

"dilution" of famous marks, regardless of whether the famous mark is registered, and regardless of whether there is competition between the senior user and junior user's marks. § 1125(c). This statute states that: 15 U.S.C.

The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this subsection. 15 U.S.C. § 1125(c)(1). Congress has defined "dilution" as:

The lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of ­ (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake, or deception. 15 U.S.C. § 1127. The basic elements of a dilution cause of action

are the defendant's commercial use of the mark, the famousness of the mark, the time of defendant's use, and the dilution of the mark in dispute. See Playboy Enterprises, Inc. v. Netscape Comm. Corp.,

354 F.3d 1020, 1031 n.49 (9th Cir. 2004). Lorillard has provided evidence that Jado commercially used five of its trademarks. See PSOF (doc. # 104) ¶¶ 18-24. These

marks were on the counterfeit cigarettes Jado offered for sale in his store. Id. The evidence is also abundantly clear that - 12 Filed 07/13/2005

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Lorillard's marks are famous and have been for a considerable period of time. Lorillard has been manufacturing and selling Id. ¶ 1. NEWPORT cigarettes are

NEWPORT cigarettes since 1956.

currently the best-selling brand of menthol cigarettes in the United States and the second best selling cigarette brand overall. Id. Lorillard spends millions of dollars every year in promoting

and marketing the NEWPORT brand of cigarettes which are identified by the marks in issue. marks. Id. ¶ 3. These marks are, indeed, famous

Moreover, the marks became famous well before Jado started Therefore, the

selling counterfeit NEWPORT cigarettes in 2002.

first three elements of the dilution claim have been met. The final element of a dilution claim is that the defendant's mark diluted the famous mark. Lorillard points out that the

counterfeit cigarettes Jado sold were not subjected to the same quality assurance and control measures Lorillard uses in its manufacturing process and, therefore, the counterfeits "may create a negative association with Lorillard's products." # 104) at 13. Mot. (doc.

The United States Supreme Court has ruled that the

text of the federal dilution statute "requires a showing of actual dilution, rather than a likelihood of dilution." Secret Catalogue, Inc., 537 U.S. 418, 433 (2003). Moseley v. V However, the

Court observed that where the junior and senior marks at issue are identical, that is sufficient circumstantial evidence to prove actual dilution. See id. at 433-34. Lorillard has demonstrated

that the marks Jado was using were identical to Lorillard's marks. PSOF (doc. # 104) ¶¶ 18-24. Therefore, this final element of the

dilution claim is established. . . . - 13 Filed 07/13/2005

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B.

State law

Arizona's trademark law substantially mirrors the antidilution provision of the Lanham Act, providing a statutory cause of action and remedies for injury to business reputation and dilution of marks famous in Arizona. provides that: The owner of a mark that is famous in this state shall be entitled, subject to the principles of equity and on terms as the court deems reasonable, to an injunction against another person's commercial use of a mark or trade name, if the use begins after the mark has become famous and causes dilution of the distinctive quality of the mark and to obtain other relief provided in this section. A.R.S. § 44-1448.01(A). Lorillard's marks are clearly famous in Therefore, Lorillard Specifically, the statute

Arizona as well as the rest of the country.

is entitled to relief against Jado on its state dilution claim for the same reasons it is entitled to relief on its federal dilution claim. See supra Section VI. A.

VII. Remedies Lorillard's motion for partial summary judgment seeks four remedies ­- permanent injunctive relief, permission to destroy the counterfeit cigarettes seized from Jado's store, statutory damages, and attorneys' fees. Mot. (doc. # 104) at 14-16. The first two

remedies sought are clearly appropriate.

The Ninth Circuit has

observed that "[i]njunctive relief is the remedy of choice for trademark and unfair competition cases." Century 21 Real Estate

Corp. v. Sandlin, 846 F.2d 1175, 1180 (9th Cir. 1988). Furthermore, there is express statutory authorization for ordering the destruction of seized counterfeit goods once a violation of the federal trademark infringement or unfair competition statutes has been established. See 15 U.S.C. § 1118. - 14 Filed 07/13/2005

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While Jado does not challenge the propriety of injunctive relief or destruction of the seized cigarettes, he does argue that the undisputed evidence is not sufficient to entitle Lorillard to the statutory damages it seeks. See Resp. (doc. # 113). The

statutory provision at issue states that: 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) of this section, an award of statutory damages for any such use in connection with the sale, offering for sale, or distribution of goods or services in the amount of­ (1) not less than $500 or more than $100,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just; or (2) if the court finds that the use of the counterfeit mark was wilful, not more than $1,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just. 15 U.S.C. § 1117(c). While Jado admits that he is liable for

violations of federal trademark infringement law and federal unfair competition law, he argues that Lorillard is not entitled to statutory damages under § 1117(c) because it must demonstrate wilfulness to prevail on its counterfeiting claim. # 113) at 5-7. Resp. (doc.

