OPINION, ORDER, AND AMENDED JUDGMENT
Following a trial, a jury found defendants New York & Company, Inc. and New York & Company Stores, Inc. (collectively, “New York & Company”) liable for infringing the trademark of plaintiffs 4 Pillar Dynasty LLC (“4 Pillar”) and Reflex Performance Resources, Inc. (“Reflex”). The Court entered judgment awarding plaintiffs $5,593,011.87 — three times defendants’ stipulated gross profits from the infringing products — and enjoining defendants from using plaintiffs’ trademark in connection with their products (the “Judgment”). Now before the Court is defendants’ motion for judgment as a matter of law and to alter or amend the Judgment, which seeks to vacate the monetary award. Also before the Court is plaintiffs’ motion for attorneys’ fees and for pre- and post-judgment interest. For the reasons explained below, the Court amends the Judgment to reduce the monetary award to $1,864,337.29, and also grants plaintiffs’ motion and instructs plaintiffs to submit a calculation of their attorneys’ fees and interest.
The relevant facts and background may be briefly summarized as follows. 4 Pillar and Reflex, two companies owned by Beh-rooz Hedvat and his brothers, design and sell women’s apparel, including spandex clothing intended to be used for yoga and
In • 2015, a buyer ■ came to plaintiffs’ showroom and asked Hedvat whether 4 Pillar had licensed the Velocity mark to New York & Company. Tr. 82. Surprised by the question, Hedvat looked at New York & Company’s website and discovered that New York &' Company was marketing a collection of aetivewear using the label “NY&C Velocity” (the “NY&C Velocity mark”). Tr. 82-83; see PX 11.
Plaintiffs thereupon filed this action on April 15, 2016. See-CompL, ECF No. 1. While they asserted several causes of action under the Federal Lanham Act and New York law, all of their claims rested on the allegation that defendants’ use of the NY&C Velocity mark infringed plaintiffs’ Velocity mark. Compl. .¶¶ 13-51. In their pre-trial submissions,- plaintiffs made clear that they did not seek to prove that they suffered actual damages from any infringement, but rather they sought to recover defendants’ profits from the sale of NY&C Velocity products. Proposed Pre-trial Consent Order 6, ECF No. 25.
The case went to trial on February 6, 2017. In defendants’ opening statement, they asserted that Yelena Monzina and Christine Munnelly — respectively the creative director and the head of merchandising of New York & Company — would testify that when they decided to use the NY&C Velocity mark they believed that no consumer would be confused. Tr. 33, 36-37. Specifically, defendants asserted that Monzina would testify that after she came up with NY&C Velocity as a name she ran a trademark search that turned up several trademarks including the word “Velocity,” but that she did not recall encountering plaintiffs’ mark. Tr. 33-34.
Plaintiffs called only one witness, Hed-vat, who testified during his direct examination about the creation and registration of the'Velocity mark and the products on which it was used. See generally Tr. 37-91. After describing his discovery of the products bearing the NY&C Velocity mark following the buyer’s inquiry about a licensing arrangement between 4 Pillar and New York & Company, Hedvat testified that he called his lawyers and asked them to request that New York & Company stop using the Velocity mark. Tr. 86. He further testified that defendants did not stop using the mark after being contacted by plaintiffs’ lawyers, id., though on cross examination he could not recall whether the lawyers sent defendants a. cease-and-desist letter or simply initiated this action, Tr. 210-11. After Hedvat’s examination concluded, plaintiffs read into evidence a stipulation by the parties that defendants’ gross profits from the sale of products bearing the NY&C Velocity mark were $1,864,337.29. Tr. 275.
Plaintiffs then rested, and defendants moved for judgment as a matter of law, which the Court denied:
THE COURT: All right. Does plaintiff rest? ■
MR. SOLOMON: Yes, your Honor.
THE COURT: Okay. The defense will call their first witness.
*616 MR. O’REILLY: Your Honor, before we do that, we’d just like to move for a judgment—
THE COURT: Ah, yes, okay. That motion is properly made and is equally properly denied.
MR. O’REILLY: As expected. Thank you, your Honor.
Tr. 27 6. Defendants then rested without putting on any evidence, id., despite their earlier representation that they would call Monzina and'Munnelly.
Later the same day, while the Court discussed with the parties the instructions of law for the jury, defendants expressed their position that an award of profits under the Lanham Act required a finding of willfulness. Tr. 301-02. Both sides agreed that the determination of whether any infringement was willful was a matter for the Court to decide. Tr. 300-01. The Court decided, however, that it would seek an advisory verdict from the jury on the issue of willfulness (as well as the binding verdict on the issue of infringement).
