Roger Cleveland Golf Company Inc v. Prince et al

Filing 137

REPLY to Response to Motion re 127 MOTION for Attorney Fees Response filed by Roger Cleveland Golf Company Inc. (Attachments: # 1 Exhibit A - Jury Trial Discussions excerpt, # 2 Exhibit B - Verdict Form, # 3 Exhibit C - 9.29.10 ltr & Amended Notices of Depos to Doolittle, # 4 Exhibit D - Rolex v. Brown, # 5 Exhibit E - Chanel v. French, # 6 Exhibit F - Rolex v. Jones, # 7 Exhibit G - Lorillard Tobacco v. S&M Central Serv. Corp., # 8 Exhibit H - Employers Council v. Feltman, # 9 Exhibit I - Rodgers v. Anderson, # 10 Exhibit J - Silhouette v. Chakhbazian)(McElwaine, John)

Exhibit G

Page 1

LEXSEE 2004 U.S. DIST. LEXIS 22563
LORILLARD TOBACCO COMPANY, Plaintiff, v. S&M CENTRAL SERVICE
CORPORATION, Defendant.
No. 03 C 4986
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS, EASTERN DIVISION
2004 U.S. Dist. LEXIS 22563

November 5, 2004, Decided
November 8, 2004, Docketed
DISPOSITION:
Judgment entered for plaintiff.
Plaintiff's request for a permanent injunction granted;
Plaintiff's Motion to Amend the Pleadings to Conform to
the Evidence and Motion to Strike S&M's Brief on
Damages denied.

COUNSEL: [*1] For LORILLARD TOBACCO
COMPANY, A DELAWARE CORPORATION,
Plaintiff: John S. Pacocha, Jeffrey G. Mote, Daniel T
Fahner, Cameron Matthew Nelson, Greenberg Traurig,
LLP., Chicago, IL.
For S&M CENTRAL SERVICE CORPORATION, AN
ILLINOIS CORPORATION, Defendant: Alexander
Sotirios Michalakos, Zanayed & Michalakos, Ltd.,
Chicago, IL.
JUDGES: JAMES F. HOLDERMAN, District Judge.
OPINION BY: JAMES F. HOLDERMAN
OPINION

MEMORANDUM OPINION AND ORDER
JAMES F. HOLDERMAN, District Judge:

Plaintiff Lorillard Tobacco Co., ("Lorillard"), filed
suit against defendant S&M Central Service Corporation,
("S&M"), alleging that S&M infringed of five of
Lorillard's registered trademarks in violation of the
Trademark Act of 1946, 15 U.S.C. § 1051 et seq.,
("Lanham Act"), by willfully, or with willful blindness,
offering for sale, selling and distributing counterfeit
versions of Lorillard's Newport cigarettes. At the
conclusion of a two day trial on the merits, a jury
returned a verdict in favor of Lorillard and stated: (1) yes,
consumers would likely confuse the cigarette packs
bearing the counterfeit marks sold by S&M with genuine
Newport cigarette packs; and (2) yes, S&M's actions
were [*2] taken willfully or committed with willful
blindness. (Dkt. No. 49.)
Lorillard's August 4, 2004 post-trial motions request
this court to (1) award Lorillard statutory damages of five
hundred thousand dollars, ($ 500,000) 1, pursuant to 15
U.S.C. § 1117(c); (2) award Lorillard costs and
reasonable attorneys' fees pursuant to 15 U.S.C. §
1117(b); (3) enter a permanent injunction barring S&M
from selling, offering for sale or distributing counterfeit
cigarettes, and, (4) amend the pleadings to add Safwan
Alkhawan ("Alkhawan") and Marwan Khawam
("Khawam") as individually liable defendants in order to
conform the pleadings to the evidence presented at trial.
Lorillard also submitted a motion on August 16, 2004 to
Strike the Defendant's Brief on Damages pursuant to

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2004 U.S. Dist. LEXIS 22563, *2

Rules 12, 26 and 37 of the Federal Rules of Civil
Procedure, ("Rules").

and 1,920,666, have attained incontestable status under
15 U.S.C. § 1115(b). (Id.)

1 Lorillard arrived at the $ 500,000 figure by
requesting damages of one hundred thousand
dollars, ($ 100,000), for each of the five infringed
trademarks.

