IP Law Daily, TRADEMARK—D. Nev.: Marketing company liable for infringement of bracelet maker’s trademarks, copyright, (Apr 17, 2017)

By Mark Engstrom, J.D.

Bracelet maker Lokai Holdings was entitled to $14,000 in statutory damages for trademark and copyright infringement based on the marketing and sale of counterfeit Lokai bracelets by Absolute Marketing and its owner, the federal district court in Reno, Nevada, has ruled. Because Lokai proffered evidence that, if uncontroverted at trial, would entitle it to a directed verdict on its trademark and copyright claims, and because the defendants failed to satisfy their burden of creating a genuine issue of material fact for trial, the court granted summary judgment to Lokai (Lokai Holdings, LLC v. Absolute Marketing, April 13, 2017, Jones, R.).

Lokai’s bracelets bear multiple LOKAI marks, a water droplet logo mark, and a FIND YOUR BALANCE mark. Clear-colored Lokai Bracelets have an attached "Hangtag" that has been registered with the U.S. Copyright Office. According to the court, Absolute Marketing and its owner, Craig Hueffner, have used Lokai’s trademarks and copyright at trade shows throughout the United States, including in Nevada, and have falsely held themselves out to be sponsored by, authorized by, or otherwise affiliated with Lokai. At those trade shows, the defendants marketed, offered for sale, and sold counterfeit versions of Lokai’s bracelets, and thereby violated Lokai’s trademarks and copyright.

Trademark infringement. Lokai’s Chief Financial Officer (CFO) identified various characteristics of multiple goods that the defendants had displayed at a Nevada trade show, compared them to authentic Lokai bracelets, and provided a detailed explanation of why the defendants’ goods were not authentic Lokai bracelets. According to the court, the testimony of the CFO was supported by photographic evidence.

The defendants denied the sale of counterfeit products, but Lokai proffered evidence that, if uncontroverted at trial, would entitle it to a directed verdict on the question of whether the defendants had used the marks, in connection with the advertising of goods, in a way that was likely to cause confusion, mistake, or deception. Further, the defendants failed to satisfy their shifted burden to create a genuine issue of material fact for trial. For those reasons, the court granted summary judgment to Lokai on the claim of trademark infringement.

Copyright infringement. To the extent that the artwork on the front of Lokai’s hangtag was the original expression of Lokai, it was copyrightable, the court observed. The artwork comprised "a light blue protrusion from the Lokai Bracelet, connected to a larger circle consisting of a beige exterior ring surrounding a white field, with three of the marks positioned within the white field on an axis perpendicular to the light blue protrusion: the stylized LOKAI mark, the FIND YOUR BALANCE mark, and the water droplet logo mark".

Proffered images of the defendants goods revealed counterfeit hangtags that were "virtually identical" to genuine Lokai hangtags. Because Lokai would be entitled to a directed verdict of copyright infringement if the proffered evidence was uncontroverted at trial, Lokai satisfied its initial burden on summary judgment. In addition, the defendants did not satisfy their shifted burden to create a genuine issue of material fact for trail. Summary judgment was therefore warranted on Lokai’s claim of copyright infringement.

Statutory Damages. Evidence for the loss or destruction of evidence regarding the defendants’ use of the Lokai marks was "ample in Hueffner’s deposition testimony." The court thus found that Lokai was entitled to statutory damages on its trademark and copyright claims.

At least seven unauthorized uses of Lokai’s trademarks were proved: one use of the standard LOKAI mark on a sign at a Nevada trade show and six uses of Lokai’s marks on counterfeit goods that were offered for sale and obtained at the same trade show (two uses of the stylized LOKAI mark, two uses of the FIND YOUR BALANCE mark, and two uses of the water droplet logo mark). The court awarded $7,000 in statutory damages—$1,000 per unauthorized use.

In addition, the court decided that $7,000 was a just penalty for the defendants’ infringement of Lokai’s copyright, which was conducted in conjunction with trademark infringement. Each violation contributed to the other, the court noted, and a purchaser might overlook minor imperfections in the bracelets themselves if the counterfeited hangtag, like the marks, led the purchaser to believe that the product was authentic.

Attorney Fees. The defendants presented a frivolous and objectively unreasonable defense, the court decided. Significantly, Hueffner had admitted that he had destroyed all of the relevant evidence in his possession. In addition, his deposition answers were evasive, he refused to answer several questions without a claim of privilege, and he failed to respond to Lokai’s summary judgment motion with anything more than an inadmissible affidavit that was unnotarized, lacked a perjury clause, and lacked argumentation.

In addition, Hueffner had unreasonably multiplied the plaintiff’s litigation expenses, and his motivation for selling counterfeit copies of Lokai’s copyrighted work—the hangtag—was simply to profit from the intellectual efforts of another. According to the court, an award of attorney fees would help to make Lokai whole and to deter others from future infringement. The court decided that it would consider a reasonable fee when Lokai submitted its supplemental brief.

The case is No. 3:16-cv-00283-RCJ-VPC.

Attorneys: Ronald Bienstock (Scarinci & Hollenbeck, LLC) and Ann Morgan (Fennemore Craig Jones Vargas) for Lokai Holdings, LLC.

Companies: Lokai Holdings, LLC v. Absolute Marketing

Cases: Trademark Copyright NevadaNews