Seventh Circuit Slaps Online Marketer with Default Judgment, Permanent Injunction

By on May 7, 2020
Posted In Trademarks

A unanimous panel of the US Court of Appeals for the Seventh Circuit upheld a default judgment and permanent injunction against an online marketer for trademark infringement, false advertising, dilution, unfair competition under the Lanham Act, and claims under Illinois statutory and common law. Quincy Bioscience, LLC v. Ellishbooks, et al., Case No. 19-1799 (7th Cir. Apr. 24, 2020) (Wood, J.).

Quincy Bioscience develops, markets and sells the dietary supplement Prevagen® for the support of cognitive function. Ellishbooks sold various products on Amazon, including dietary supplements identified as Prevagen®. Ellishbooks was not authorized to sell Prevagen® products, however. Quincy brought this action against Ellishbooks alleging violations of the Lanham Act and violations of Illinois statutory and common law, and seeking preliminary and permanent injunctive relief to prevent Ellishbooks from using the Prevagen® mark and falsely representing that it was associated with Quincy.

Ellishbooks did not answer the complaint, and Quincy subsequently filed a motion for entry of default, which was granted. Quincy then moved for entry of default judgment. Ellishbooks opposed the motion, arguing that it had not been properly served and that the products it sold on Amazon were not listed or identified as Prevagen®. The district court granted Quincy’s motion for default judgment. On the issue of service, the district court found that Ellishbooks had “deliberately obfuscated their place of business and sought to evade service.” Because Quincy mailed service to Ellishbooks’ registered agent, the court held Quincy had “effected legally adequate service.” Regarding Ellishbooks’ substantive arguments, the district court held that Ellishbooks had “identified no circumstances capable of establishing good cause for its default.”

At the prove-up hearing, Quincy introduced evidence from Amazon establishing that Ellishbooks received approximately $481,000 in sales from products it sold as Prevagen® brand products. The court entered judgment in favor of Quincy for that amount plus attorneys’ fees and costs. Quincy then filed a motion pursuant to Fed. R. Civ. P. 59 to amend the judgment to include injunctive relief. Counsel for Ellishbooks did not appear at the hearing. The court granted Quincy’s motion to amend and permanently enjoined Ellishbooks from infringing on Quincy’s Prevagen® trademark and selling stolen Prevagen® products. Ellishbooks appealed.

The Seventh Circuit affirmed, holding that Ellishbooks forfeited the argument that it did not sell stolen goods by failing to respond to the complaint and failing to provide a sufficient explanation for its failure to respond. The Court held that whether Quincy was entitled to damages under the Lanham Act did not depend on whether the Prevagen® products were stolen, and therefore the district court was not required to make such a finding in support of its damages award. That said, the Court found that “[b]y reason of the default, this allegation was established: the defendants sold Prevagen products that they knew or had reason to know were stolen.” Ellishbooks also failed to introduce any evidence at the prove-up hearing contradicting this fact. The Seventh Circuit concluded that the district court was entitled to rely on the finding that Ellishbooks knew or had reason to know the goods were stolen in awarding damages and issuing the permanent injunction against Ellishbooks.

Allyson E. Riemma
Allyson Riemma concentrates her practice on complex litigation relating to consumer fraud, securities, and professional malpractice litigation, as well as various forms of governmental investigations by the PCAOB, SEC, US Attorney’s office and other agencies. She is experienced representing clients from Fortune 500 companies to small closely held corporations. Allyson also maintains an active pro bono practice. Read Allyson E. Riemma's full bio.