Chanel, Inc. v. 2012handbagsonline.net et al

Filing 37

MEMORANDUM AND ORDER GRANTING 29 Request for entry of default, GRANTING 34 MOTION for Default Judgment and permanent injunction.(Signed by Judge Gray H. Miller) Parties notified.(rkonieczny, 4)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
CHANEL, INC.,
Plaintiff,
v.
THE PARTNERSHIPS AND UNINCORPORATED
ASSOCIATIONS IDENTIFIED IN SCHEDULE “A”
AND DOES 1-1000,
Defendants.

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CIVIL ACTION H-12-02085

M EMORANDUM O PINION & O RDER
Pending before the court are plaintiff Chanel, Inc.’s (“Chanel”) request for entry of default
(Dkt. 29) and motion for default judgment and permanent injunction. Dkt. 34. On October 26,
2012, after the court approved an order authorizing alternate service of process on the Partnerships
and Unincorporated Associations Identified in Schedule “A,” attached hereto (“defendants”) (Dkt.
20),1 Chanel served defendants with process via email or website publication. Defendants’ answers
were due on November 16, 2012, but to date, no defendant has answered or otherwise responded to
Chanel’s complaint and motion for default judgment and permanent injunction. Upon consideration
of the pleading, motions, declarations, evidence, and applicable law, Chanel’s application for entry
of default (Dkt. 29) and motion for default judgment and permanent injunction (Dkt. 34) are
GRANTED.

1

The attached Schedule “A” contains the defendant identification numbers from Chanel’s original petition. The
identified defendants are collectively referred to as “defendants” in this order and are the defendants subject to the court’s
default judgment and permanent injunction. The court notes that the omitted defendants, Defendants 5, 14, 25, 30 (solely
with respect to okdesignerhandbags.com), 33, 34, 41, 42, 43, 49, 51, and Does 1–1000, have been dismissed without
prejudice from this action upon Chanel’s request. See Dkts. 11, 26, 34–36. The court further notes that chanelslippers.com— which Chanel initially identified as Defendant 18— is an alias of Defendant 19 and is designated under
the latter defendant identification number in Schedule “A.” See Dkt. 28.

I. E NTRY OF D EFAULT & D EFAULT J UDGMENT
Pursuant to Rule 55 of the Federal Rules of Civil Procedure, entry of default is appropriate
“[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or
otherwise defend, and that failure is shown by affidavit or otherwise . . . .” FED . R. CIV . P. 55(a).
When a defendant fails to answer the complaint in a timely manner, the court has the authority to
accept the plaintiff’s well-pleaded facts as true and may award the relief sought by the plaintiffs. See
Nishimatsu Constr. Co. v. Hou. Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975).
In this case, Chanel seeks a default judgment with the following injunctive relief: a
permanent injunction prohibiting defendants from infringing certain Chanel trademarks (the “Chanel
Marks”), an order that the Subject Domain Names (“SDNs”) be transferred to Chanel or disabled,2
reasonable attorneys’ fees and other costs associated with its claims,3 and an order that PayPal, Inc.
(“PayPal”) and its affiliates transfer the funds from defendants’ accounts to partially satisfy any
award of attorneys’ fees and costs. Dkt. 34 at 25.
Chanel served defendants with process via email or website publication on October 26, 2012.
Id. at 14; Dkts. 24–25 (returns of service). Defendants’ deadline to answer or otherwise appear was
twenty-one days later, on November 16, 2012. FED R. CIV . P. 12(a). To date, no defendant has filed
an answer or other response with the court, and no extension of time has been requested or granted.
Dkt. 34, Ex. A (declaration of Steven M. Abbott) at 2 ¶ 8.
On this record, the court finds that defendants’ failure to answer Chanel’s complaint or
otherwise appear within the time required by the Federal Rules places defendants in default, and an

2

See Part II.A of this order, infra, for a chart of the Chanel Marks. Schedule “A” contains a list of the SDNs
corresponding to the defendant identification numbers.
3

Specifically, Chanel seeks $57,657.50 in attorneys’ fees, $2,357.10 in investigative fees, and $1,832.65 in
other costs. Dkt. 34 at 22–23.