On February 10, 2017, the case was submitted to the jury with instructions as to the determination of whether there was infringement and, if so, whether such infringement was willful. Tr. 336-49. The jury returned a verdict of infringement with an advisory finding that the infringement was willful. Tr. 354. That same day, the Court entered judgment “agreeing] with the jury’s opinion as to willfulness” and “holding defendants jointly and severally hable to plaintiffs in the amount of $5,593,011.87,” as well as “enjoin[ing] defendants from using in connection with their products the term ‘NY&C Velocity’ as well as the term ‘Velocity,’ alone or in conjunction with other words.” Judgment (Feb. 10, 2017), ECF No. 34. The Judgment indicated that an opinion explaining the reasons for the rulings therein would issue shortly. Id.
On February 22, the Court granted defendants’ request that the Court stay the execution of the Judgment and forebear issuing an opinion pending the disposition of defendants’ post-trial motion. Memo Endorsement (Feb. 22, 2017), ECF No. 39. On February 24, plaintiffs filed a motion seeking a declaration that they were entitled to attorneys’ fees, a fourteen-day period in which to submit their invoices for those fees, and an award of pre- and post-judgment interest. Notice of Mot. (Feb. 24, 2017), ECF No. 40; Decl. of Aaron J. Solomon in Supp. of Mot. (“Solomon Decl. dated Feb 24, 2017”), ECF No. 41. On March 2, defendants filed their motion. Notice of Mot. (Mar. 2, 2017), ECF No. 52; Mem. of Law (1) in Supp. of Defs.’ Mot. for J. as a Matter of Law and to Amend or Alter the J., and (2) in Opp. to Pis.’ Mot. for Att’ys’ Fees and Pre-J. Interest (“Defs. Mem.”), ECF. No. 53.
The Court turns first to defendants’ motion, which is styled as a motion for judgment as a matter of law dismissing plaintiffs’ claim for damages under Federal Rule of Civil Procedure 50 (b) and to alter or amend the Judgment under Rule 59(e). The relief defendants seek is straightforward: they do not challenge the jury’s determination of infringement, and they therefore accept the injunction contained in the Judgment,
As a threshold matter, defendants have waived this challenge. It is a requirement of motions under Rules 50 and 59 that the movant have previously put before the Court the grounds for their motion, rather than raising an argument for the first time in a post-judgment challenge. Defendants had ample opportunity to raise their challenge to the adequacy of evidence of willfulness at trial but failed to do so.
Under Rule 50, “[a] motion for judgment as a matter of law may be made at any time before the case is submitted to the jury. The motion must specify the judgment sought and the law and facts that entitle the movant to the judgment.” Fed. R. Civ. P. 50(a) (2). If a court denies such a motion, the movant may, within a certain time after the entry of judgment, “file a renewed motion for judgment as a matter of law.” Fed. R. Civ. P. 50(b). But a renewed motion for judgment as a matter of law “is limited to those grounds that were ‘specifically raised in the prior motion for [judgment as a matter of law].’ ” McCardle v. Haddad,
Alternatively, however, defendants bring their motion under Rule 59(e), pursuant to which “district courts may alter or amend judgment to correct a clear error of law or prevent manifest injustice.” Munafo v. Metro. Transp. Auth.,
Here, defendants had ample opportunity to raise the purported deficiency of plaintiffs’ proof of willfulness (or actual confusion) as a ground for their contention that plaintiffs were not entitled to any monetary recovery. During a conference regarding jury instructions, they expressed the view that a finding of willfulness was necessary to support an award of profits, Tr. 301-02, and the Court indicated that it would seek from the jury an adviso
Defendants now argue that their failure to articulate specific grounds should be excused. First, they claim that, when they moved for judgment as a matter of law at trial, the Court denied the motion before defendants’ counsel could articulate the ground for the motion, and thus they should not be barred from renewing the motion because of a lack of specificity. Reply Mem. of Law in Supp. of Defs.’ Mot. for J. as a Matter of Law and to Amend or Alter the J. (“Defs. Reply”) 9, ECF No. 64; see Wilson Sporting Goods Co. v. David Geoffrey & Assocs.,
Second, defendants argue that the Court should disregard their failure to raise specific grounds because upholding the Judgment would result in manifest injustice in the form of a windfall to plaintiffs at their expense. But, as explained below, there is ample basis to find, as the Court does, that defendants’ infringement was willful, and therefore an award .of profits is not a windfall to plaintiffs. Moreover, defendants’ “strategic decision” to rest immediately after the conclusion of plaintiffs’ case, Defs. Reply 2, rather than put on evidence that their actions did not amount to willful infringement of the Velocity mark, undercuts the notion that justice requires allowing them to challenge a finding of willfulness at this time.
