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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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3M COMPANY,
Plaintiff,
-against-
PERFORMANCE SUPPLY, LLC,
Defendant.
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To the Honorable Jennifer L. Rochon, United States District Judge:
On November 23, 2022, this case was referred for a Report and
Recommendation on Plaintiff’s then-anticipated motion for a default judgment and
motion for a permanent injunction. Dkt. No. 35. On January 13, 2023, Plaintiff filed
their motions, Dkt. No. 45 (“Motion” or “Mot.”), as well as a Memorandum of Law,
Dkt. No. 46 (“Memorandum” or “Memo.”), Proposed Findings of Fact and Conclusions
of Law, Dkt. No. 47 (“Proposed Findings”), and the Affidavit of Jonathan W. Thomas,
Dkt. No. 48 (“Thomas Affidavit” or “Thomas Aff.”). On January 18, 2023, Plaintiff
filed an affidavit that notice of their motion was served on Defendant. Dkt. No. 49.
Defendant did not appear in this action, and did not file any opposition papers. See
Dkt. No. 42 (setting a deadline of January 27, 2023 for Defendant to respond). It is
my recommendation that the motion for a default judgment be GRANTED, and the
motion for a permanent injunction be GRANTED.
BACKGROUND
On April 10, 2020, Plaintiff filed the Complaint that forms the basis for this
action. Proposed Findings at ¶ 1. Plaintiff’s allegations concern the rise in demand
Report & Recommendation
20-CV-2949 (JLR) (JW)
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for N95 respirators, along with other personal protective equipment (“PPE”),
following the onset of the COVID-19 pandemic. Id. at ¶¶ 20-21. Plaintiff is a
manufacturer of N95 respirators and has sold the respirators under their brand name
and marks for decades. Id. at ¶¶ 30-31. Since the onset of the pandemic, Plaintiff
has increased their output of respirators to 1.1 billion per year. Id. at ¶ 33.
As demand for PPE rose, third parties began to exploit the moment by reselling
3M-brand N95 respirators at high prices, selling counterfeit versions of 3M-brand
respirators, and collecting payments for 3M-brand N95 respirators that they do not
possess and are not authorized to sell. Proposed Findings at ¶ 34. Plaintiff engaged
in efforts to combat price-gouging and counterfeiting during the pandemic. Id. at ¶¶
35-36. Plaintiff brought several successful actions along these lines. Id. at ¶ 37.
On March 30, 2020, Defendant sent a letter to a purchasing agent at New York
City’s Office of Citywide Procurement (the “City”) a quote offering to sell seven million
3M-brand N95 respirators. Proposed Findings at ¶ 39. Defendant is not a licensed
or authorized distributor, agent, or representative of 3M or its brand N95 respirators.
Id. Defendant offered to sell two million 3M 8210 respirators at a 460-590% markup,
and five million 3M 1860 respirators at a 500% mark up. Id. In the quote, Defendant
reproduced 3M’s Marks and Slogans, referred to their headquarters in Minnesota,
and included 3M Technical Specification Sheets for the models. Id. at ¶ 40.
The City received Defendant’s quote and, in response, prepared an Evaluation
Request—Bid Document Review, within which Defendant was twice identified as a
“vendor” of 3M-brand respirators. Proposed Findings at ¶ 41. As part of that process,
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the City contacted a 3M Business Development Manager to verify Defendant’s claim.
Id. at ¶ 45. The sale was, ultimately, averted. Id.
This Action was initiated on April 10, 2020. Dkt. No. 1. On April 24, 2020,
Plaintiff filed a motion for a temporary restraining order and preliminary injunction
against Defendant. Dkt. No. 12. On May 4, 2020, District Judge Loretta A. Preska
granted the motion for a preliminary injunction. Dkt. No. 22. On May 21, 2020, the
United States District Attorney for the Southern District of New York criminally
charged Defendant’s principal regarding his participation in a fraud scheme to sell
3M-branded N95 respirators to government agencies. Dkt. No. 28. At that time,
Plaintiff informed the Court that they were considered filing an amended complaint
based on the allegations in the criminal complaint, as well as moving forward with a
default judgment. Id. On December 17, 2021, Plaintiff wrote to the Court that they
were inclined to defer to the criminal proceeding before moving forward with this civil
action. Dkt. No. 30. Judge Preska approved this approach that same day. Dkt. No.
31. On September 15, 2022, the criminal proceeding concluded. Dkt. No. 33. Plaintiff
informed the now-presiding judge, District Judge Jennifer L. Rochon, that they were
ready to proceed with seeking a default judgment and permanent injunction. Id.
