Coty Inc. v. Cosmopolitan Cosmetics Inc.

District Court, S.D. New York·Decided June 18, 2020·No. 1:18-cv-11145·Unknown

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK COTY INC., et al.,

Plaintiffs,

against CIVIL ACTION NO.: 18 Civ. 11145 (LTS) (SLC)

ORDER COSMOPOLITAN COSMETICS INC., et al.,

Defendants.

SARAH L. CAVE, United States Magistrate Judge. The Court held a Telephone Conference on June 11, 2020 (the “June Conference”) regarding the discovery issues raised in the parties’ joint Letter-Motion (ECF No. 96) (the “Motion”). The Court resolves the Motion as set forth below. I. INTRODUCTION Plaintiffs Coty Inc. (“Coty”), Calvin Klein Trademark Trust (“CKTT”), Calvin Klein, Inc., Calvin Klein Cosmetic Corporation, HUGO BOSS Trade Mark Management GmbH & Co. KG, and Marc Jacobs Trademarks, LLC (collectively, “Plaintiffs”),1 sued Cosmopolitan Cosmetics Inc. (“Cosmopolitan”), Eugene Abraham, and William Gold (Abraham and Gold, the “Individual Defendants”) (Cosmopolitan and the Individual Defendants, collectively, “Defendants”). (ECF No. 31). All Plaintiffs other than Coty assert claims for “trademark infringement and trademark counterfeiting under Section 32(1) of the Trademark Act of 1946 (the “Lanham Act”), 15 U.S.C. § 1114(1); [and all Plaintiffs including Coty assert] claims for unfair competition [,false

1 CKTT, Calvin Klein, Inc., Calvin Klein Cosmetic Corporation, HUGO BOSS Trade Mark Management GmbH & Co. KG, and Marc Jacobs Trademarks, LLC are referred to as the “Brand Owner Plaintiffs.” description,] and false designation of origin under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),” and unfair competition under New York common law. (Id. at 13, 19–21). A detailed discussion of the parties’ relationship and Plaintiffs’ claims, as well as uniform

defined terms, are set forth in the memorandum opinion and order issued by the Honorable Laura Taylor Swain ruling on Defendants’ motion to dismiss the First Amended Complaint (“FAC”), and are incorporated herein by reference. See Coty Inc. v. Cosmopolitan Cosmetics Inc., 432 F. Supp. 3d 345 (S.D.N.Y. 2020) (the “MTD Decision”). As in the MTD Decision, the Court uses the term “Decoded Products” to refer to the “units of Plaintiffs’ Fragrances from

which the Production Codes have been removed, or on which the Production Codes have been obscured, stickered or otherwise mutilated” and then sold by Cosmopolitan. Id. at 349.2 II. DISCUSSION A. Legal Standard Under the Federal Rules of Civil Procedure, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Fed. R. Civ. P. 26(b)(1). Rule 26 gives a district court “broad discretion . . . to impose limitations or conditions on [ ] discovery, . . .which extends to granting or denying motions to compel or for protective orders on ‘just terms.’” Capstone Logistics Holdings, Inc. v. Navarrete, No. 17 Civ. 4819 (GBD) (BCM), 2018 WL 6786237, at *8 (S.D.N.Y. Dec. 13, 2018) (internal citation omitted);

2 In the MTD Decision, Judge Swain dismissed all claims against the Individual Defendants. Coty Inc., 432 F. Supp. 3d at 353–54. see EM Ltd. v. Republic of Argentina, 695 F.3d 201, 207 (2d Cir. 2012) (“Of course, as in all matters relating to discovery, the district court has broad discretion to limit discovery in a prudential and proportionate way.”), aff’d sub nom. Republic of Argentina v. NML Capital, Ltd.,

573 U.S. 134 (2014). B. Plaintiffs’ Issues with Defendants’ Discovery Responses 1. Information regarding Cosmopolitan’s sales Plaintiffs argue that, in addition to the Decoded Products, Cosmopolitan also sells “untampered-with units of these same fragrance products” (“Non-Decoded Products”), as to

which Cosmopolitan has refused to produce any information concerning sales or how it tracks sales of the Decoded Products separately from sales of Non-Decoded Products. (ECF No. 96 at 2). Plaintiffs argue that they are entitled to information about “[t]he total scope of Cosmopolitan’s sales of Plaintiffs’ fragrances,” both Decoded and Non-Decoded Products, “and the reliability of any related record-keeping” to enable Plaintiffs to establish their monetary damages and, potentially, prove Cosmopolitan’s bad faith. (Id. at 2–3).

Cosmopolitan responds that the information Plaintiffs are seeking concerns “products that have no conceivable connection with this case,” and that the Court previously ruled that Non-Decoded Products were outside the scope of discovery. (ECF No. 96 at 3 (citing ECF No. 77 at 16)). Cosmopolitan argues that “discovery relating to non-accused products is legally irrelevant and not likely to lead to discovery of relevant evidence” because “Plaintiffs cannot seek damages for such products or seek to enjoin their sale.” (Id. at 3). Cosmopolitan also

argues that Plaintiffs’ request for information about Non-Decoded Products is facially unreasonable because those products are non-infringing, and, in any event, it has produced business records sufficient to show the differentiation between Decoded and Non-Decoded Products, which Plaintiffs can explore through deposition testimony. (Id. at 3–4). As Judge Swain set forth in her January 9, 2020 decision on the motion to dismiss the

FAC, “[a] claim for trademark infringement arises when a person uses a registered mark in commerce in connection with the sale of a good without the consent of the registrant and in a manner likely to cause confusion about the source of the goods.” Coty Inc., 432 F. Supp. 3d at 349; see 15 U.S.C. § 1114(1)(a). The Second Circuit has explained that “[d]istribution of a product that does not meet the trademark holder’s quality control standards may result in the

devaluation of the mark by tarnishing its image,” in which case “the non-conforming product is deemed for Lanham Act purposes not to be the genuine product of the holder, and its distribution constitutes trademark infringement.” Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3, 6 (2d Cir. 1996) (emphasis added). The focus, then, of the trademark infringement inquiry is on the non-conforming goods that a defendant allegedly sold. See Id. at 6–7 (focusing the infringement analysis on the non-conforming products); Zino Davidoff SA v. CVS Corp., 571

F.3d 238, 244–46 (2d Cir. 2009) (analyzing trademark infringement claims based on fragrances with codes removed); L’Oreal USA, Inc. v. Trend Beauty Corp., No. 11 Civ. 4187 (RA), 2013 WL 4400532, at *7, 14–18 (S.D.N.Y. Aug. 15, 2013) (tallying counterfeit and decoded fragrance units, and analyzing whether defendant’s sale of the decoded units violated Lanham Act). Because the focus of Plaintiffs’ claims must be on the non-conforming goods Cosmopolitan allegedly sold—the Decoded Products—so too must the scope of discovery be

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