STANDARD PROCESS INC., Plaintiff, v. AVC INFINITE, LLC, A VITAMIN A DAY LLC, ANDREW CHEKAYEV, IRINA PEYSAKHOVICH and JOHN DOES 1-100, individually or as corporate/business entities, Defendants.
18-cv-849-wmc
IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN
January 9, 2020
WILLIAM M. CONLEY, District Judge
Having conducted a hearing on plaintiff‘s motion for default judgment and permanent injunction (dkt. #12), at which plaintiff appeared by Attorneys Ann Maher and Tyler Pensyl, and defendants failed to appear, the court enters the following opinion and order.
FINDINGS OF FACT1
A. Standard Process and Its Trademarks
1. Standard Process develops, manufactures, markets, and sells ingestible nutritional supplements, including products under the Standard Process®, Standard Process Veterinary Formulas™, and MediHerb brands (the “Standard Process Products“). (Compl. (dkt. #1) ¶ 12.)
3. Standard Process has registered several trademarks with the United States Patent and Trademark Office (“USPTO“), including, but not limited to: STANDARD PROCESS® (U.S. Trademark Registration No. 2,329,616), SP® (U.S. Trademark Registration Nos. 2,469,448, 2,888,707, and 3,618,534), SP STANDARD PROCESS® (U.S. Trademark Registration No. 3,726,215), CATALYN® (U.S. Trademark Registration No. 1,476,530), ZYPAN® (U.S. Trademark Registration No. 1,982,691), LIGAPLEX® (U.S. Trademark Registration No. 1,984,258), CATAPLEX® (U.S. Trademark Registration No. 1,984,251), CONGAPLEX® (U.S. Trademark Registration No. 1,995,346), MULTIZYME® (U.S. Trademark Registration No. 2,548,738), ALLERPLEX® (U.S. Trademark Registration No. 2,321,705), GASTREX® (U.S. Trademark Registration No. 2,332,945), SP CLEANSE® (U.S. Trademark Registration No. 2,622,227), GASTRO-FIBER® (U.S. Trademark Registration No. 2,730,337), and SP GREEN FOOD® (U.S. Trademark Registration No. 3,665,686) (collectively, the “Standard Process Trademarks“). (Id. ¶ 14.)
4. The registrations for the Standard Process Trademarks appear to be valid, subsisting, and in full force and effect. (Id. ¶ 15.)
B. Online Marketplaces
5. In recent years, there has been an increase in the amount of retail sales completed through online marketplaces, such as www.amazon.com (“Amazon“). (Id. ¶¶ 25-26.) These online marketplaces allow third party sellers to offer a manufacturer‘s
6. Anonymous sales by unauthorized sellers through the online marketplaces may also threaten a manufacturer‘s ability to maintain its goodwill, reputation, and brand integrity. (Id. ¶ 32.) A consumer who receives a defective or poor quality product from an unauthorized seller through an online marketplace may become frustrated with the brand. (Id. ¶¶ 33-34.) The consumer can also leave a negative review about the brand on the marketplace site, potentially impacting the purchasing decisions of other consumers. (Id. ¶¶ 35-38.)
7. Standard Process has been the victim of multiple negative online marketplace reviews, including on Amazon, from consumers who purchased products bearing the Standard Process Trademarks from unauthorized sellers, including consumer complaints that they received expired, damaged, defective, and/or tampered with products. (Id. ¶¶ 39-50.)
C. Standard Process Has Implemented Quality Controls to Protect Consumers and Its Brands
8. To protect consumers and its brands’ value and associated goodwill, Standard Process has implemented quality controls that are designed to minimize the
9. To further combat the unauthorized sale of poor quality products on online marketplaces, Standard Process has imposed additional requirements on its Authorized Resellers that are approved to sell online and on the online marketplaces. (Id. ¶¶ 73-89.)