B. S&M Central Service Corporation and its interaction
with Lorillard

[*3] S&M, in its Brief Regarding Damages of
August 6, 2004, requests that if any damages are
awarded, the court should award 15 U.S.C. § 1117(c)'s
minimum amount of $ 500 per infringed mark for a total
award of $ 2,500. S&M also argues that an award of
attorneys' fees and costs is not appropriate in this case.
For the reasons set forth below, this court awards to
Lorillard, pursuant to 15 U.S.C. § 1117(c), statutory
damages of Fifty Thousand Dollars ($ 50,000) per
infringed mark for a total statutory damage award of Two
Hundred Fifty Thousand Dollars ($ 250,000). This court
also finds that Lorillard is entitled to receive reasonable
costs and attorneys' fees pursuant to 15 U.S.C. § 1117(b)
but the parties must comply with the requirements of
Local Rule 54.3 before this court can calculate a figure
for reasonable costs and attorneys' fees. In addition, this
court grants Lorillard's request for a permanent
injunction, but denies Lorillard's Motion to Amend the
Pleadings to Conform to the Evidence and denies
Lorillard's August 16, 2004 Motion to Strike S&M's
Brief on Damages.
BACKGROUND
A. Lorillard Tobacco Company
[*4] Lorillard is the fourth largest tobacco company
in the United States. (Stipulation and Statement of
Uncontested Facts P 4, Ex. 1 to the Pre-Trial Order,
[hereinafter Uncontested Facts].) First introduced into the
market in 1956, Newport is a Lorillard cigarette brand.
(Id. at P 6.) Newport is the leading brand of menthol
cigarettes sold in the United States, and it is the second
leading cigarette brand overall with an eight percent
market share. (Id. at P 6-7.)
Lorillard has protected the value of the Newport
brand by registering the five following trademarks with
the United States Patent and Trademark Office: Reg. No.
1,108,876; Reg. No. 1,178,413; Reg. No. 1,191,816; Reg.
No. 1,920,066; and Reg. No. 2,600,870. (Id. at P 10.)
Four of the marks, Nos. 1,108,876; 1,178,417; 1,191,816;

S&M operates a gas station in Chicago, Illinois.
(Trial Tr. pg. 59.) The station sells gasoline, operates
maintenance bays, and sells consumer products including
food, magazines and cigarettes. (Uncontested [*5] Facts
at P 3.) Lorillard became aware of counterfeit Newport
cigarettes at S&M when one of Lorillard's sales
representatives made a sales call to S&M. (Id. at 16.) The
sales representative purchased two cartons of the
counterfeit cigarettes. (Trial Tr. at 42.) On July 18, 2003,
Lorillard obtained an Ex Parte Seizure Order from this
court authorizing a seizure of counterfeit cigarettes at
S&M. The executed search of S&M resulted in a seizure
of 83 cartons and 9 packages of counterfeit Newport
cigarettes and associated business records.
ANALYSIS
A. Lorillard's Motion to Strike S&M's Brief on Damages
On August 16, 2004, Lorillard filed a motion to
strike S&M's August 6, 2004 brief on damages under
Rules 12, 26, and 37. Lorillard's motion asserts two
separate concerns. First, Lorillard argues that S&M's
brief contains misstatement of facts unsupported by
citation to the record. Second, Lorillard argues that S&M
improperly included its 2001, 2002, and 2003 tax returns
as an exhibit to S&M's brief on damages. Lorillard argues
that it had requested financial information included tax
returns from S&M during discovery, that S&M had failed
to disclose these items, and therefore [*6] S&M should
be prohibited from using these documents under Rule 37.
Lorillard requests the court to strike S&M's brief in
whole, or in the alternative strike specific offending
portions of the brief, and the impose sanctions against
S&M.
S&M counters that the documents provided with its
brief were specifically requested by the court at the end
of the trial, that these documents were not disclosed
during discovery because they were not relevant and the
information contained in the brief is appropriate since
S&M is making arguments to the court. S&M further
argues that Lorillard should be sanctioned for bringing its
motion to strike.

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2004 U.S. Dist. LEXIS 22563, *6

