IP Law Daily, TRADEMARK—7th Cir.: District court’s award of minimum statutory damages for counterfeiting and cybersquatting upheld, (May 4, 2026)

By Carolin Dennis, B.Sc., LL.B., LL.M.

The district court did not err by failing to offer a robust explanation of its ruling because the online clothing retailer failed to offer evidence or arguments in favor of maximum damages for willful counterfeiting and cybersquatting.

The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s default judgment awarding minimum statutory damages of $2,000 to an online clothing retailer against a company found liable for willful counterfeiting and cybersquatting under the Lanham Act. The appellate court held that the district court did not abuse its discretion by awarding only minimum damages without explanation because the retailer failed to support its desired maximum statutory damages award (Shenzhen Huajie Technology Co., Ltd. v. Shenzhen Leyibei Technology Co., Ltd., No. 25-2659 (7th Cir. Apr. 29, 2026)).

Background. China based Shenzhen Huajie Technology Co., Ltd. (Huajie) has sold clothing under the “bellelily” trademark since 2017 on the website www.bellelily.com. In 2021, Shenzhen Leyibei Technology Co., Ltd. (Leyibei) also based in China, began selling similar clothing on its similarly named website, www.bellelliy.com. In 2022, Huajie sued Leyibei under the Lanham Act for trademark infringement and counterfeiting; falsely designating the origin of its products; cybersquatting; and violating the Illinois Uniform Deceptive Trade Practices Act. Huajie moved for summary judgment, contending that Leyibei designed its trademark and website to resemble Huajie’s website, confusing consumers and infringing on Huajie’s intellectual property rights. Huajie sought maximum statutory damages under the Lanham Act—$2 million for trademark counterfeiting and $100,000 for cybersquatting arguing that the award would deter Leyibei and other counterfeiters from future infringement.

However, by the time Huajie moved for summary judgment, Leyibei had stopped participating in the litigation and shortly after the motion was filed Leyibei’s counsel moved to withdraw. Leyibei never responded to the motion. In light of Leyibei’s non-participation, the district court ordered Leyibei to show cause as to why judgment must not be entered in favor of Huajie. Leyibei never responded to the show cause order and the district court sua sponte entered default against Leyibei and directed Huajie to submit a proposed final judgment order. The district court found that Huajie’s proposed order did not provide proposed reasoning to justify its desired maximum statutory damages or reference arguments that Huajie had made in its earlier motion for summary judgment. The proposed order repeated Huajie’s requests for a permanent injunction, attorney’s fees, and maximum statutory damages.

The district court then issued a final judgment without making specific factual findings or detailing its reasoning. The district court found Leyibei liable for willful infringement based on the earlier entry of default, granted Huajie’s requested injunction, and awarded $1,000 to Huajie for trademark counterfeiting and $1,000 for cybersquatting the minimum statutory damages under each provision. Huajie appealed contending that the district court abused its discretion by awarding only minimum damages without explanation.

Statutory damages. The district court’s initial entry of default established that Leyibei was liable for willful trademark counterfeiting and cybersquatting under the Lanham Act. However, the entry of default did not establish that Huajie was entitled to the amount of statutory damages that it requested under the Act. On appeal, Huajie challenged the adequacy of the district court’s explanation for the award of minimum statutory damages arguing that the district court must explain how and why it used its discretion. The appellate court noted that typically, a district court’s ruling should demonstrate that the court considered the factors relevant to its decision and in fact exercised its discretion, but district courts need not address arguments that a party failed to raise or develop. Here, Huajie failed to offer evidence or arguments in favor of maximum damages, so the district court did not err by failing to offer a robust explanation of its ruling.

Huajie argued that the district court should have circled back to its motion for summary judgment to search for support for its damages award. The appellate court noted that a district court has no basis to award greater than minimum statutory damages where the plaintiff has not developed an evidentiary record supporting such an award or has not presented that record to the court. Although, Huajie sought maximum statutory damages in its earlier motion for summary judgment arguing that only a substantial award could compensate it for its losses and deter future misconduct it failed to direct the court to those earlier arguments. It was Huajie’s job to make its case for maximum damages on default to the district court, not the court’s job to search through the record for support. Thus, Huajie failed to establish its entitlement to the considerable damages it requested.

Dissenting opinion. Circuit Judge Doris L. Pryor filed a dissenting opinion to express her view that a district court must provide some explanation to support its exercise of discretion in fashioning an award of damages to satisfy due process and facilitate appellate review, even in Schedule A litigation regarding statutory damages. According to Judge Pryor, the district court’s decision did not explain how and why it landed on its statutory damages award for wilful trademark infringement ($1,000) or cybersquatting ($1,000), and nothing else in the record provided any hints. Additionally, there was simply no indication the district court exercised its discretion, which forecloses appellate review. In Judge Pryor’s view, the majority erred in its analysis and instead of speculating why the district court denied the Huajie’s request, she would vacate and remand for it to provide its rationale for the Seventh Circuit to conduct appellate review.

The Case is No. 25-2659.

Judge: NA

Attorneys: Adam Edward Urbanczyk (AU LLC) for Shenzhen Huajie Technology Co., Ltd. Shenzhen Leyibei Technology Co., Ltd., pro se.

Companies: Shenzhen Huajie Technology Co., Ltd.; Shenzhen Leyibei Technology Co., Ltd.

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