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entry of default and default judgment are warranted. By defaulting, defendants “admit[] the
plaintiff’s well-pleaded allegations of fact, [are] concluded on those facts by the judgment, and [are]
barred from contesting on appeal the facts thus established.” Nishimatsu, 515 F.2d at 1206.
Consistent with Chanel’s well-pleaded allegations, as detailed further below, the court finds that
defendants violated the Lanham act and infringed the Chanel Marks. As a result of defendants’
default, the court next addresses Chanel’s request for a permanent injunction and makes the
following findings of fact and conclusions of law.
II. I NJUNCTIVE R ELIEF
A. Findings of Fact4
1.

Chanel is engaged in the business of manufacturing and distributing high-quality

luxury goods under the widely recognized and distinctive Chanel Marks throughout the world,
including within this Judicial District (“District”), and at all times relevant hereto has been, the
owner of all rights in and to the following trademark registrations:

Trademark

Registration
Number

Registration
Date

CHANEL

0,626,035

May 1, 1956

CHANEL

0,902,190

Nov. 10, 1970 IC 014 — Bracelets, Pins, & Earrings

CHANEL

0,915,139

June 15, 1971 IC 025 — Women’s Shoes

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Class(es)/Goods

IC 018 — Women’s Handbags

To the extent any Finding of Fact reflects a legal conclusion, it shall to that extent be deemed a Conclusion
of Law, and to the extent any Conclusion of Law reflects a factual finding, it shall to that extent be deemed a Finding
of Fact.

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CHANEL

0,955,074

Mar. 13, 1973 IC 014 — Watches

CHANEL

1,241,265

June 7, 1983

1,314,511

CHANEL

IC 025 — Suits, Jackets, Skirts,
Dresses, Pants, Blouses, Tunics,
Sweaters, Cardigans, Coats, Raincoats,
Scarves, Shoes, & Boots

Jan. 15, 1985

IC 018 — Leather Goods-Namely,
Handbags

1,347,677

July 9, 1985

IC 018 — Leather Goods-Namely,
Handbags
IC 006 — Keychains
IC 014 — Costume Jewelry
IC 016 — Gift Wrapping Paper

1,501,898

Aug. 30, 1988 IC 025 — Blouses, Shoes, Belts,
Scarves, Jackets, Men’s Ties
IC 026 — Brooches and Buttons for
Clothing

CHANEL

Nov. 1, 1988

1,654,252

CHANEL

1,510,757

Aug. 20, 1991 IC 009 — Sunglasses

1,733,051

1,734,822

IC 009 — Sunglasses

IC 018 — Leather Goods-Namely,
Handbags, Wallets, Travel Bags,
Nov. 17, 1992 Luggage, Business and Credit Card
Cases, Change Purses, Tote Bags,
Cosmetic Bags Sold Empty, and
Garment Bags for Travel
IC 018 — Leather Goods-Namely,
Handbags, Wallets, Travel Bags,
Nov. 24, 1992 Luggage, Business Card Cases,
Change Purses, Tote Bags, and
Cosmetic Bags Sold Empty
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J12