Lorillard is unable to bring a motion to strike under
Rule 12(f). Rule 12(f) provides that "the court may strike
from any pleading any insufficient defense or any
redundant, immaterial, impertinent, or scandalous
matter." Fed. R. Civ. P. 12(f). The plain language of Rule
12(f) states that the Rule applies to "pleadings." A
memorandum submitted in support of a court's
determination of damages is not a pleading under the
Rules. See Fed. R. Civ. P. 7(a) (Defining pleadings as
either a complaint, answer, reply to a counterclaim, an
answer to a cross-claim, [*7] a third-party complaint, or
third-party answer); see, e.g., E.E.O.C. v. Admiral Maint.
Serv., L.P., 174 F.R.D. 643, 645-47 (N.D. Ill. 1997).
Consequently, by the plain language of Rules, Rule 12(f)
is not applicable. The court notes, however, that any
evaluation of the facts must be based on the record
presented to the court and the court will provide proper
citations to the record were appropriate.
Furthermore, this court concludes that it will
consider the tax returns provided by S&M in its brief on
damages. The language of Rule 37(c) allows a court to
consider evidence that otherwise would be excluded
when the result is harmless. Fed. R. Civ. P. 37(c). In this
case, the court concludes that S&M's decision to provide
its 2001, 2003 and 2003 tax returns was harmless to
Lorillard and actually undercuts certain of S&M's
arguments due to the way that S&M uses the tax returns
in its brief on damages.
S&M provides its tax returns as support for its
statement that "S&M has not been a profitable enterprise.
The attached tax returns of 2001, 2002, and 2003 show
that there was no taxable income to the company. As a
result, any award of damages would cause a hardship to
the [*8] Defendant." (Def. Br. Regarding Damages of
August 6, 2004 at 3.) However, the information contained
in the tax returns contradict the statement that any award
of damages would be a hardship. It is true that S&M
reported zero taxable income on its 2001, 2002 and 2003
federal tax returns. However, the zero taxable figure was
the result of a Net Operating Loss deduction, ("NOL"),
that S&M was able to take during those three years. A
NOL is a non cash deduction that allows a company to
"carry-forward" and/or "carry-back" prior year losses and
recognize them as current year deductions. See 26 U.S.C.
§ 172. Consequently, S&M's statement that it "has not
been a profitable enterprise" may be technically correct
for tax purposes since S&M reported no taxable income.
However, the tax returns actually undermine S&M's

statement that "any award of damages would cause a
hardship for the Defendant" because S&M recognized a
profit before the NOL deduction. S&M's creditability as
to its statement of financial condition is further
undermined by the millions of dollars of wire transfers
uncovered by Lorillard. (Pls. Brief on Damages and
Att'ys Fees of August 6, 2004 at Ex. [*9] I.) Since the
tax returns submitted by S&M are actually harmful to
S&M and helpful to Lorillard, the court concludes there
is no harm as to Lorillard and will deny Lorillard's
motion to strike. In light of this decision, S&M's motion
to sanction Lorillard for bringing its motion to strike is
denied.
B. Lorillard's Motion for Statutory Damages under
15 U.S.C. § 1117(c)
Title 15, Section 1117 allows a plaintiff to elect, at
any time before final judgment is rendered, one of two
alternative recovery options for trademark infringement:
(1) the actual damages caused by the infringement, 15
U.S.C. § 1117(a); or (2) statutory damages. 15 U.S.C. §
1117(c). Congress provided the statutory damages option
of 15 U.S.C. § 1117(c) through the Anticounterfeiting
Consumer Protection Act of 1996, Pub. L. No. 104-153,
§ 7, 110 Stat. 1386. This option was added due to the
concern that a counterfeiter might hide, alter or destroy
records, thus making it impossible for a plaintiff to
determine the scope of, or be able to prove, actual
damages. Louis Vuitton v. Veit, 211 F. Supp. 2d 567, 583
(E.D. Pa. 2002) [*10] (citing S. Rep. No. 177, 104 Cong.
(1995)).
Section 1117(c)(1) allows statutory damages of "not
less than $ 500 and no more than $ 100,000 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)(1). In addition, Section
1117(c)(2) allows a statutory award of up to $ 1,000,000
per counterfeit mark "if the court finds that the use of the
counterfeit mark was willful." 15 U.S.C. § 1117(c)(2).
Although section 1117(c) contains the dollar ranges
for possible statutory damage awards, the statute does not
provides guidance on how to select a damage figure
within statutory dollar range. Courts interpreting section
1117(c) have looked by analogy to case law applying the
statutory damage provision of the Copyright Act
contained in 17 U.S.C. § 504(c). Sara Lee v. Bags of New
York, Inc., 36 F. Supp. 2d 161, 166 (S.D.N.Y. 1999)
("Cases decided under the Copyright Act, which deals

