IP Law Daily, TRADEMARK—S.D.N.Y.: Court tosses some claims in trademark suit over stolen toys, (Feb 9, 2026)

By Jonathan Anderson

The court separately entered default judgment against a defendant because its attorney misused AI by citing non-existent cases and misquoting sources in motions and briefs.

The federal district court in Manhattan upheld some trademark infringement claims brought by the manufacturer of an educational toy company, while dismissing other claims for certain defendants. The suit, against more than 20 defendants, alleges federal claims under the Lanham Act for trademark infringement and unfair competition, and state and common law claims for deceptive trade practices, fostering the sale of stolen goods, and unfair competition. In a separate order, the court entered default judgment against a defendant because its attorney misused artificial intelligence (AI) by citing non-existent cases and misquoting sources in motions and briefs (Flycatcher Corp. Ltd. v. Affable Avenue LLC, No. 1:24-cv-09429-KPF (S.D.N.Y. Feb. 5, 2026)).

Background. Co-plaintiff Flycatcher Corp. Ltd. produces a toy called the smART Sketcher 2.0 that transforms photos from a mobile device into drawings via projector under the trademark “SMART SKETCHER” for children’s educational toys. Co-plaintiff Flycatcher Toys, Inc., a wholly owned U.S. subsidiary, distributes Flycatcher products in the United States.

After 12,600 units of smART Sketcher 2.0 products were stolen in October 2024, Flycatcher discovered that various merchants were selling an unusually high number of the toys at artificially low prices. Flycatcher subsequently determined that these merchants were selling the stolen goods and demanded them back. Certain entities refused to comply with this demand and continued to sell the items.

Plaintiffs subsequently filed a lawsuit against 20-plus defendants alleging federal claims under the Lanham Act for trademark infringement and unfair competition, and state and common law claims for deceptive trade practices, fostering the sale of stolen goods, and unfair competition. Two co-defendants, Top Experience Company LLC (Top) and Valley Bodega Wholesale Inc. (Valley), moved to dismiss plaintiffs’ third amended complaint in full.

Motion to dismiss. The court granted in part and denied in part the motions to dismiss. As to both Top and Valley, the court dismissed with prejudice Count IV and Count V. As to Valley only, the court dismissed Count VI, Count VII, Count VII, and Count IX. The court said Count I, Count II, and Count III state claims for relief as to both defendants, while Count IV, Count VII, Count VIII, and Count IX state claims for relief as to Top alone. The court directed the clerk to terminate the pending motion and ordered the parties to submit a proposed case management plan.

Shotgun pleading. The court rejected arguments by Top and Valley that the amended complaint improperly lumps together all defendants and fails to differentiate individual conduct. The court said that Flycatcher’s group pleading satisfies federal pleading standards and sufficiently distinguishes the conduct of the two moving defendants.

Federal trademark infringement (Count I), unfair competition (Count II). The court allowed Counts I and II to proceed, finding that Top and Valley cannot invoke the first sale doctrine. Plaintiffs argued that they never authorized the first sale of the products, and the stolen goods were materially different and not genuine because they lacked a manufacturer’s warranty.

Common law unfair competition (Count IV). The court held that Flycatcher stated a common law unfair competition claim only as to Top, and that the amended complaint’s allegations do not pertain to suppliers like Valley.

False advertising (Count III). The court allowed this claim to proceed. Although the count could be vitiated by New York General Business Law § 369-b, the court found that plaintiffs’ allegations extend to a group of purchasers unable to invoke this statute or an analogous state statute. Top and Valley argued that Flycatcher did not adequately allege injuries flowing directly from the alleged deception, but the court said it agreed with Flycatcher’s response, which argued that a presumption of injury applies.

New York Deceptive Trade Practices (Count IV). The court said this count fails to state a claim for relief because the amended complaint does not allege harms that pose a significant risk of harm to the public health or interest. As to Valley, the court further found that this count fails to state a claim for the separate reason that the claim applies only to conduct by merchant defendants and not supplier defendants.

New York Penal Law (Count V). The court found that Count V does not state a claim upon which relief can be granted. The count alleged that defendants violated New York Penal Law § 165.66, but the court held this statute lacks a private right of action.

Conversion (Count VII), replevin (Count VIII). The court held that the factual allegation that merchants continued to sell after receiving cease-and-desist letters is sufficient to establish refusal and therefore Count VII and Count VIII state claims as to Top. However, the court dismissed these counts as to Valley, finding that plaintiffs sent cease-and-desist letters to merchants only.

California penal code (Count IX). The court found that Count IX states a claim as to Top. However, this count does not state a claim as to Valley because it does not allege that defendants’ suppliers received cease-and-desist letters “or otherwise had knowledge.”

Terminal sanctions. In a separate order, the court entered default judgment against another defendant, Affable Avenue LLC, as a sanction against the company’s attorney. The court found that Affable’s attorney misused AI by citing non-existent cases and misquoting sources in motions and briefs. The attorney admitted to using AI to help prepare the pleadings.

The court reasoned that the attorney acted in bad faith because he was given multiple warnings from the court and opposing counsel about the erroneous citations but continued to submit defective pleadings. The court concluded that the attorney was not deterred by the repeated warnings and failed to admit his mistakes or accept full responsibility for them. The court further granted plaintiffs’ counsel permission to file an application for attorneys’ fees to Affable’s counsel.

The Case is No. 1:24-cv-09429-KPF.

Judge: Failla, K.

Attorneys: Tal S. Benschar (Koffsky Schwalb LLC) for Flycatcher Corp. Ltd. and Flycatcher Toys, Inc. Steven Andrew Feldman (Steven Andrew Feldman, Attorney at Law) for Affable Avenue LLC d/b/a CJ Dist.

Companies: Flycatcher Corp. Ltd.; Flycatcher Toys, Inc.; Affable Avenue LLC d/b/a CJ Dist; Ozmos Co. LLC; Eytan Grossman d/b/a EYG Deals

Cases: Trademark AINews NewYorkNews