A defendant opposing a motion for summary judgment in a trademark case often repeats the refrain that issues of likelihood of confusion and dilution are riddled with issues of fact reserved for a jury. But in this "exceptional" trademark case filled with admissions on key issues (like intentional copying), a lack of evidence opposing plaintiff's undisputed facts, and "procedural mischief"—including evasion of process, default, failure to meet extended deadlines, and more—the U.S. District Court for the Eastern District of Tennessee granted a motion for summary judgment on trademark infringement, unfair competition, and dilution and awarded statutory damages and attorneys' fees under the Lanham Act (the "Act").

Plaintiff The Gathering Spot, LLC ("TGS") is a members-only social club that operates under the federally registered name and mark THE GATHERING SPOT and has locations in Atlanta, Washington, D.C., and Los Angeles. Like TGS, the defendants—The Gathering Spot at Burlington Village LLC ("Burlington TGS") and its owner Terri Cade-Hill ("Cade-Hill")—also operate a social club, but in Knoxville, Tennessee. Before Burlington TGS opened its doors, in around November 2016, Cade-Hill met with and emailed one of TGS's founders, seeking business advice in creating a shared working space in Knoxville. TGS's founder provided potential financing sources, but never gave permission to use THE GATHERING SPOT name. Years later, in June 2019, Cade-Hill finally opened her social club. To TGS's surprise, Cade-Hill named it "The Gathering Spot at Burlington Village" and offered many of the same services as TGS, including restaurant services and the ability to host weddings, parties, and concerts. TGS notified Cade-Hill that she could not use the name THE GATHERING SPOT and asked her to stop. Cade-Hill not only refused, but also chose to make the name closer to TGS by dropping "at Burlington Village" and using "The Gathering Spot"—an exact copy of TGS's name and trademark. Cade-Hill promoted her social club using the social media handle "@GSpotKnox."

In January 2022, TGS filed a lawsuit for federal trademark infringement, unfair competition, and dilution, claiming Burlington TGS intentionally copied TGS's federally registered trademarks for THE GATHERING SPOT and TGS. That was the easy part. TGS immediately encountered difficulty serving Burlington TGS and Cade-Hill, who evaded over a dozen attempts of service before TGS was finally able to serve Burlington TGS in May 2022. Cade-Hill, however, continued to evade service, so the court permitted service on her by e-mail.

But as the Court observed, "avoiding service for six months was only the beginning of Defendants' procedural mischief." Once served, Burlington TGS and Cade-Hill failed to answer the complaint, which resulted in an entry of default against them. They finally appeared after filing a motion to set aside the default, which the Court granted, but not without awarding TGS over $30,000 in attorneys' fees and expenses. Even after appearing, Burlington TGS and Cade-Hill continued to disregard their obligations. They never responded to TGS's efforts to set a payment schedule for the awarded fees, and when discovery came, they failed to serve initial disclosures and witness lists or respond to any written discovery.

After discovery closed, TGS moved for summary judgment on all its claims on July 5, 2023. Burlington TGS and Cade-Hill requested an extension of time to respond, which the Court granted until August 11, 2023—but they missed that deadline and instead filed their response on August 15, 2023, along with another motion to extend their response time. The Court granted that extension too, but it found Burlington TGS's and Cade-Hill's arguments on the merits unpersuasive and granted TGS's summary judgment motion in full.

Trademark Infringement and Unfair Competition

On the trademark infringement claim, TGS needed to prove: (1) it owned a trademark; (2) Burlington TGS and Cade-Hill used the mark in commerce without authorization; and (3) use of its mark in commerce was likely to cause confusion. Regarding the first element, the Court confirmed that TGS owned rights in its THE GATHERING SPOT and TGS marks by virtue of its federal registrations. The Court then confirmed that Burlington TGS and Cade-Hill did in fact use their mark in commerce based on affidavits submitted by TGS testifying about that use. Burlington TGS and Cade-Hill "denied" these allegations, but provided no affirmative proof its denials. With no more than mere general denials, the Court found there was no genuine issue of fact that TGS satisfied the use-in-commerce element.

As to likelihood of confusion, the Court detailed the Sixth Circuit's eight likelihood-of-confusion factors, but clarified that it need not balance these factors in cases like this one, where a defendant counterfeits a plaintiff's mark on competitive goods or services. In such cases, confusion is presumed.

Here, the undisputed material facts showed that Burlington TGS and Cade-Hill counterfeited TGS's marks by using the same marks in the same social-club industry for many of the same services, including weddings, concerts, and a restaurant. Burlington TGS and Cade-Hill even admitted to intentionally copying TGS's marks. The Court thus held that confusion was presumed and it did not need to balance the likelihood-of-confusion factors. In any event, the Court noted that most of the factors favored TGS. Accordingly, the Court granted summary judgment for TGS on trademark infringement and unfair competition (which is governed by the same test).