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2004 U.S. Dist. LEXIS 22563, *10

with a similar problem and a similar legislative grant to
discretion, afford guidance here."). Accord, Tommy
Hilfiger Licensing, Inc. v. Goody's [*11] Family
Clothing, Inc., 2003 U.S. Dist. LEXIS 8788, No.
1:00-CV-1934-BBM, 2003 WL 22331254, at *28(N.D.
Ga. May 9, 2003); Louis Vuitton, 211 F. Supp. 2d at 583;
Microsoft Corp. v. Logical Choice Computers, Inc., 2001
U.S. Dist. LEXIS 479, No. 99 C 1300, 2001 WL 58950 at
* 11 (N.D. Ill. Jan. 22, 2001); , Microsoft Corp. v.
Software Wholesale Club, Inc., 129 F. Supp. 2d 995,
1008 (S.D. Tex. 2000).
The Seventh Circuit's standard for awarding
copyright statutory damages under 17 U.S.C § 504(c),
and thus the standard this court will use for awarding
trademark statutory damages under 15 U.S.C. § 1117(c),
is enumerated in Chi-Boy Music v. Charlie Club. 930
F.2d 1224, 1229 (7th Cir. 1991). Under the Chi-Boy
standard, a court awarding statutory damages is "not
required to follow any rigid formula but instead enjoys
wide discretion." Id. In computing the award amount, a
court may consider factors such as "the difficulty or
impossibility of proving actual damages, the
circumstances of the infringement, and the efficacy of the
damages as a deterrent." Id. Additionally, statutory
damages are appropriate to "penalize [*12] the infringer
and deter future violations" when the infringement was
willful. Id. at 1230.
Lorillard argues for a damages award of at least $
100,000 per each of the five infringed marks for a
minimum damage award of $ 500,000. Lorillard argues
that the $ 500,000 is appropriate in light of (1) S&M's
annual total gross sales of approximately $ 1.35 million,
(2) S&M's annual total gross sales of cigarettes of $
300,000, (3) the "immeasurable value" of Lorillard's
trademarks and the risk that customers using inferior
counterfeit cigarettes will stop buying Newport products,
and, (4) will serve to deter both S&M and other potential
infringers. (Pls. Brief on Damages and Att'ys Fees of
August 6, 2004 at pg 12-13, 18.) In addition, Lorillard
argues that the court should reject any of the S&M's
arguments about inability to pay a damages award.
According to Lorillard, S&M's financial information
should be "viewed with a healthy degree of skepticism,"
since they have failed to provide supporting
documentation and Lorillard uncovered "millions of
dollars worth of foreign wire transfers" made by S&M.
(Id. at 13.)

Lorillard also argues for the court to find that S&M
was [*13] willful in its infringement. A finding of willful
infringement would allow for a damages award of up to $
1,000,000 per counterfeit mark, 15 U.S.C. § 1117(c)(2),
for a total potential award of $ 5,000,000. According to
Lorillard, evidence of S&M's willfulness include (1) the
purchase of larger than usual quantities of purported
Newport cigarettes from Cam-Kat at a price well below
market value and in unusual packaging that differed
significantly from the genuine Newport packaging, and,
(2) the jury's verdict finding willful infringement. (Id. at
15.) Additionally, Lorillard argues that S&M's attempts
to rebut the question of willfulness merely highlight their
own guilt," (Id.), and they have exacerbated their willful
purchases of counterfeit Newports by "lying throughout
this case - from the day of the ex parte seizure to the last
day of trial." (Id. at 16.)
S&M argues the court should impose no damages or
at the most the minimum statutory penalty of $ 500 per
infringed mark for a total award of $ 2,500. S&M argues
that (1) the conduct of defendants in other reported
infringement cases is more willful and done with more
disdain than in this [*14] case, and therefore warranted
higher damages, (Defs. Brief Regarding Damages of
August 6, 2004 at pg 2); (2) S&M has not been a
profitable enterprise and therefore any damage award
would cause a hardship, (Id.); (3) the actual damage to
Lorillard was very small due to the small number of
cartons of counterfeit product purchased, (Id. at 4.); (4)
despite the jury's finding of willfulness, the evidence for
willfulness was not overwhelming, (Id.); (5) Lorillard
shares some level of responsibility since it possessed
specialized and sophisticated knowledge about how to
identify counterfeit packages and never shared this
information with S&M, (Id. at 5); and, (6) the court
should not be bound by the jury's findings. (Id. at 6)
This court concludes that the appropriate damage
award in this case is $ 50,000 per infringed mark for a
total statutory damages award of $ 250,000. This amount
is appropriate due to the value of the trademarks, the
conduct by S&M, and the need to deter future conduct by
S&M and other potential counterfeiters. Furthermore, this
court notes that an award of $ 250,000 is reasonable and
fair in light of the range of awards provided by other
courts [*15] awarding damages under 15 U.S.C. §
1117(c) 2, and that the total potential award could have
been as high as $ 5,000,000 due to the maximum
statutory award of $ 1,000,000 for each willfully