IC 014 — Timepieces; namely,
Watches, & Parts Thereof

2,559,772

Apr. 9, 2002

3,025,934

Dec. 13, 2005 IC 018 — Handbags
IC 009 - Eyeglass Frames, Sunglasses

3,025,936

Dec. 13, 2005

IC 025 - Gloves, Swimwear
IC 026 - Hair Accessories namely
Barrettes

CHANEL

3,133,139

Aug. 22, 2006 IC 014 — Jewelry and Watches

The Chanel Marks are used in connection with the manufacture and distribution of high-quality
goods in the categories referenced above.
2. The Chanel Marks have been used in interstate commerce to identify and distinguish its
high-quality handbags, wallets, sunglasses, shoes, dresses, watches, costume jewelry (including
earrings), and other goods (collectively, “Chanel Products”) for an extended period of time. Dkt.
1 (original complaint) at 7.
3. The Chanel Marks have achieved a secondary meaning as identifiers of Chanel’s highquality products, including its Chanel Products and other goods, and the Chanel Marks qualify as
famous marks as that term is defined in 15 U.S.C. § 1125(c)(1). Id. at 8.
4. Chanel has never abandoned the Chanel Marks, nor has it authorized any defendant to use
the Chanel Marks for any purpose. Id. at 7.
5. Among other venues, genuine Chanel-branded goods are widely and legitimately
advertised and promoted via the internet by Chanel, its authorized distributors, and unrelated, noninfringing third parties (such as Chanel fan web pages). Id. at 8.

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6. At all times relevant to this action, defendants knew about Chanel’s ownership of the
Chanel Marks, including its exclusive right to use and license such intellectual property and the
goodwill associated therewith. Id. at 9.
7. From at least April 2012, through the initiation of this lawsuit, defendants knowingly and
intentionally advertised, offered for sale, and sold counterfeit merchandise—including handbags,
wallets, sunglasses, shoes, dresses, watches, and costume jewelry (including earrings), bearing marks
that are exact copies or colorable imitations of the Chanel Marks (collectively, “defendants’
counterfeit goods”)—through various fully interactive commercial Internet websites (the “websites”)
operating under the Subject Domain Names. As reflected in Schedule “A,” thirty-three of the SDNs
unlawfully contain at least one of Chanel’s federally-registered trademarks in its entirety. Id. at 10.
8. On June 21, 2012, Chanel’s investigator, Malerie Maggio, purchased counterfeit Chanel
shoes from Defendant 20, chanelsza.com, by making payment to PayPal account recipient
[e-mail] as directed by Defendant 20. Dkt. 34 at 6–7.
9. Defendants’ infringing activities described above are likely to cause confusion, deception,
and mistake in consumers’ minds, the public, and the trade that there is a connection or association
between Chanel and defendants’ counterfeit goods when, in fact, there is not. Dkt. 1 at 10.
10. On July 11, 2012, Chanel filed this action against defendants for (1) trademark
counterfeiting and infringement in violation of 15 U.S.C. § 1114; (2) using false designations of
origin in violation of 15 U.S.C. § 1125(a); (3) cyberpiracy in violation of the Anti-Cybersquatting
Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d); and (4) unfair competition under Texas
common law. Id. at 11–15.
11. On August 14, 2012, the court entered a temporary restraining order (“TRO”), enjoining
defendants from infringing the Chanel Marks. Dkt. 8.
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12. On August 28, 2012, the court entered an order granting Chanel’s application for a
preliminary injunction, extending the injunctive and other relief in the TRO until the conclusion of
this proceeding or further order of the court. Dkt. 16.
13. The court finds that defendants’ illegal counterfeiting and infringement of the Chanel
Marks was engaged in intentionally, knowingly, maliciously, and willfully.
14. Chanel will continue to suffer irreparable harm unless defendants are permanently
enjoined from infringing the Chanel Marks.
15. To give practical effect to the permanent injunction entered in this case, the court finds
that the Subject Domain Names should be transferred to Chanel or otherwise disabled so that they
can no longer be used as platforms to sell counterfeit Chanel merchandise.
16. The court finds that this is an exceptional case under 15 U.S.C. § 1117(a), and that no
“extenuating circumstances” exist as that term is used under 15 U.S.C. § 1117(b).
17. Chanel’s investigative fees in this case were incurred under the direction of Chanel’s
counsel. Dkt. 34, Ex. B (declaration of Stephen M. Gaffigan) at 2 ¶ 6.
18. Chanel has incurred reasonable attorneys’ fees in the sum of $57,657.50, reasonable
investigative fees in the sum of $2,357.10, and reasonable costs in the sum of $1,832.65 in
prosecuting its claims against defendants. Dkt. 34 at 22–23.
B. Conclusions of Law
1. This court has jurisdiction over the subject matter of this action.
2. Venue is proper in this District.
3. Defendants are subject to the jurisdiction of this court.
4. As a result of defendants’ defaults in this action, they are deemed to admit the factual
allegations in Chanel’s complaint and concede liability on all causes of action alleged in Chanel’s
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complaint. See, e.g., Fehlhaber v. Fehlhaber, 681 F.2d 1015, 1026 (5th Cir. Unit B 1982) (stating
that a default admits the defendant’s liability). As such, defendants are liable to Chanel for
(1) federal trademark counterfeiting and infringement in violation of 15 U.S.C. § 1114; (2) false
designations of origin in violation of 15 U.S.C. § 1125(a); (3) cyberpiracy in violation of the ACPA,
15 U.S.C. § 1125(d); and (4) unfair competition under Texas common law.
5. Permanent injunctive relief is appropriate when the plaintiff demonstrates: “(1) a
substantial likelihood of success on the merits; (2) a substantial threat of irreparable injury if the
injunction is not issued; (3) that the threatened injury to [plaintiff] outweighs any damage the
injunction might cause [defendant]; and (4) that the injunction will not disserve the public interest.”
DSC Commc’ns Corp. v. DGI Techs., Inc., 81 F.3d 597, 600 (5th Cir. 1996).
6. A plaintiff is entitled to a permanent injunction to prevent any future trademark
infringement by a defendant pursuant to 15 U.S.C. § 1116.
7. Chanel established the four (4) necessary elements for a permanent injunction as is
evidenced by the court’s entry of the TRO (Dkt. 8) and preliminary injunction (Dkt. 16).
8. Under 15 U.S.C. § 1125(d)(1)(C), a court may order the forfeiture or cancellation of the
offending domain name, or the transfer of the offending domain name to the owner of the mark. 15
U.S.C.A. § 1125(d)(1)(C); see E. & J. Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 280–81 (5th
Cir. 2002).
9. Pursuant to 15 U.S.C. § 1117(a), a court may award reasonable attorneys’ fees in
exceptional cases. An exceptional case is one in which the defendant’s infringement can be
characterized as “malicious,” “fraudulent,” deliberate,” or “willful.” Schlotzsky’s, Ltd. v. Sterling
Purchasing & Nat’l Distribution Co., 520 F.3d 393, 402 (5th Cir. 2008). An award of attorneys’