On November 29, 2022, a Clerk’s Certificate of Default was entered in this
matter. Dkt. No. 39. Plaintiff filed their Motion for Default Judgment and
Permanent Injunction on January 13, 2023. Dkt. No. 45.
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THE MOTION FOR A DEFAULT JUDGMENT
“In deciding a motion for default judgment, the Court must consider the
following three factors: (1) whether the defendant’s default was willful; (2) whether
defendant has a meritorious defense to plaintiff’s claims; and (3) the level of prejudice
the non-defaulting party would suffer as a result of the denial of the motion for default
judgment.” Indymac Bank, F.S.B. v. Nat’l Settlement Agency, Inc., No. 07-cv-6865
(LTS) (GWG), 2007 WL 4468652, at *1 (S.D.N.Y. Dec. 20, 2007) (internal quotations
omitted). “Once the Court finds that these factors favor the plaintiff, it must
determine whether the plaintiff has pleaded facts supported by evidence sufficient to
establish the defendant’s liability with respect to each cause of action.” Nespresso
USA, Inc. v. Africa America Coffee Trading Co. LLC, No. 15-cv-5553 (LTS), 2016 WL
3162118, at *2 (S.D.N.Y. June 2, 2016). For purposes of the inquest inquiry, the Court
accepts as true “all the factual allegations of the complaint except those relating to
damages.” Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981).
The Court finds that all three factors for deciding a motion for default
judgment weigh in favor of Plaintiff. First, Defendant’s nonappearance in the action,
as well as their failure to respond to the Complaint and this motion for default
judgment, constitute willful conduct.1 See Indymac Bank, F.S.B., 2007 WL 4468652,
at *1. Second, for the same reason, the Court cannot determine whether Defendant
has a meritorious defense as no defense has been presented to the Court, and all
1 As stated above, while this civil case was ongoing Defendant’s principal was charged
criminally and participated in that case. This indicates that Defendant was suitably
on notice, yet chose not to engage in this matter.
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factual allegations in the complaint are deemed admitted. Id. Third, denying the
motion would prejudice Plaintiff, who faces an absent opponent who made no
response to the allegations in the Complaint. Id.
Thus, the Court moves to the second part of the analysis: whether Plaintiff has
established Defendant’s liability as to each cause of action.
A. The Trademark Claims
To succeed with trademark claims under the Lanham Act, Plaintiff must
satisfy two elements: one, that Plaintiff has a valid mark that is entitled to protection
under the Act; and two, that Defendant’s use of the mark infringes the mark of the
Plaintiff such that it is likely to cause confusion. See Lexington Mgmt. Corp. v.
Lexington Capital Partners, 10 F. Supp. 2d 271, 277 (S.D.N.Y. 1998). As recently as
2020, 3M’s registrations for its Marks were held to be “’incontestable’ within the
meaning of 15 U.S.C. § 1065.” 3M Co. v. Performance Supply, LLC, 458 F. Supp. 3d
181, 193 (S.D.N.Y. 2020). Thus, the first element is satisfied.
For the second element, confusion, Court’s in this Circuit look to the eight
Polaroid factors: “(1) the strength of the plaintiff’s mark; (2) the degree of similarity
between the marks; (3) the proximity of the products or services; (4) the likelihood
that the senior user will ‘bridge the gap’ into the junior user’s product or service line;
(5) evidence of actual confusion between the marks; (6) whether the defendant
adopted the mark in good faith; (7) the quality of defendant’s products or services;
and (8) the sophistication of the parties’ customers.” Lexington Mgmt. Corp., 10 F.
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Supp. at 278 (citing Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir.
1961)).
At the preliminary injunction stage, the District Judge found that all eight
factors weighed in favor of Plaintiff. While the analysis at this stage is similar, for
completeness the Court will briefly analyze the factors.
First, the strength of Plaintiff’s mark: “The strength of a mark refers to its
distinctiveness… To gauge a mark’s strength, we consider two factors: its inherent
distinctiveness, and its distinctiveness in the marketplace.” Streetwise Maps, Inc. v.