10. To allow Standard Process to know where its products are being sold so that it can exercise control over its products and address any quality issues that may arise, Authorized Resellers are prohibited from selling on unauthorized websites and online marketplaces and from selling to other resellers. (Id. ¶ 73.) Authorized Resellers that are approved to sell on online marketplaces may sell only under storefront names that have been specifically approved by Standard Process and are prohibited from selling products anonymously. (Id. ¶¶ 73-78.)
11. Standard Process vets its Authorized Resellers before approving them to sell online and on online marketplaces to make sure that each Authorized Reseller operates an appropriate and acceptable business that Standard Process wishes to have representing its brands. (See id. ¶¶ 73-89.)
12. Authorized Resellers selling online and on the online marketplaces must comply with several additional quality control requirements, including: opting out of certain repackaging and commingling programs that may result in consumers receiving
13. Standard Process monitors its Authorized Resellers to ensure their compliance with Standard Process‘s quality controls, including conducting reviews of the Authorized Resellers’ websites, storefronts, and reviews and conducting test purchases and inspections. (Id. ¶¶ 90-92.)
14. The quality controls allow Standard Process to control the quality of products sold under its trademarks, and may be material and relevant to a consumer‘s purchasing decision. (Id. ¶¶ 88, 89.)
D. Defendants’ Unlawful Sales of Standard Process Products
15. Defendants AVC Infinite, LLC (“AVC“), A Vitamin A Day, LLC (“A Vitamin A Day“), Andrew Chekayev, and Irina Peysakhovich (together, “Defendants“) operate storefronts on Amazon under the “Vitaminpro” and “I & G Brothers” (also known as “Stroke of Luck“, “Best of NH“, “Limitless Vitamins“, “Atetrans“, and “Valar V“) storefronts (the “Storefronts“). Through the Storefronts, Defendants have advertised and sold products bearing the Standard Process Trademarks. (Id. ¶¶ 8, 10, 95, 103, 135, 206-
16. The products Defendants sell bearing the Standard Process Trademarks are not genuine Standard Process Products because they do not abide by, but interfere with, Standard Process‘s quality controls. (Id. ¶¶ 130-32.) Specifically, Defendants:
- do not inspect the products they sell for damage, defects, broken seals, evidence of tampering, and other non-conformance from inventory, and sell products bearing the Standard Process Trademarks that are damaged, have broken seals, and that have been tampered with, as well as ship damaged products to customers, id. ¶ 116;
- do not regularly inspect their inventory for expired or soon-to-be-expired products and remove those products from inventory; rather, Defendants sell products bearing the Standard Process Trademarks that are expired or soon-to-be expired, id. ¶ 117;
- allow their inventory stored at Amazon‘s warehouses to be commingled with other sellers’ inventory, and fake, counterfeit, and tampered-with products from other sellers, ultimately resulting in consumers purchasing fake, counterfeit, and tampered-with products, id. ¶ 119;
- cause Amazon to fulfill orders from their storefront with products that are fake, counterfeit, and tampered with, id. ¶ 120;
- resell products as “new” that have been opened or repackaged, resulting in consumers who believe they are purchasing new Standard Process
Products actually receiving returned products that have been opened or have had their safety seal broken, id. ¶ 121; and - ship products in a manner that allows them to become damaged, id. at 122.
17. By selling materially different, non-genuine products bearing the Standard Process Trademarks, Defendants have created consumer confusion because consumers who purchased products from Defendants thought they were getting genuine Standard Process Products that abided by Standard Process‘s quality controls when, in fact, they were not. (Id. ¶¶ 105-08.)
E. Defendants’ Interference with Standard Process‘s Agreements With Their Authorized Resellers
18. Standard Process‘s agreements with its Authorized Resellers prohibit Authorized Resellers from selling products to third parties for purposes of resale. (Id. at 168.)
19. Defendants knew of this prohibition, but have continued to acquire products from Authorized Resellers for the purpose of reselling them and infringing on the Standard Process Trademarks. (Id. ¶¶ 169-73.)
20. Defendants have acted with an improper purpose because they intended to induce Standard Process‘s Authorized Resellers to breach their agreements. (Id.)