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fees is mandatory upon finding intent and knowledge. See Dunkin’ Donuts Inc. v. Mercantile
Ventures, No. 93-8270, 1994 WL 93257, at *2 (5th Cir. Mar. 7, 1994).
10. Under 15 U.S.C. § 1117(b), a court “shall” award “a reasonable attorney’s fee” if the
defendant intentionally used the mark and knew that the mark was counterfeit, unless extenuating
circumstances exist. Rolex Watch USA, Inc. v. Meece, 158 F.3d 816, 824 (5th Cir. 1998).
“Extenuating circumstances” will rarely be found in cases in which the defendant has trafficked in
goods or services using a mark that he or she knows to be counterfeit. See, e.g., Dunkin’ Donuts,
1994 WL 93257, at *2.
11. Chanel is entitled to recover its reasonable attorneys’ fees under 15 U.S.C. § 1117(a)–(b).
12. Further, a plaintiff may recover its reasonable investigative fees under the Lanham Act,
as long as the investigator acted under the direction of an attorney. See Joint Statement on
Trademark Counterfeiting Legislation, 130 Cong. Rec. 12076, 12083–Part H (1984); Bollore, S.A.
v. Import Warehouse, Inc., 2004 WL 1873069, at *1 (N.D. Tex. Aug. 19, 2004).
13. Chanel is entitled to recover its reasonable investigative fees.
14. A plaintiff is entitled to recover its costs of action under 15 U.S.C. § 1117(a). This
includes taxable costs such as filing fees, as well as out-of-pocket litigation costs such as
photocopying, long distance telephone calls, service of process, and regular and express mail service,
if such costs are necessary for client representation. See 15 U.S.C.A. § 1117(a); Prot. One Alarm
Monitoring, Inc. v. Exec. Prot. One Sec. Serv., LLC, 553 F. Supp. 2d 201, 210–11 (E.D.N.Y. 2008).
15. Chanel is entitled to recover its reasonable costs incurred in this action.
16. A district court may order a third party, such as PayPal, to transfer to a successful
plaintiff any funds that PayPal is holding on behalf of one of its account recipients or customers in
order to satisfy or partially satisfy a monetary award entered against that recipient or customer. See,
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e.g., Animale Group Inc. v. Sunny’s Perfume Inc., 256 F. App’x 707, 709 (5th Cir. 2007); Chanel,
Inc. v. 2012chanelbag.net, Case No. 12-cv-22092-Martinez (S.D. Fla. Nov. 27, 2012).
17. Chanel is entitled to recover the funds associated with the PayPal account recipient
[e-mail], or any other accounts belonging to defendants, to partially satisfy a monetary
award associated with this cause of action.
III. C ONCLUSION
The court hereby GRANTS Chanel’s request for entry of default (Dkt. 29) and motion for
default judgment (Dkt. 34). The court further GRANTS Chanel’s application for a permanent
injunction (Dkt. 34) and ENJOINS defendants from infringing upon the Chanel Marks, as outlined
in Part II, supra. Lastly, the court orders that defendants’ SDNs be cancelled and that PayPal and
its affiliates transfer any funds in the account associated with [e-mail], or any other
accounts belonging to defendants, to Chanel. The court will enter a separate final judgment
consistent with this opinion.
It is so ORDERED.
Signed at Houston, Texas on September 26, 2013.