VanDam, Inc., 159 F.3d 739, 743 (2d Cir. 1998). To determine a mark’s inherent
distinctiveness, or its conceptual strength, courts rely on the Abercrombie rubric
which establishes four categories: “(1) generic, (2) descriptive, (3) suggestive, and (4)
arbitrary or fanciful.” Landscape Forms, Inc. v. Columbia Cascade Co., 113 F.3d 373,
377 (2d Cir. 1997) (citing Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d
4, 11 (2d Cir. 1976)). The 3M Mark, namely “3M,” bears no relationship to respirators
and is therefore fanciful in this context. See Lane Capital Mgmt., Inc. v. Lane Capital
Mgmt., Inc., 192 F.3d 337, 344 (2d Cir. 1999) (“[A] fanciful mark is not a real word at
all, but is invented for its use as a mark.”). A mark’s distinctiveness in the
marketplace occurs when “in the minds of the public, the primary significance of [the
mark] is to identify the source of the product rather than the product itself.”
Christian Louboutin S.A. v. Yves Saint Laurent Am. Holdings, Inc., 696 F.3d 206,
216 (2d Cir. 2012) (citing Inwood Labs., Inc. v. Ivs Labs., Inc., 456 U.S. 844, 851 n. 11
(1982)). Beyond 3M’s consistent maintenance of the registration of their mark, this
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Court has found that the 3M Mark is distinctive and famous, and at least one other
Court has as well. See 3M Co., 458 F. Supp. 3d at 194; 3M Co. v. Christian
Investments LLC, No. 11-cv-627, 2012 WL 6561732, at *8 (E.D. Va. July 12, 2012).
Thus, the first Polaroid factor leans in Plaintiff’s favor.
Second, the degree of similarity between the marks: Defendant fully reproduced
the 3M Mark and Slogans in the quote submitted to the City, as well as on the
Technical Specification Sheets. See Proposed Findings ¶ 40. This factor also favors
Plaintiff.
Third, the proximity of the products or services: “[T]he closer the secondary
user’s goods are to those the consumer has seen marketed under the prior user’s
brand, the more likely that the consumer will mistakenly assume a common source.”
Virgin Enterprises Ltd. v. Nawab, 335 F.3d 141, 150 (2d Cir. 2005). It is commonly
known that 3M manufactures and markets N95 respirators. Proposed Findings ¶¶
30-31. Defendant purported to offer those exact same respirators. Thus, the third
factor also weighs in Plaintiff’s favor.
Fourth, the likelihood that the gap will be bridged: As noted in the decision
granting the preliminary injunction, “there is no ‘gap’ to bridge” in this case. 3M Co.,
458 F. Supp. 3d at 195. The products in this case are identical; the “two companies
are likely to compete directly in the same market.” Gucci Am., Inc. v. Guess?, Inc.,
868 F. Supp. 2d 207, 239-240 (S.D.N.Y. 2012). This factor is in Plaintiff’s favor.
Fifth, evidence of actual confusion: Officials at the City believed Defendant
was a vendor of 3M-brand N95 respirators. Proposed Findings ¶ 41. When confusion
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has actually occurred, as in this case, this factor is self-evident. See Mobil Oil Corp.
v. Pegasus Petroleum Corp., 818 F.2d 254, 259 (2d Cir. 1987). This factor favors
Plaintiff.
Sixth, whether the mark was adopted in good faith: “Registration of a mark in
the principal register [constitutes] constructive notice of the registrant’s claim of
ownership thereof.” 15 U.S.C. § 1072. The 3M Mark was federally registered;
therefore Defendant was, absent of all other considerations, on notice of 3M’s Mark’s
therein. When notice is “accompanied by similarities so strong that it seems plain
that deliberate copying has occurred, [the Second Circuit has] upheld findings of bad
faith.” Paddington Corp. v. Attiki Importers & Distribs., Inc., 996 F.2d 577, 586-87
(2d Cir. 1993). Here, Defendant specifically used the 3M Marks while purporting to
sell 3M N95 respirators. The similarities are, in point of fact, identical. Proposed
Findings ¶ 40. Thus, a finding of bad faith is appropriate, and this factor goes in
Plaintiff’s favor.
Seventh, the quality of Defendant’s goods: Should Defendant continue to use
the 3M Mark to create the impression that he is an authorized representative of 3M,
it will likely jeopardize 3M’s reputation. See Louis Vuitton Malletier v. Sunny
Merchandise Corp., 97 F. Supp. 3d 485, 497-98 (S.D.N.Y. 2015). Defendant’s efforts
to sell N95 respirators were an example of price gouging during the worst of the
COVID-19 pandemic; any perception created that 3M was engaging in such behavior
would cause damage to their reputation. Thus, factor seven weighs in favor of
Plaintiff.