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2004 U.S. Dist. LEXIS 22563, *15

infringed trademark.
2 A figure of $ 50,000 per infringed mark for a
total award of $ 250,000 is within the range of
statutory awards made by other courts under 15
U.S.C. § 1117(c). See Philip Morris USA, Inc. v.
Felizardo, 2004 U.S. Dist. LEXIS 11154, No. 03
Civ. 5891, 2004 WL 1375277, at *7 n.16
(S.D.N.Y. June 18, 2004) ($ 62,500 statutory
damage award for two infringed trademarks when
defendant attempted to sell 7500 counterfeit
cartons of cigarettes); Philip Morris USA, Inc. v.
Castworld Prods., Inc., 219 F.R.D. 494, 501
(C.D. Cal. 2003) ($ 2,000,000 statutory damage
award for two infringed trademarks when
defendant imported 8,000,000 counterfeit
cigarettes); see e.g., Silhouette Int'l Schmied v.
Chakhbazian, No. 04 Civ. 3613, at *2 (S.D.N.Y
Oct. 4, 2004) ($ 250,000 statutory damage award
for infringement of multiple eyewear trademarks);
Microsoft Corp v. V3 Solutions, Inc., 2003 U.S.
Dist. LEXIS 15008, No. 01 C 4693, 2003 WL
22038593, at *16 (N.D. Ill. Aug. 28, 2003) ($
35,000 statutory damage award for seven
infringed Microsoft software trademarks);
Microsoft Corp. v. Logical Choice Computers,
Inc., 2001 U.S. Dist. LEXIS 479, No. 99 C 1300,
2001 WL 58950, at *11 (N.D. Ill. Jan. 22, 2001)
($ 1,400,000 statutory damage for the
infringement of seven Microsoft software
trademarks).

significant value of Lorillard's brand and the efforts taken
to protect, promote and enhance that brand should be
considered by the court in the determination of the
appropriate dollar figure for the award. Furthermore, the
actual damages incurred by Lorillard are of [*17] lesser
concern in determining a proper damage award because
Congress' decision to allow statutory damages under 15
U.S.C. § 1117(c) was in direct recognition of the fact that
the calculation of the actual damages may be difficult, if
not impossible, to determine. Louis Vuitton v. Veit, 211 F.
Supp. 2d 567, 583 (E.D. Pa. 2002) (citing S. Rep. No.
177, 104 Cong. (1995)).
The actual damages figure is also less relevant since
part of the purpose of statutory damages is to deter the
current violator and other potential future violators. Thus,
the court believes that a damage award limited to
Lorillard's lost profits would have little to no deterrent
effect on future violations. A counterfeiter must fear
more than just having to turn over his ill gotten gains to
the rightful owners. Instead, the counterfeit must
understand that he risks his financial future by engaging
in his illegal practice. As the Seventh Circuit has held,
"one who undertakes a course of infringing conduct may
neither sneer in the face of the [trademark] owner nor
hide its head in the sand like an ostrich." Wildlife Express
Corp. v. Carol Wright Sales, Inc., 18 F.3d 502, 514 (7th
Cir. 1994) [*18] (citations omitted).

[*16] The five trademarks infringed by S&M are of
considerable worth and value. Lorillard has taken
considerable action to cultivate, maintain and strengthen
these trademarks including: (1) registering the trademarks
with the United States Patent and Trademark Office,
(Uncontested Facts at P 8); (2) manufacturing the
Newport product through strict quality control standards,
(Id. at P 5); (3) investing substantial time, energy and
money in advertising and promoting the Newport product
(Id. at P 6); (4) training its sales personnel to be aware of
counterfeit products so, like in this case, they can identify
and report suspicious items, (Trial Tr. at pg 33.); and, (5)
protecting the value of its trademarks by litigating against
trademark infringers.

Furthermore, deterring S&M along with potential
future trademark infringers is an important consideration
in light of the fact that counterfeiters often times
produces lower quality products than the original.
Lorillard properly notes that infringement deprives the
rightful owner of profits and reduces the value of its
brands. But an additional concern, above and beyond the
financial harm, is that counterfeit consumer products can
also potentially pose the risk of being more harmful or
dangerous then the real product. The House of
Representatives in its report on the Anticounterfeiting
Consumer Protection Act of 1996, Pub. L. No. 104-153,
§ 7, 110 Stat. 1386, noted, "even more grievous than the
enormous economic losses suffered by American
companies are the serious health and safety hazards
caused by criminal counterfeiting." H. Rep. No. 556, 104
Cong. (1996).