Nonetheless, the Court retains the authority to correct erroneous rulings. An issue that was not focused on by the parties or the Court at the time the Judgment was entered, but that the parties have now briefed, is whether the Court can and should treble a monetary award on the basis of willfulness-when the award constitutes defendants’ profits, not plaintiffs’ damages. The Court is now focused on the issue and decides that it is precluded from trebling the award in these circumstances.
This conclusion follows from the statutory framework that governs awards of monetary damages for trademark infringement under the Lanham Act. Section 35(a) provides in relevant part:
When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office ... shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled ... subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. The court shall assess such profits and damages or cause the same to be assessed under its direction.
Second Circuit decisions have fleshed out the “principles of equity” that govern whether a court should award profits. Specifically, they have identified three rationales that justify such an award: “(1) unjust enrichment, (2) compensation, and (3) deterrence.” Merck Eprova AG v. Gnosis S.p.A.,
It is not necessary that each of these three rationales be applicable, as a court may “award a defendant’s full profits based solely on deterrence.” Merck II,
The Lanham Act also allows courts to enhance an award of profits in certain circumstances. Section 35(a) provides:
If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case. Such sum in either of the above circumstances shall constitute compensation and not a penalty.
15 U.S.C. § 1117(a). Such an enhanced award may be justified “ ‘to redress fully plaintiffs whose actual damages were difficult to prove’ ” and also “where ‘deterrence of willful infringement is needed.’ ” Merck II,
Applying the above framework to the case at hand, the Court first reaffirms its prior finding (see Judgment) that defendants’ infringement was willful. “The standard for willfulness is whether the defendant had knowledge that his conduct represented infringement or perhaps recklessly disregarded the possibility.” Fendi Adele S.R.L. v. Filene’s Basement, Inc.,
Defendants argue that there is simply no basis in the record from which a factfinder could infer that their infringement was willful. Even defendants’ refusal to stop selling the infringing goods after the filing of this action cannot support a finding of willfulness, they assert, because a decision to defend oneself in a lawsuit does not necessarily indicate bad faith. See Sands, Taylor & Wood Co. v. Quaker Oats Co.,
Defendants were on notice that their use of the NY&C Velocity mark possibly infringed plaintiffs’ mark when plaintiffs sued them, yet defendants continued to sell the goods in question for months thereafter. See Tr. 86. While the fact that a defendant chooses to defend its use of an allegedly infringing mark, rather than cease sales of products bearing that mark, does not necessarily mean that it willfully infringed, the case that defendants cite in support of this proposition, Sands, presented quite different circumstances from those present here. The in-house counsel for the defendant in Sands concluded that the defendant’s use of the mark in question in an advertisement was merely descriptive and therefore could not infringe a trademark; this view was reiterated in an opinion letter by outside counsel.
In addition, defendants’ failure to call the witnesses who they had previously represented would testify regarding the decision to use the NY&C Velocity mark supports an advérse inference of willfulness. Although the Court declined to give a “missing witness” instruction to the jury, that in no way precludes the Court, as the ultimate finder of fact on the issue of willfulness, from drawing such an inference, which it does.
Specifically, while,- as noted above, defendants represented in their opening statement that they would call Monzina and- Munnelly, they ultimately rested without calling any witnesses. Were Monzina able to testify credibly to the purported facts that defendants previewed in their opening statement — including that a trademark search did not turn up plaintiffs’
In short, while the evidence of willfulness in the record is less extensive than it might have been had defendants not strategically cut short the trial, there is nonetheless sufficient reason to find, as the Court does, that defendants willfully infringed plaintiffs’ mark. Their use of the word “Velocity” on their products was, on its face, a blatant infringement. Yet, when confronted with a lawsuit asserting that claim, defendants did not stop selling the product, took no apparent steps to determine whether they were in fact infringing plaintiffs’ trademark, dragged their heels during discovery, and did not call the witnesses that they previously represented would testify to facts l’efuting any claim of willfulness. For those reasons, the Court, like the jury, finds that defendants engaged in willful infringement, thus authorizing an award of profits.. . .