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Eighth, the sophistication of the purchaser: In the decision granting the
preliminary injunction, Judge Preska stated that “In the current [COVID-19]
pandemic, purchasers of N95 respirators are government entities and hospitals and
healthcare providers. These customers are sophisticated and prone to exercise high
degrees of care; however, the current state of emergency has stymied the ability of
customers to take the time and conduct the diligence necessary to show extensive
care.” 3M Co., 458 F. Supp. 3d at 196 (internal citation omitted). The heightened
state of emergency that existed in early 2020 has passed; thus, this factor is not as
strongly in Plaintiff’s column. However, a consequence of the pandemic has been that
ordinary consumers are more likely to purchase N95 respirators. Thus, while the
specific sophisticated purchasers at issue in the prior decision might be less likely to
purchase the product now, the overall sophistication of the consumers interested in
N95 respirators has decreased. At best for Defendant, this factor is neutral.
Seven, if not eight, of the Polaroid factors weigh in favor of Plaintiff. Thus,
Plaintiff has established Defendant’s liability as to the trademark claims brought
under the Lanham Act.
B. The False Advertising Claim
Plaintiff also brings a claim for false advertising under Section 43(a)(1)(B) of
the Lanham Act. 15 U.S.C. § 1125(a)(1)(B). “To prevail on a Lanham Act false
advertising claim, a plaintiff must establish that the challenged message is (1) either
literally or impliedly false, (2) material, (3) placed in interstate commerce, and (4) the
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cause of actual or likely injury to the plaintiff.” Church & Dwight Co., Inc. v. SPD
SWISS Precision Diagnostics, GmBH, 843 F.3d 48, 65 (2d Cir. 2016).
As for the first element of falsity, “[a] plaintiff may establish falsity in two
different ways. To establish literal falsity, a plaintiff must show that the
advertisement either makes an express statement that is false or a statement is false
by necessary implication, meaning that the advertisement’s words or images,
considered in context, necessarily and unambiguously imply a false message.” Id. at
65. Defendant’s use of the 3M Mark in interstate commerce in conjunction with the
quote and Technical Specification Sheets while claiming to sell a product 3M was
known to manufacture unambiguously imply a false message: namely, that the masks
were 3M products sold by a legitimate 3M vendor. The fact that the City believed
that the products were 3M products is proof that they were material, and would cause
injury to Plaintiff’s reputation. Plaintiff has established Defendant’s liability as to
the false advertising claim brought under the Lanham Act.
C. Claims under New York General Business Law (“GBL”) §§ 349, 350
Plaintiff also asserts claims for Deceptive Acts and Practices, as well as False
Advertising, under GBL §§ 349 and 350. For Plaintiff to prevail on these claims, they
must show that Defendant “has engaged in (1) consumer-oriented conduct that is (2)
materially misleading and that (3) [P]laintiff suffered injury as a result of the
allegedly deceptive act or practice.” Orlander v. Staples, Inc., 802 F.3d 289, 300 (2d
Cir. 2015) (citing Koch v. Acker, Merrall & Condit Co., 18 N.Y.3d 940, 941 (2012)).
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Here, Plaintiff has satisfied all three elements. Defendant’s conduct was
clearly consumer-oriented, as the quote was sent to the City in order to lead to a
purchase. Proposed Findings ¶¶ 39-40. Defendant’s conduct was materially
misleading, as Defendant was not an authorized vendor and yet the City officials
prepared to bid on the products offered. Id. at ¶¶41-43. Finally, Plaintiff suffered
injury as purchasers were misled into believing they were dealing with Plaintiff,
when they were not. Id. Plaintiff has established Defendant’s liability under GBL §§
349 and 350.
As Plaintiff has established Defendant’s as to all the claims asserted, I
recommend that the motion for a default judgment in Plaintiff’s favor be GRANTED.
THE MOTION FOR A PERMANENT INJUNCTION
The Court may issue a permanent injunction “when a plaintiff has succeeded
on the merits and has demonstrated that (1) it suffered irreparable harm; (2) that
remedies available at law are inadequate to compensate for that injury; (3) that the
balance of hardships between the parties warrants such a remedy; and (4) that the
public interest would not be disserved by the issuance of an injunction.” Diageo North
Am., Inc. v. W.J. Deutsch & Sons Ltd., No. 17-cv-4259 (LLS), 2022 WL 4093752, at
*11 (S.D.N.Y. Sept. 7, 2022). The Lanham Act provides the Court with the authority
to provide injunctive relief to prevent further trademark violations. 15 U.S.C. § 1116;
see also Moonbug Entertainment Limited v. A20688, No. 21-cv-4313 (VM), 2022 WL
1239586, at *2 (S.D.N.Y. Apr. 26, 2022).