______________________________
Gray H. Miller
United States District Judge

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SCHEDULE “A”
DEFENDANTS BY SUBJECT DOMAIN NAMES AND DEFENDANT NUMBER
Domain Name
Defendant No.
1

2012handbagsonline.net

2

3chanelhandbag.com

3

airmaxinstore.com

4

ashionpurse.com

6

blueswisswatches.com

7

caphatshopping.com

8

cchanell.com

9

chanel-bagsbags.com

9

chanels--bags.org

10

chanelbagsebay.com

10

chanelbagshandbags.net

11

chanelbagsoutletonline.com

12

chanelcheaponsale.com

12

thechanelbagssale.com

12

classicchanelbagssale.com

13

chanelflapbags.net

13

frchanelhandbags.com

13

replicachanelhandbagssales.com

13

chanelhandbagwalletpurse.com

13

chanelhandbagschanelwallets.com

15

chaneloutletsonline.us

15

chanelreplicasbags.us

16

chanelpursesreplica.com

16

hubags.com
11

17

chanelsalext.com

19

chanel-slippers.com

19

chanelslippers.com

20

chanelsza.com

21

chanelxt.com

22

cheapbagshandbags.com

22

classichandbagsfr.com

23

cheapbagsoutlet2u.com

24

cheapchanelhandbags2012.com

26

cheapwomensbags.com

26

classicbagsoutlet.com

27

designer-outlet-online.com

28

designershandbags.us

29

fairhandbags1.com

29

fairhandbags2.com

30

fashionlife.us

30

realpricemall.com

30

wholesalesalemall.com

31

goforchanelbags.com

32

handbags-purse-sale.com

35

isofdc.com

36

onlinechanelbagsales.com

37

onlinetopcheap.com

38

outletchanelbagonline.com

39

outletchanelbagsale.com

40

outletchanelbagssales.com

44

sunglassesnewyork.com
12

45

thechanelwatches.com

45

thechanelwatches2012.com

46

topchanel255.com

46

topchanelflap.com

47

toppursestrade2012.com

48

wahandbags.com

50

wholesale100.com

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