The Court also concludes that an award of profits is more than justified here in consideration of the factors set out in George Basch Co.,
As to the first factor, “the degree of certainty, that-the defendant benefited from the unlawful conduct,” id., defendants stipulated at trial that they made $1,864,337.29 in gross profits from the sale of clothing bearing the NY&C Velocity mark, Tr. 275. It appears probable, in light of the jury’s finding that there was a likelihood of confusion between the plaintiffs’ and defendants’ products, that, at least some sales were at plaintiffs’ expense, although plaintiffs did not present evidence demonstrating this with certainty.
As to the second factor, the “availability and adequacy of other remedies,” George Basch Co.,
Defendants argue that no enhancement is needed to compensate plaintiffs because plaintiffs never argued that New York & Company’s profits were inadequate to compensate them, and also that even a single profits award would more than compensate plaintiffs because the amount of profits stipulated at trial does not take into account various expenses and deductions that reduce the total amount that defendants gained through their .infringement. Plaintiffs contend that an enhancement of the profits award is warranted in order to compensate them for “intangibles,” i.e., hard-to-measure losses of sales. Specifically, they contend that it is impossible to calculate (1) how many other sales of other products defendants made after they had lured customers to their store or website with the infringing products; (2) how many' sales plaintiffs lost when customers purchased the infringing products instead of plaintiffs’ products; and (3) how many sales plaintiffs lost by virtue of the fact that confused customers who purchased the infringing products were disappointed by their quality (which Hedvat claimed was inferior, see Tr. 86-87), and did not purchase ány more of plaintiffs’ products. Mem. of Law in Opp. to Defs.’ Mot. for J. as a Matter of Law and to Amend or Alter the J. (“Pis. Opp.”) 24, EOF No. 62.
But these intangibles do not show that plaintiffs require an enhanced award, much less an award equal to three times the stipulated profits, in order to compensate them fully. The second of the supposed intangible losses referenced above merely describes sales of infringing products, the value of which is already encompassed within the award of the stipulated profits. The first and third, while distinct from the sales that are already accounted for, are entirely speculative. The first assumes that customers were drawn to New York & Company’s stores or website to buy NY&C Velocity products and ended up buying other products as well. While not impossible, plaintiffs have never attempted to show that this did occur or in what measure. Moreover, in the counter-factual world in which consumers were not lured to New York & Company stores in order to buy Velocity-branded products, it is not clear that any such ancillary sales would redound to plaintiffs’ benefit, especially since there is no evidence that they maintain physical stores where customers could come for a Velocity-branded product and leave with several of plaintiffs’ other products. The third supposed intangible loss is based only on Hedvat’s uncorroborated and self-serving opinion testimony
The district court’s decision in Merck I, upon which plaintiffs rely to support their claim that an award of three times profits is warranted here, presented circumstances bearing on the compensatory nature of an enhanced profits award — primarily the fact that the defendant usurped the plaintiffs market share beyond simply the infringing goods at issue — that are not present in this case. In Merck I, the plaintiff had spent decades and tens of millions of dollars developing a pure form of an ingredient used in nutritional supplements, and it was the first company to develop that particular form. Id at 446. The defendant falsely advertised that its cheaper and inferior product was equivalent to the plaintiffs product, thereby “deliberately and willfully engag[ing] in false advertising as part of a strategy designed to gain its market share in the lucrative vitamin and nutritional supplement industry through deception.” Id. at 458. The court concluded that an enhanced award was needed “to fully compensate [the plaintiff] for the improved market position [the defendant] enjoyed solely as a result of its false advertising,” since the defendant’s deception allowed it to enter the market in which the plaintiff had theretofore been the only participant, and therefore the defendant’s “sales in that market even after it corrected its advertising — and therefore after the window for accounting — stemmed from its initial deception.” Id. at 460.
Here, in contrast, there is no indication that New York & Company gained entry into the activewear market solely because it fooled customers into thinking that it sold clothing produced by plaintiffs. Nor is there any indication, as noted above, that defendants’ sale of NY&C Velocity products somehow took away sales from plaintiffs’ other products. Thus, the key factor that justified the enhanced award in Merck I on the basis of compensation is not present here.