Jado asserts that "Plaintiff's claim of trademark

counterfeiting is distinct from its claim of trademark infringement and involves a higher burden of proof." Id. at 6. However, the

cases which Jado relies upon to support the proposition that wilfulness is an element of a trademark counterfeiting claim all address claims which seek treble damages for trademark counterfeiting under § 1117(b). See Babbit Elec., Inc. v. Dynascan

Corp., 38 F.3d 1161, 1181 (11th Cir. 1994); Too, Inc. v. The TJX Cos., 229 F. Supp. 2d 825, 837 (S.D. Ohio 2002); Playboy Enter. v. - 15 Filed 07/13/2005

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Universal Tel-A-Talk, Inc., 1998 U.S. Dist. LEXIS 8231 at *9. Subsection (b) allows treble damages in cases of trademark infringement "that consist[] of intentionally using a mark or designation, knowing the mark or designation is a counterfeit mark." 15 U.S.C. § 1117(b). However, subsection (c) provides for

statutory damages in "a case involving the use of a counterfeit mark." Id. § 1117(c). Since the terms of subsection (b)

explicitly require a showing of wilfulness, but subsection (c) contains no such language, the Court concludes that the line of cases discussing § 1117(b) is inapposite. The language of

§ 1117(c) clearly indicates that wilfulness is not necessary to obtain statutory damages. Subsection (c) not only fails to

explicitly state such a requirement, but also sets forth a higher maximum for statutory damages for instances of wilful violations, which necessarily implies that the general limits apply to nonwilful violations. See 15 U.S.C. § 1117(c). Therefore, Jado's

argument that a demonstration of wilfulness is a prerequisite to the recovery of any statutory damages under § 1117(c) fails. Jado also maintains that statutory damages cannot be assessed against him under § 1117(c) on the basis of his violations of federal and state dilution laws. Resp. (doc. # 113) at 11-12.

However, this assertion is irrelevant because Lorillard only seeks injunctive relief on its dilution claims, not monetary damages. See Reply (doc. # 122) at 9. Lorillard acknowledges that there is an issue of fact regarding the wilfulness of Jado's violations. at 2, n.2. Reply (doc. # 122)

Consequently, the Court cannot grant statutory damages Nevertheless, damages pursuant to § 1117(c)(1) - 16 Filed 07/13/2005

under § 1117(c)(2).

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are appropriate.

Jado argues that the undisputed facts are

insufficient to support Lorillard's request for damages in the high end of the permissible range set forth in § 1117(c)(1). (doc. # 113) at 9-11. Resp.

Lorillard asserts that it is entitled to

"significant statutory damages" because its trademarks are extremely valuable and because Jado profited from selling the counterfeit cigarettes. Reply (doc. # 122) at 7-8. Jado does not

challenge the testimony regarding the value of Lorillard's marks, but points out that the maximum profit he could have obtained from selling the counterfeit NEWPORT cigarettes was only three hundred sixty dollars. Resp. (doc. # 113) at 10. Moreover, Jado points

out that since he is no longer in the business of selling cigarettes, a significant amount of damages is not necessary to deter him from future violations. Id. Most importantly, Jado

emphasizes that the evidence not only fails to indicate that he was aware of the counterfeit nature of the cigarettes at the time they were sold, but also shows that his store manager Yousif took steps to ensure that counterfeit NEWPORTs were not offered for sale at Cigarettes R Us. Id. at 7-9, 10.

Under the circumstances of this case the Court considers it just to award damages of $500.00 per counterfeit mark. Even if

every carton of NEWPORT cigarettes sold in Cigarettes R Us between August 2002 and February 2003 was counterfeit, Jado would only have made approximately three hundred sixty dollars. # 113) at 10. See Resp. (doc.

The most significant factor, however, is the lack of

evidence that Jado was aware that the cigarettes in question were counterfeit. Despite Lorillard's efforts to characterize Jado's

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the record indicates that steps were taken to verify the genuineness of the "NEWPORT" cigarettes once Jado and his store manager were alerted to a potential problem. Specifically, once

Jado's manager learned that counterfeit NEWPORT cigarettes were on the market, he obtained information about how to detect those counterfeits. DSOF (doc. # 113) ¶ 10. Then Yousif examined the

inventory at Cigarettes R Us and immediately removed a number of suspected cartons and packages from the front of the store. ¶ 11. Id.

In fact, at the time of the February raid, no counterfeit Id. ¶ 13.

NEWPORTs were being offered for sale at Cigarettes R Us.