Congress has provided the option of statutory
damages under 15 U.S.C. § 1117(c) and Lorillard has
elected to pursue that remedy. Consequently, the

The court is not entering into a discussion of the
general health effects of cigarettes or whether the
counterfeit cigarettes sold by S&M were more harmful

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2004 U.S. Dist. LEXIS 22563, *18

than the authentic Newport product. Instead, the court is
noting that there was no proof presented by the parties
that the counterfeit Newport products [*19] are subject
to any type of safety review or quality control process
when manufactured by someone other than Lorillard.
Cigarettes are consumer products and the retail
establishments that sell cigarettes often sell other
consumer products such as food, beverages,
over-the-counter medicines and cosmetics. S&M sells
food and beverages as well as cigarettes. (Uncontested
Facts at P 3.) The statutory damage award will deter
S&M and other retail establishments from purchasing
counterfeit consumer products, and this in turn will help
to reduce the probability that consumers will purchase
counterfeit products that may be more dangerous than the
authentic items.
The court's belief that a $ 250,000 award is fully
supported by its concurrence with the jury's
determination of S&M's willful infringement. A finding
of willful infringement allows the court to award the
maximum statutory damage amount, if appropriate under
the circumstances of the case, of $ 1,000,000 per
infringed mark, 15 U.S.C. § 1117(c), for a total potential
award in this case of $ 5,000,000.
"Willful infringement may be attributed to the
defendant's actions where he had knowledge that his
conduct constituted [*20] infringement or where he
showed a reckless disregard for the owner's rights. Thus,
knowledge need not be proved directly, but can be
inferred from a defendant's conduct." Logical Choice
Computers, Inc., 2001 U.S. Dist. LEXIS 479, No. 99 C
1300, 2001 WL 58950, at *11 (citing Wildlife Express
Corp., 18 F.3d at 511). Willful infringement may be
shown by the fact that the "defendant ignored the
plaintiff's notices ..., did not seek advice of an attorney,
and passed the matter off as a nuisance." Wildlife Express
Corp., 18 F.3d at 511.
Several facts support the jury's determination of
willfulness. S&M purchased the counterfeit cigarettes at a
price below the market price. Khawam testified that
S&M obtained the counterfeit cigarettes at a price of $ 34
per carton instead of the normal rate of $ 40 per carton.
(Trial Tr. 155, 161.) Khawam admitted during his
testimony that price was low enough to make him inspect
the tax stamps and the name brands on a sample of the
cartons he purchased for Cam-Kat. (Trial Tr. 160.)
Additionally evidence is that packaging for the

counterfeit cigarettes, including the outer boxes, was
different from the packaging used for authentic [*21]
Newport cigarettes. (Trial Ex. 30 - 32c.) Alkawham,
when questioned about the differences in the packaging
during his testimony, responded, "it's not my business to
find out if they're counterfeit or not." (Trial Tr. 91.)
In light of the reasons set forth above, this court
awards to Lorillard, pursuant to 15 U.S.C. § 1117(c),
statutory damages of Fifty Thousand Dollars ($ 50,000)
per infringed mark for a total statutory damage award of
Two Hundred Fifty Thousand Dollars ($ 250,000). This
amount is within the range authorized by Congress under
the statute and is appropriate in light of the evidence
presented at trial.
C. Award of costs and reasonable attorneys' fees
pursuant to 15 U.S.C. § 1117(b) and Rule 54(d)(1)
Lorillard seeks an award of $ 140,000 for costs and
reasonable attorneys' fees. As the prevailing party,
Lorillard is entitled to its costs other than attorneys' fees
as a matter of course pursuant to Rule 54(d)(1). Fed. R.
Civ. P. 54(d)(1). "The court in exceptional cases may
award reasonable attorney fees to the prevailing party."
15 U.S.C. § 1117(a). Exceptional cases allowing for an
award of [*22] attorneys' fees include "acts of
infringement [that] are 'malicious, fraudulent, deliberate
or willful.'" BASF Corp. v. Old World Trading Co., Inc.,
41 F.3d 1081, 1099 (7th Cir. 1994) (quoting Roulo v.
Russ Berrie & Co., Inc., 886 F.2d 931, 942 (7th Cir.
1989)).
An award of reasonable attorneys's fees under 15
U.S.C. § 1117(a) is appropriate in light of the jury's
determination, and the court's concurrence in that
determination, of willful infringement by S&M. The
parties must comply with the Local Rule 54.3, before the
court can determine the amount of fees and costs which
reasonably should be awarded.
D. Permanent Injunction Barring S&M from Selling,
Offering for Sale or Distributing Counterfeit Cigarettes
Lorillard seeks a permanent injunction to bar S&M
from selling, offering for sale or distributing counterfeit
cigarettes. This court has power to enter such an
injunction, "according to the principles of equity and
upon such terms as the court may deem reasonable, to
prevent the violation of any right of the registrant of a
mark registered in the Patent and Trademark Office." 15