F. Defendants’ Actions Have Harmed Standard Process
21. Defendants’ unlawful actions have caused Standard Process significant harm. Defendants have misled consumers into believing they are purchasing genuine Standard
22. As a proximate result of Defendants’ actions, Standard Process has suffered irreparable harm to its reputation, goodwill, and intellectual property rights, and will continue to suffer such harm should Defendant sell Standard Process Products in the future without following quality controls. (Id. ¶¶ 174-78.) Standard Process has also suffered monetary harm as a result of Defendants’ actions, including loss of sales and damage to its existing and potential business relations. (Id. ¶ 176.)
23. Defendants’ unlawful actions have been willful and malicious. Standard Process spent significant time and money trying to stop Defendants’ illegal sale of its products through the Storefront. (Id. ¶ 179.) Standard Process sent Defendants several cease and desist letters, but Defendants refused to comply and continued to sell products bearing the Standard Process Trademarks. (Id. ¶¶ 142-61.) Further, despite being served with the Summons and Complaint in this action, Defendants have chosen not to appear and continued to engage in their unlawful conduct resulting in entry of default against them by the clerk pursuant to
OPINION
Under
This court has subject matter jurisdiction over this case under
A. Trademark Infringement and Unfair Competition
To state a claim for trademark infringement under
Specifically, plaintiff has a protectable interest, as the Standard Process Trademarks appear to be registered, valid, subsisting, and in full force and effect, and Standard Process uses those marks to advertise and sell Standard Process Products. (Compl. (dkt. #1) ¶¶ 13-24.) Defendants have also used the Standard Process Trademarks in commerce by advertising, selling, and distributing products bearing the mark. (Id. ¶¶ 8, 10, 95, 103,
Products sold outside a manufacturer‘s authorized distribution system are not genuine products unless sold in their original packaging, within expiration dates, and otherwise sold consistent with the manufacturer‘s quality controls pursuant to the “first sale” date. See Zino Davidoff SA v. CVS Corp., 571 F.3d 238, 243 (2d Cir. 2009) (“goods are not genuine if they do not conform to the trademark holder‘s quality control standards“); Shell Oil Co. v. Comm. Petro. Inc., 928 F.2d 104, 107 (4th Cir. 1991) (“A product is not truly ‘genuine’ unless it is manufactured and distributed under quality controls established by the manufacturer.“); Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3, 5-8 (2d Cir. 1996) (reversing denial of injunction and ordering entry of injunction where defendant was selling HALLS cough drops and cough suppressant tablets in a manner inconsistent with plaintiff‘s quality controls designed to limit the sale of stale products). This follows because “[o]ne of the most valuable and important protections afforded by the Lanham Act is the right to control the quality of the goods manufactured and sold under the holder‘s trademark.” Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3, 6 (2d Cir. 1996) (quoting El Greco Leather Prods. Co. v. Shoe World, Inc., 806 F.2d 393, 395 (2d Cir. 1986)).
A mark owner also has a claim for trademark infringement against a defendant that is reselling products outside its quality controls if: (i) the owner has established legitimate,
B. Deceptive Trade Practices Under Wis. Stat. § 100.18
Standard Process has also stated a claim for unfair and deceptive trade practices under
Here, Standard Process has stated a claim for deceptive trade practices. First, Defendants used the Standard Process Trademarks to advertise and promote products in
C. Tortious Interference with Contract
Finally, to state a claim of tortious interference, plaintiff has to show: (1) it had a contract or prospective contractual relationship with a third party; (2) defendant interfered with the relationship or contract; (3) defendant‘s actions were intentional; (4) a causal connection exists between the interference and the damages; and (5) the interference with the contract was not justified. Tele-Port, Inc. v. Ameritech Mobile Communs., Inc., 49 F. Supp. 2d 1089, 1092 (E.D. Wis. 1999).
