A federal magistrate judge in New York has recommended that Gucci America, Inc. be awarded upwards of $1 million in statutory damages in its counterfeits-centric case against Lord & Taylor Ecomm LLC – a far cry from the $14 million that the luxury brand is seeking. On the heels of the court issuing a judgment of default against Lord & Taylor in August, U.S. Magistrate Judge Robyn F. Tarnofsky of the U.S. District Court for the Southern District of New York, has recommended that the court permanently enjoin Lord & Taylor from further infringing Gucci’s trademarks and award the luxury brand $1.3 million in statutory damages in connection with its offering and sale of counterfeit goods.
A Bit of Background: Gucci filed its lawsuit against Lord & Taylor in November 2023, accusing the retailer of selling products – including handbags, shoes, and belts – that made use of counterfeit versions of its “famous GUCCI trademark and related iconic design marks” via its e-commerce site. Lord & Taylor initially responded to Kering-owned Gucci’s complaint and cooperated with a court-ordered inventory inspection of the goods still in its possession. Gucci determined that all of the examined goods were, in fact, counterfeit. After that, however, the upscale apparel retailer ignored Gucci’s discovery requests, prompting the court to enter a default judgment in Gucci’s favor this summer.
By way of an August 2024 default judgment order, a judge for the U.S. District Court for the Southern District of New York held Lord & Taylor liable for trademark infringement, counterfeiting, and dilution, and issued a permanent injunction prohibiting Lord & Taylor from selling counterfeit Gucci products. Against that background, the court also ordered the retailer to turn over the counterfeits to Gucci for impoundment and destruction.
Thereafter, Gucci sought a total of $14 million – an amount based on the maximum statutory damages available under the Lanham Act for willful counterfeiting. Specifically, the luxury brand requested $6 million for infringement of the GUCCI word mark, $4 million for the Interlocking GG mark, and $4 million for the Gucci Horsebit mark, and noted the retailer’s “complete lack of cooperation during the course of discovery, along with its failure to defend this action.”
Recommendation and Report
In her February 27 report, Tarnofsky considered the $14 million sum but instead recommended damages of $1.3 million, emphasizing that while Gucci demonstrated willful counterfeiting, the lack of concrete evidence regarding Lord & Taylor’s sales volume or profits made it difficult to justify the maximum statutory damages. At the same time, the magistrate judge determined that Gucci had not properly pleaded ownership of the Horsebit mark in its initial complaint, effectively barring the brand from recovering damages for its alleged infringement.
“Awarding damages to [Gucci] for infringement of the Horsebit mark when [Gucci] neglected adequately to allege that the mark was protected and owned by [Gucci] would undermine the requirement that [Lord & Taylor] be placed on notice of the claims and the relief sought,” the magistrate judge stated.
While statutory damages in trademark counterfeiting cases can be substantial, which damages ranging from $200,000 per counterfeit mark per type of good (if infringement is not deemed willful) to $2 million per counterfeit mark per type of good (if infringement is found to be willful), courts exercise discretion in determining appropriate awards. Here, Magistrate Judge Tarnofsky applied the Fitzgerald factors, a set of criteria used to assess damages, including the financial benefits reaped by the defendant; the financial harm suffered by the plaintiff; the value of the trademark; the deterrent effect of the award on others; the willfulness of the defendant’s conduct; the level of cooperation by the defendant, and the need to discourage future infringement.
Against that background, Tarnofsky found that a number of the factors weighed in Gucci’s favor. For instance, Gucci successfully argued that Lord & Taylor’s conduct was willful and uncovered 530 counterfeit bags and 446 belts in the retailer’s possession. And while there was no evidence of actual sales figures or profits, in cases where brands lack direct sales data from the defendants, courts often assume a 300 percent markup on counterfeit luxury goods to estimate profits – an approach the court used here.
> Doing the math: If sold, the 530 counterfeit bags, each yielding a $1,483 profit, would have generated $785,990, the magistrate judge stated. This excludes profits from previously sold counterfeit goods and the 446 infringing belts in the warehouse. At a $100 profit per belt, the belts would have added $44,600, bringing the total estimated profit to $830,590. This remains far below the $6 million maximum statutory damages sought for the infringement of the GUCCI word mark (on handbags and belts) and the Interlocking GG mark (on belts).
Moreover, the judge noted that while L&T defaulted, the company had provided some inventory records before ceasing participation in the case. Additionally, the retailer removed the infringing products from its website before receiving Gucci’s cease-and-desist letter. These factors contributed to the magistrate judge’s recommendation that the court issue a damages award as follows: $1 million for the infringement of the GUCCI word mark on handbags; $150,000 for infringement of the GUCCI word mark on belts, and $150,000 for infringement of the Interlocking GG mark on belts.
It is now up to the district court judge whether to adopt the magistrate judge’s recommendation – or not.
The Broader Implications for Brands
The latest round of the case seems to underscore one of the challenges that luxury brands face in combating counterfeiting While Gucci succeeded in securing a permanent injunction against Lord & Taylor, thereby, barring it from selling counterfeit Gucci products in the future, the damages award – if adopted by the court – may not be the strong deterrent the brand had hoped for. The magistrate judge’s recommendation also serves as a reminder that even in default judgment scenarios, plaintiffs still need to present strong evidence of actual damages or profits to justify large awards.
The case is Gucci America, Inc. v. Lord & Taylor EComm LLC, 1:23-cv-10239 (SDNY).
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