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2004 U.S. Dist. LEXIS 22563, *22

U.S.C. § 1116 [*23] (a). This court grants the injunction,
as detailed below, in the "Conclusion" section of this
opinion.
E. Lorillard's Motion to Amend the Pleadings to Conform
to the Evidence Presented at Trial
Lorillard moves to amend the pleadings to add
Safwan Alkhawan, ("Alkhawam"), and Marwan Khawam
("Khawam") as individually liable defendants in order to
conform the pleadings to the evidence presented at trial
pursuant to Rule 15(b). Alkhawan is the owner of S&M.
(Trial at pg. 58.) Alkhawan handles S&M's financial
activities including its bank accounts, the paying of bills
and the writing of checks. (Trial Tr.pg 60.) Alkhawan has
employed his brother Khawam to run the gas station on a
daily basis for the past ten years. (Id.)
As a general rule, corporate officers cannot be held
personally liable for infringing actions taken by the
corporation. Drink Group, Inc. v. Gulfstream
Communications, 7 F. Supp. 2d 1009, 1010 (N.D. Ill.
1998) (citing Dangler v. Imperial Mach. Co., 11 F.2d
945, 947 (7th Cir. 1926)). However, this court has
recognized that an individual may be held liable for a
corporation's infringement under the theory of vicarious
liability or [*24] contributory liability. Microsoft Corp.
v. V3 Solutions, Inc., 2003 U.S. Dist. LEXIS 15008, No.
01 C 4693, 2003 WL 22038593, at *13 (N.D. Ill. Aug.
28, 2003) (citing Gershwin Publ'g Corp. v. Columbia
Artists Mgmt., 443 F.2d 1159 (2d Cir. 1971)). "Personal
liability for trademark infringement ... is established if a
corporate officer is a moving, active, conscious force
behind the defendant corporation's infringement."
Dynamic Force v. Dynamic Force, Ltd., 1999 U.S. Dist.
LEXIS 7892, No. 98 C 5922, 1999 WL 342407, at *4
(N.D. Ill. May 14, 1999).
The factual situation in the present case is different
from the situation in the V3 Solutions and Dynamic Force
cases. In those cases, the individual corporate officer had
been named as a defendant in the original complaint filed
with the court. Thus, the question was whether it was
appropriate to find personal liability or only limit liability
to the named corporation. However, in the present case,
Alkhawan and Khawam have never been named as
defendants in the case. Service of process was only
effectuated on S&M, not on Alkhawan or Khawam. (Dkt.
No. 14.) The U.S. Marshal's served Khawam in person on
July 18, 2003, however, Khawam was served [*25] in
his role as an employee of S&M and not in his capacity

as an individual. (Dkt. No. 13.)
This court does have the ability under Rule 15 to add
new defendants after trial and judgment has been entered.
However, as the Supreme Court held in Nelson v. Adams,
that if the court adds a new party to the litigation, due
process requires that the new party is given an
opportunity to respond and contest his personal liability.
529 U.S. 460, 463, 146 L. Ed. 2d 530, 120 S. Ct. 1579
(2000). Thus, this court, although it has the power to add
Alkhawan and Khawam, cannot immediately award
judgment against them in favor of Lorillard. Instead, if
this court decides to add Alkhawan and Khawam, it must
give them the opportunity to respond.
Furthermore, although Rule 15 provides a liberal
policy for amending pleadings, the right to amend is not
absolute. See Crestview Vill. Apartments v. United States
Dep't of Hous. and Urban Dev., 383 F.3d 552, 2004 WL
1965663, at *5 (7th Cir. 2004) (citing Perkins v.
Silverstein, 939 F.2d 463, 471-72 (7th Cir. 1991)).
Lorillard provides no reason for its failure to name
Alkhawan and Khawam as individual defendants [*26]
before the trial. Lorillard was aware of Alkhawan and
Khawam existence and their roles in the counterfeiting
before the trial. Alkhawan was present for this trial,
however, his presence was in his capacity as the owner of
S&M. Whether he and Khawam would have dealt with
this case in the same way as S&M, if they were facing
personal liability and a possible judgment against them as
individuals, is a matter of speculation. The only way to
know would be to retry the case and the court is
unwilling at this point to impose to undertake that burden
especially when Lorillard could have named Alkhawan
and Khawam as defendants much earlier in the litigation.
Consequently, the court denies Lorillard's motion to
amend the pleadings to conform to the evidence
presented at trial.
CONCLUSION
For the reasons set forth above, this court order
judgment to Plaintiff Lorillard Tobacco Company of
statutory damages of Fifty Thousand Dollars ($ 50,000)
per infringed mark for a total statutory damage award,
pursuant to 15 U.S.C. § 1117(c), of Two Hundred and
Fifty Thousand Dollars ($ 250,000) from Defendant
S&M Central Service Corporation. This court also finds
that Lorillard [*27] Tobacco Company is entitled to
receive reasonable costs and attorneys' fees from S&M
Central Service Corporation, pursuant to 15 U.S.C. §