Here, Standard Process has specific agreements with its Authorized Resellers that prohibit them from selling Standard Process Products to third parties who intend to resell the products. As set forth above, Defendants knew of this prohibition and intended to induce a breach of these agreements for the purpose of resale. Defendants’ purchase and
For the foregoing reasons, Default Judgment will be entered in this matter against Defendants pursuant to
PERMANENT INJUNCTION
The Lanham Act authorizes a district court to issue an injunction according to the principles of equity and upon such terms as the court may deem reasonable to prevent violations of trademark law.
A permanent injunction is warranted in this case because a balancing of these factors weighs strongly in favor of granting Standard Process a permanent injunction. See id.; Otter Prods., LLC, 2019 U.S. Dist. LEXIS 52916, at *16-20 (granting a permanent injunction in a substantially similar case); ADG Concerns, Inc, 2018 U.S. Dist. LEXIS 155542, at *26-32 (same). First, taking its allegations as true, as this court must in light of Defendants’ default, plaintiff will suffer irreparable injury if Defendants continue to advertise and sell products bearing the Standard Process Trademarks without exercising quality controls. (Compl. ¶¶ 32-36, 128, 177-78.) See Spectrum Brands, Inc., 2017 U.S. Dist. LEXIS 80999, at *5 (finding that a loss of goodwill alone is sufficient for a finding of irreparable harm, and finding such a loss in the continued sale of infringing products by defendants). Second, plaintiff lacks an adequate remedy at law because Defendants’ continued non-conforming sales will cause damage to Standard Process‘s intellectual property, goodwill, and brand integrity. (Compl. ¶¶ 177-78.) See Spectrum Brands, Inc., 2017 U.S. Dist. LEXIS 80999, at *5. Third, the balance of hardships between the parties favors injunctive relief. Plaintiff has expended substantial time and money developing and protecting the Standard Process Trademarks and without an injunction it will be unable to protect its trademarks and stop Defendants’ non-conforming sales. (Compl. ¶¶ 51-56, 139-40, 144, 158-59.) See Spectrum Brands, Inc., 2017 U.S. Dist. LEXIS 80999, at *5-6 (finding balance weighed in favor of trademark owner and that no harm would be suffered by an infringer where the infringer is enjoined from selling only infringing products); Shenzhen Ruobilin Network Tech., Ltd. v. SJG-Lens, No. 16-cv-386-wmc, 2017 U.S. Dist. LEXIS 88555, at *4 (W.D. Wis. June 9, 2017) (“[T]rademark infringement, by [its] very nature, carr[ies] a presumption of harm.“). Finally, the public interest lies in favor of upholding Standard Process‘s trademark rights and preventing customer confusion. Spectrum Brands, Inc., 2017 U.S. Dist. LEXIS 80999, at *6.2
DAMAGES
Under the Lanham Act, a trademark owner may also recover profits derived from a defendant‘s infringement of its trademarks.
Standard Process has presented evidence that Defendants’ sales of its products from October 1, 2017 to May 1, 2019, amounted to $35,114.55. (Wells Decl. (dkt. #16) ¶ 22.) Standard Process calculated this total from data collected through a monitoring tool called TriGuardian, which monitors listings and sales of products on Amazon and calculates the amount of sales that a particular storefront makes of certain products. Standard Process pulled data from TriGuardian regarding Defendants’ sales of Standard Process Products from October 1, 2017, through May 1, 2019, for each respective Amazon.com storefront. (Id. ¶¶ 3-13.) The data shows over 740 products sold by the Storefronts amounting to $35,114.55 in total sales, including 380 products amounting to $16,782.15 sold by the “Vitaminpro” storefront and 365 products amounting to $18,332.40 sold by the “I & G Brothers” storefront. (Id. ¶¶ 15-23; id., Ex. A (dkt. #16-1) (showing data of sales).) As such, Standard Process has shown Defendants’ profits with reasonable certainty. See Otter Prods., LLC, 2019 U.S. Dist. LEXIS 52916, at *20-21 (holding TriGuardian established defendant‘s sales with reasonable certainty); ADG Concerns, Inc., 2018 U.S. Dist. LEXIS 155542, at *32-34 (same). Defendants have presented no evidence of costs or other deductions that should reduce the award of all sale of infringing products as disgorged profits.