Trademark Dilution

On the remaining claim for trademark dilution, TGS needed to prove that (1) its marks were famous and (2) distinctive, and that (3) Burlington TGS's and Cade-Hill's use of their mark was in commerce, (4) began after TGS's marks became famous, and (5) caused dilution of the distinctive quality of TGS's marks. Like TGS's other claims, the Court held that the undisputed facts entitled TGS to summary judgment on dilution.

First, although the Court expressed doubts that TGS's marks were famous because they had been used in the niche industry of members-only social clubs, it found the marks were famous because Burlington TGS and Cade-Hill did not contest fame and thus waived arguments against fame. Second, the Court found that TGS's marks were distinctive because they appeared in various media publications and were recognized and favorably associated with TGS. Third, the Court held that Burlington TGS and Cade-Hill used TGS's marks in commerce by using them on the internet, which is "an instrumentality of interstate commerce." Fourth, it found that Burlington TGS and Cade-Hill began using TGS's marks in 2019, after they became famous.

Fifth and finally, the Court found that use of "GSpot" in Burlington TGS's social media handle diluted TGS's marks by tarnishment. It explained that any mark with a lewd or offensive sexual association, as the Court found with the use of "GSpot," raises a strong inference of tarnishment, which can only "be overcome by evidence that rebuts the probability that some consumers will find the new mark both offensive and harmful to the reputation and the favorable symbolism of the famous mark." Although Burlington TGS and Cade-Hill "vehemently" denied that the use of "GSpot" was an innuendo and argued they were "appalled" at the suggestion, the Court again noted that a general denial without affirmative evidence fails to create a dispute of fact on summary judgment. As Burlington TGS and Cade-Hill provided no affirmative evidence, the Court granted summary judgment to TGS for dilution by tarnishment.

Relief

Following the Court's grant of summary judgment for TGS on all claims, it considered TGS's requests for (1) permanent injunctive relief, (2) statutory damages, and (3) attorney's fees.

The Court first enumerated the four factors for granting permanent injunctive relief: (1) the plaintiff suffered an irreparable injury, (2) remedies available at law (i.e., monetary damages) are inadequate, (3) the balance of hardships between the plaintiff and defendant warrants an equitable remedy, and (4) the public interest would not be disserved by a permanent injunction. Each factor favored injunctive relief. First, irreparable harm was presumed given the Court's finding of infringement and dilution, and Burlington TGS and Cade-Hill failed to rebut that presumption of irreparable harm. Second, the Court found no adequate legal remedy for Burlington TGS's and Cade-Hill's continuing trademark infringement. Third, Burlington TGS and Cade Hill would face no hardship by complying with the law whereas TGS would continue to suffer hardship from infringement, dilution, and unfair competition. And fourth, the Court found that enjoining the infringing and diluting uses would further the purposes of the Act to prevent consumer confusion and protect the trademark holder's interest in the mark.

For its monetary damages, TGS elected statutory damages rather than actual damages. In cases of counterfeiting, like this one, a plaintiff may recover anywhere from $1,000 to $200,000 in statutory damages per counterfeit mark, and up to $2,000,000 per willfully counterfeited mark. TGS asked for $250,000, and the Court granted the request, finding that Burlington TGS and Cade-Hill willfully infringed based on their undisputed knowledge of TGS before adopting their mark; their alteration of their mark to more closely resemble TGS's mark after TGS asked them to stop; and all of their procedural failings, including their willful evasion of service. The Court found this $250,000 award "just" because it was well below the maximum TGS could recover even without showing willfulness.

Finally, TGS asked for its attorneys' fees, which can be awarded in "exceptional cases." Here, the Court agreed this case was exceptional given Burlington TGS's and Cade-Hill's willful infringement and failure to respond to discovery or "meaningfully engage in th[e] lawsuit in any way." Although the Court clarified that failure to respond to discovery alone does not make a case exceptional if only the non-responding party is harmed, the Court held that TGS had been harmed because the failure to respond increased TGS's costs, limited its ability to calculate its actual damages, and "unnecessarily strained the Court's limited resources." Thus, the Court granted TGS attorneys' fees, with a precise amount to be determined by the magistrate judge below.

The case is The Gathering Spot, LLC v. The Gathering Spot at Burlington Village LLC, et al., No. 3:22-cv-00007-TRM-JEM (E.D. Tenn., Aug. 29, 2023).

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