Page 8
2004 U.S. Dist. LEXIS 22563, *27

1117(b), but the parties must comply with the
requirements of Local Rule 54.3 as follows: Lorillard
must provide S&M with its 54.3 material by November
12, 2004 and S&M must provide Lorillard with its 54.3
material by November 23, 2004. The parties should then
attempt to resolve any remaining disputes over attorneys'
fees and costs. If an agreement cannot be reached,
Lorillard's further petition for fees and costs, including
the joint statement under 54.3(e), is due no later than
December 6, 2004. Response is due December 17, 2004
and the reply is December 28, 2004.
This court denies Lorillard's Motion to Amend the
Pleadings to Conform to the Evidence and denies
Lorillard's August 16, 2004 Motion to Strike S&M's
Brief on Damages.
The court orders the clerk of this court to release the
five hundred dollar ($ 500) bond posted by Lorillard
Tobacco Company at the commencement of this action
on July 18, 2003, plus interest, be immediately released
to Martin Kedziora or Thomas Kost in a check payable to
Greenberg Traurig, LLP.
[*28] Furthermore, it is therefore ordered that
defendant S&M Central Service Corporation, and their
agents, servants, employees, attorneys, and those personal
or entities in active concert or participating with them
who receive actual notice of this order by personal
service or otherwise, are permanently enjoined from
doing, or assisting others in doing, the following acts:
(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, which cigarettes in fact are not
connected with Lorillard or are not
genuine Lorillard products, which such
use is likely to cause confusion, or to
cause mistake, or to deceive;
(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 Defendants' products are connected
with Lorillard or are genuine Lorillard
products if they are not, which such use is
likely to cause confusion, or to cause

mistake, or to deceive;
(iii) passing off, inducing, or enabling
others to sell or pass off any merchandise
which is [*29] not genuine Lorillard
merchandise as and for genuine Lorillard
merchandise;
(iv) committing any other acts
reasonably calculated to cause purchasers
to believe that Defendant's products are
Lorillard's products, when in fact such
products are not Lorillard products;
(v) 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;
(vi) discussing or communicating any
aspect of the seizure of counterfeit
cigarettes or the identifying markers of
counterfeit cigarettes with any person or
entity selling or attempting to sell
cigarettes to Defendants;
(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); and (viii) other than by an
order of this Court,
(1) selling, moving,
destroying, or otherwise
disposing of any goods,
boxes, labels, packaging or
other items or documents
bearing any reproduction,
counterfeit, or imitation of
the Lorillard [*30] Marks,
which such use is likely to
cause confusion, or to
cause mistake, or to
deceive;
(2)

moving,

Page 9
2004 U.S. Dist. LEXIS 22563, *30

destroying, or otherwise
disposing of any business
records
or
documents
relating in any way to the
manufacture, importation,
acquisition,
purchase,
distribution, or sale of
goods or merchandise
bearing any of the Lorillard
Marks or any reproduction,
counterfeit, or imitation of
the Lorillard Marks, which
such use is likely to cause
confusion, or to cause
mistake, or to deceive; or

S&M Central Service Corporation and their agents,
servants, employees, attorneys, and those personal or
entities in active concert or participating with them who
receive actual notice of this order by personal service or
otherwise is warned that any act by them in violation of
any of the terms of this Order may be considered and
prosecuted as contempt of this Court.
ENTER:
JAMES F. HOLDERMAN
United [*31] States District Judge
DATE: November 5, 2004

(3) assisting any third
party
in
identifying,
moving, destroying, or
otherwise disposing of any
reproduction, counterfeit or
imitation goods, as well as
any records pertaining to
reproduction, counterfeit or
imitation goods, which
such use is likely to cause
confusion, or to cause
mistake, or to deceive.

JUDGMENT IN A CIVIL CASE
Decision by Court. This action came to trial before
the Court. The issues have been tried and a decision has
been rendered.
IT IS HEREBY ORDERED AND ADJUDGED that
judgment is entered in favor of plaintiff and against
defendant in the amount of $ 250,000.00 plus costs and
attorneys' fees.
Date: 11/5/2004