Unfortunately, Standard Process has provided no proof as to how many of Standard Process‘s products were purchased from Authorized Resellers (rather than from an entity outside Standard Process‘s approved distribution chain), nor how many of its products sold
ORDER
Accordingly, IT IS ORDERED that final judgment shall be entered as follows:
- Plaintiff‘s motion for default judgment (dkt. #12) is GRANTED;
- Defendants and any of their employees, agents, servants, officers, representatives, directors, attorneys, successors, affiliates, assigns, any and all other entities owned or controlled by Defendants (the “Enjoined Parties“) are:
- ENJOINED for five years from:
- advertising or selling all Standard Process Products or products bearing the Standard Process Trademarks through any Amazon storefront, including, but not limited to, the Amazon storefronts currently named “Valar V” and “Vitaminpro“;
- advertising or selling, via the Internet, all Standard Process products or products bearing the Standard Process Trademarks;
- ENJOINED for five years from:
-
- using any of the Standard Process Trademarks in any manner, including advertising on the Internet;
- importing, exporting, manufacturing, producing, distributing, circulating, selling, offering to sell, advertising, promoting, or displaying any and all Standard Process Products, as well as any products bearing any of the Standard Process Trademarks;
- disposing of, destroying, altering, moving, removing, concealing, or tampering with any records related to any products sold by them which contain the Standard Process Trademarks, including invoices, correspondence with vendors and distributors, bank records, account books, financial statements, purchase contracts, sales receipts, and any other records that would reflect the source of the products that Defendants have sold bearing these trademarks;
- PERMANENTLY ENJOINED FROM:
- purchasing for resale any Standard Process products or products bearing the Standard Process Trademarks from an Authorized Reseller or any other entity the Enjoined Parties have reason to believe is contractually prevented from selling to a reseller; and
- selling any Standard Process products or products bearing the Standard Process Trademarks unless still in its original packaging at least six months from its designated expiration date, and otherwise in reasonable compliance with Standard Process‘s quality controls.
-
In addition, Defendants SHALL: - take all action to remove from the Enjoined Parties’ websites or storefronts any reference to any of Standard Process Products, or any of the Standard Process Trademarks;
- take all action, including but not limited to, requesting Internet search engines (such as Google, Yahoo!, and Bing) to remove from the Internet any of the Standard Process Trademarks, which associate Standard Process Products or the Standard Process Trademarks with the Enjoined Parties or the Enjoined Parties’ websites or storefronts; and
- take all action to remove unauthorized Standard Process Trademarks from the Internet, including from Amazon.
- Pursuant to
Rule 65(d)(2) of the Federal Rules of Civil Procedure , this Order is binding upon the following persons who receive actual notice of it: the parties, the parties’ officers, agents, servants, employees, and attorneys. - Both the Lanham Act and
Wis. Stat. § 100.18 have fee shifting provisions. See15 U.S.C. § 1117(a) (authorizing an award of attorney‘s fees in “exceptional cases“);Wis. Stat. § 100.18(11)(b)2 (authorizing an award of “reasonable attorney fees“); see also Epic Sys. Corp. v. Silver, No. 13-CV-355-WMC, 2014 WL 2694051, at *2 (W.D. Wis. June 13, 2014) (“[D]efendant‘s default and his apparent utter disregard for Epic‘s intellectual property rights make this an ‘exceptional case’ under15 U.S.C. § 1117 , justifying an award of Epic‘s attorney‘s fees and costs in this litigation.“). As such, plaintiff remains free to seekreimbursement of its reasonable fees and costs of litigation. In filing such a request, plaintiff‘s counsel should include their time records and proof of payment of invoices. - This court shall retain subject matter jurisdiction for the purpose of enforcing and/or adjudicating claims for violation of this Final Judgment and Permanent Injunction. Any such matters shall be raised by noticed motion.
Entered this 9th day of January, 2020.
BY THE COURT:
/s/
WILLIAM M. CONLEY
District Judge