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As noted above, Plaintiff has established Defendant’s liability as to all causes
of action, and a default judgment is recommended. Thus, this Court finds that
Plaintiff has succeeded on the merits. The Court’s analysis therefore moves to the
four factors that must be demonstrated to support a grant of a permanent injunction.
Plaintiff has demonstrated that they suffered irreparable harm. First, “[a]
plaintiff seeking any such injunction [to prevent the violation of a registered mark]
shall be entitled to a rebuttable presumption of irreparable harm upon the finding of
a [trademark] violation.” 15 U.S.C. § 1116(a). Further, “[t]he loss of reputation and
goodwill constitutes irreparable harm.” Really Good Stuff, LLC v. BAP Investors,
L.C., 813 F. App’x 39, 44 (2d Cir. 2020). Plaintiff has provided two categories through
which their reputation has been harmed by Defendant’s actions. The first is that
Defendant purported that his products were manufactured by Plaintiff; yet, Plaintiff
had no control over their manufacture or any insight into what was being sold under
their Mark. See El Greco Leather Prods. Co., Inc. v. Shoe World, Inc., 806 F.2d 392,
395 (2d Cir. 1986) (“One 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.”). Second, Defendant engaged in price-gouging during
the height of the COVID-19 pandemic; this would naturally, if associated with
Plaintiff, reflect poorly upon them and their mark. Both of these damage Defendant’s
reputation and goodwill in a way constituting irreparable harm. See also Church of
Scientology Intern. v. Elmira Mission of the Church of Scientology, 794 F.2d 38, 41
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(2d Cir. 1986) (“[The Second Circuit’s] cases clearly say that establishing a high
probability of confusion … almost inevitably establishes irreparable harm.”).
The remedies available at law are also inadequate to compensate for the injury
to Plaintiff’s goodwill and reputation. A defaulting defendant may be presumed to be
willing to continue their infringement of a mark. See Kelly Toys Holdings, LLC v.
alialialiLL Store, No. 21-cv-8434 (AKH) (RWL), 2022 WL 2072567, at *52-53
(S.D.N.Y. June 9, 2022). Thus, there is no guarantee that monetary damages will
suffice to protect Plaintiff’s Mark moving forward. As such, a permanent injunction
is likely necessary to remedy Plaintiff’s injury.
There is no hardship to Defendant in enjoining him from abusing Plaintiff’s
Mark in the future. Defendant’s actions were unlawful and were the basis for his
criminal conviction. Rather than a hardship, it would be to Defendant’s benefit to
refrain from using the Mark in the future, as doing so could expose him to further
criminal liability. Furthermore, it is generally accepted that an infringer cannot
claim hardship due to “the loss of ability to offer its infringing product.” WpIX, Inc.
v. ivi, Inc., 691 F.3d 275, 287 (2d Cir. 2012). Thus, the balance of hardships is in
Plaintiff’s favor.
Finally, the public interest would be served by the granting of this injunction.
The public has an interest in receiving the products that they think they are
receiving. An injunction would protect the public from purchasing an N95 respirator
believing it was manufactured and sold by 3M, when in fact it was not. See New York
City Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F. Supp.2d 305, 344 (S.D.N.Y.
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2010) (“[T]he public has an interest in not being deceived – in being assured that the
mark it associates with a product is not attached to goods of unknown origin and
quality.”). The permanent injunction is the most effective safeguard for the public
against confusion.
Plaintiff has satisfied all the requirements for a permanent injunction, and it
is therefore my recommendation that the motion for a permanent injunction be
GRANTED.
RECOMMENDATION
In light of the foregoing, I recommend that the motion for default judgment be
GRANTED and the motion for a permanent injunction be GRANTED.
FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil
Procedure, the parties shall have fourteen days from service of this Report to file
written objections. See also Fed. R. Civ. P. 6. Such objections, and any responses to
objections shall be filed with the Clerk of Court and on ECF. Any requests for an
extension of time for filing objections must be directed to Judge Rochon. Failure to
file objections within fourteen days will result in a waiver of objections and
will preclude appellate review. See Thomas v. Arn, 474 U.S. 140 (1985); Cephas
v. Nash, 328 F.3d 98, 107 (2d Cir. 2003).
SO ORDERED.
DATED:
New York, New York
April 26, 2023
______________________________
JENNIFER E. WILLIS
United States Magistrate Judge
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