Plaintiffs also argue that an enhanced award is warranted on the basis of deterrence. As noted above, while the text of the Lanham Act specifies that an enhancement shall not be a “penalty,” decisions by the Second Circuit suggest that deterring further infringement is a proper purpose of enhancement. See Merck II,
Yet plaintiffs have not put forth authority demonstrating that a court may enhance damages solely for deterrence purposes to an amount that far exceeds the amount needed to compensate a plaintiff, and the clear directive of the statute is that an enhancement is to be compensatory. Thus, because, as discussed above, plaintiffs have not shown that an award of gross profits is insufficient to compensate them, deterrence alone, while not irrelevant in assessing the availability of lost profits as a measure of damages here, does not on the facts of this case justify enhancing damages to three times the amount of the stipulated profits. While the infringement here was willful, it did not rise to the “egregious” conduct at issue in Merck, and thus a less substantial award is sufficient to deter defendants here. Merck II,
Defendants, however, have not shown that this award should be further reduced. Defendants concede that they cannot now reduce the profits award by submitting evidence of the costs and expenses used to produce the infringing goods — he., demonstrate their net profits rather than their gross profits from their sales of those goods — since they failed to do so at trial, but instead simply stipulated to the amount of gross profits. Defs. Mem. 3 n.2; see Fendi Adele, S.R.L. v. Ashley Reed Trading, Inc.,
This argument is hardly persuasive. Defendants provide no authority for the proposition that, where a finding of willfulness is predicated on a defendant’s continued infringement after being on notice of the plaintiffs claim, a court may only award those profits that accrued after the notice was received. Cf. Merck II,
The Court turns next to plaintiffs’ motion for attorneys’ fees and pre- and post-
Defendants argue that beyond the finding of willfulness there is nothing That makes this case .exceptional, and therefore the Court should exercise its discretion not to award fees. Yet courts have reached different conclusions regarding whether a finding of willfulness, without more, justifies awarding fees; in other words, it -is not dear whether the default outcome in a case of willful infringement is to award fees unless there are mitigating factors, or to require aggravating factors-in order'to justify a fee award. See Gidatex, S.r.L. v. Campaniello Imports, Ltd.,
Although defendants note that there is no suggestion that they engaged in the kind of litigation - misconduct that often causes courts to award attorneys’ fees, see Beastie Boys v. Monster Energy Co.,
Here, in contrast, the issue of infringement was not particularly close, and defendants did not put forth any evidence indicating that they had a good-faith defense to plaintiffs’ claims. There is no indication that plaintiffs had unclean hands, and it is not the case that there were only a few isolated instances of infringement
With regard to prejudgment interest, “[although Section 1117(a) does not provide for prejudgment interest, such an award is within the discretion of the trial court and is normally reserved for exceptional cases.” Fresh Del Monte Produce,
As to the rate of interest, “an award of pre-judgment interest pursuant to § 35(a) [of the Lanham Act] should, as a general matter, compensate plaintiff for what it could have earned if it had had its award when it was first entitled to it.” Gillette Co. v. Wilkinson Sword, Inc., No. 89 CV 3586 (KMW),
In sum, the Court reaffirms its finding that defendants’ infringement was willful and concludes that an award of defendants’ profits is warranted. However, it concludes that an enhancement of that award is unwarranted, and it hereby amends the Judgment to hold that defendants are jointly and severally liable to plaintiffs in the amount of $1,864,337.29. The injunction entered at the time of the original Judgment remains in place, and this ruling hereby lifts the stay on the execution of the Judgment. The Court also concludes that plaintiffs are entitled to reasonable attorneys’ fees as well as pre- and post-judgment interest at the applicable prime rate, and it instructs plaintiffs to submit proposed calculations of both fees and interest by July 17, 2017. Any objections thereto must be submitted by July 24, 2017, after which the Court will issue a final Amended Judgment reflecting the award of attorneys’ fees and interest.
SO ORDERED.
Notes
. As to the award of injunctive relief, the Lanham Act authorizes district courts to “grant injunctions, 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.” 15 U.S.C. § 1116(a). Such "injunctive relief [should] be ‘no broader than necessary to cure the effects of the harm caused’ ” by the infringement. Sterling Drug, Inc. v. Bayer AG,
. Defendants are incorrect that a plaintiff must provide proof of actual confusion in order to receive any kind of monetary award. Rather, while recovery of a plaintiff’s damages requires proof of actual confusion, see George Basch Co.,
The other authority that defendants put forth in support of the purported actual confusion requirement is no more persuasive. They cite another pre-George Basch Co. case for the unextraordinary proposition that “[a] Lan-ham Act plaintiff seeking damages is normally required to prove actual consumer confusion or deception resulting from the violation.” Getty Petroleum Corp. v. Island Transp. Corp.,
. Alongside the enhancement provision regarding profits, the Lanham Act provides that "[i]n assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount.” 15 U.S.C. § 1117(a). Also, the Act provides that "in a case involving use of a counterfeit mark or designation,” the court shall award three times profits or damages unless there are extenuating circumstances and provided that certain conditions are satisfied^ 1117(b).