These circumstances persuade the Court that even in light of the value of Lorillard's trademarks an award of damages at the low end authorized by the statute is just. Since the counterfeit

cigarettes bore five Lorillard marks the damages award must be multiplied by five. See 15 U.S.C. § 1117(c)(1). Consequently,

Lorillard is entitled to a total of $2,500.00 in statutory damages. Lorillard's final requested remedy is attorneys' fees. (doc. # 103) at 15. It asserts that this is the kind of Mot.

"exceptional" case in which 15 U.S.C. § 1117(a) permits the Court to award attorneys' fees. Id. Jado argues that Lorillard is not

entitled to attorneys' fees as a matter of law because there is an issue of fact regarding wilfulness. Resp. (doc. # 113) at 12-13.

The Ninth Circuit has held that "[w]hile the term 'exceptional' is not defined in the statute, attorney's fees are available in infringement cases where the acts of infringement can be characterized as malicious, fraudulent, deliberate, or willful." Rio Properties, Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1023 (9th Cir. 2002). Although Lorillard has established the underlying - 18 Filed 07/13/2005

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infringement, the issue of whether Jado was aware of the counterfeit nature of the cigarettes at the time of the infringement is still disputed. This genuine issue of material

fact precludes awarding Lorillard attorney's fees as a matter of law. The only issue remaining in this case is whether Jado's violations were wilful. The Court will set this matter for trial

on the issue of wilfulness if Lorillard so requests within thirty days of the filing of this order. If Lorillard does not file such

a request within the allotted time the clerk will enter judgment pursuant to this order granting Lorillard permanent injunctive relief, permitting the destruction of the counterfeit cigarettes, awarding damages in the amount of $2,500.00 and terminating the case. IT IS ORDERED that Plaintiff's Motion to Strike (doc. # 121) is GRANTED in part and DENIED in part. IT IS FURTHER ORDERED that the following statements in Yousif's March 17, 2005 affidavit are STRUCK: ¶ 10: "I . . . asked him to visit the store to check these cigarettes and determine whether they were expired or no good." ¶ 14: "I . . . requested that the Newport sales representative come to look at the expired cigarettes." IT IS FURTHER ORDERED that Plaintiff's Motion to Strike (doc. # 133) is DENIED as moot. IT IS FURTHER ORDERED that Plaintiff's Motion for Partial Summary Judgment (doc. # 103) is GRANTED. IT IS FURTHER ORDERED that if Plaintiff does not file a request for trial on the issue of wilfulness within 30 days from - 19 Filed 07/13/2005

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the date of the filing of this order the clerk is directed to enter judgment in favor of Plaintiff as follows and terminate this case: With regard to Lorillard's registered trademarks LORILLARD® (Reg. No. 1,920,006), NEWPORT® (Reg. No. 1,108,876), NEWPORT® (stylized) (Reg. No. 2,600,870), Spinnaker Design® (Reg. No. 1,178,413), and NEWPORT and Design® (Reg. No. 1,191,816), registered on the Principal Register in the United States Patent and Trademark Office (collectively, the "Lorillard Marks"), commencing immediately from the date of entry of this Judgment, Defendant Esmail Jado d/b/a Cigarettes R Us and any of its officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with Defendant who receive actual notice of this Order by personal service or otherwise, are hereby permanently enjoined and restrained from directly or indirectly: (i) using any reproduction, counterfeit, copy, or colorable imitation of the Lorillard Marks in connection with the importation, sale, offering for sale, or distribution of cigarettes in the United States; (ii) using the Lorillard Marks or any reproduction, counterfeit, copy, or colorable imitation of the same in any manner likely to cause others to believe that Defendant's products are connected with Lorillard or are genuine Lorillard products if they are not; (iii) passing off, inducing, or enabling others to sell or pass off any merchandise which is not genuine Lorillard merchandise as and for genuine Lorillard merchandise; (iv) making any false or misleading statements regarding Lorillard or its respective goods, or the relationship between Lorillard and Defendant; (v) committing any other acts calculated to cause purchasers to believe that Defendant's products are Lorillard's products; (vi) importing, shipping, delivering, distributing, holding for sale, returning, transferring, or otherwise moving or disposing of in any manner such cigarettes falsely bearing one or more of the Lorillard Marks or any reproduction, counterfeit, copy, or colorable imitation of the same; and (vii) assisting, aiding, or abetting any other person or business entity in engaging in or performing any of the activities referred to in the above paragraphs (i) through (vi). Plaintiff is permitted to destroy all counterfeit cigarettes seized from Defendant Jado which are in Plaintiff's custody and control. Defendant Jado is liable to Plaintiff for statutory damages in the amount of $2,500.00. IT IS FINALLY ORDERED that if Plaintiff does file a request

27 for a trial within 30 days of the date of the filing of this order, 28 - 20 Filed 07/13/2005

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the clerk shall not enter judgment in this case. DATED this 12th day of July, 2005.

Copies to counsel of record

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