United States District Court, N.D. Illinois, Eastern Division
REPORT AND RECOMMENDATION
MARY M. ROWLAND, Magistrate Judge.
Plaintiff Bulgari, S.p.A. ("Bulgari") brings the present action against the Partnerships and Unincorporated Associations identified on Schedule A to the Complaint (collectively, the "Defendants") for federal trademark infringement and counterfeiting (Count I), false designation of origin (Count II), cybersquatting (Count III), and violation of the Illinois Uniform Deceptive Trade Practices Act ("UDTPA") (Count IV).
I. STATEMENT OF FACTS
As alleged in the Complaint, the Defendants are promoting, advertising, marketing, distributing, offering for sale and selling counterfeit products, including jewelry, watches and other merchandise, bearing counterfeit versions of Bulgari's trademarks (collectively, the "Counterfeit BVLGARI Products") through various fully interactive commercial Internet websites operating under at least the Defendant Domain Names and Online Marketplace Accounts listed in Schedule A to the Complaint (collectively, the "Defendant Internet Stores").
The Defendants create the Defendant Internet Stores by the hundreds and design them to appear to be selling genuine BVLGARI Products, while actually selling low-quality, unlicensed Counterfeit BVLGARI Products to unknowing consumers. The Defendant Internet Stores share unique identifiers, such as website design and similarities of the counterfeit products offered for sale, establishing a logical relationship between them and suggesting that Defendants' counter-feiting operation arises out of the same transaction, occurrence, or series of transactions or occurrences. Defendants attempt to avoid liability by going to great lengths to conceal both their iden-tities and the full scope and interworking of their massive counterfeiting operation. Defendants directly target unlawful business activities toward consumers in Illinois, cause harm to Bulgari's business within this Judicial District, and have caused and will continue to cause irreparable injury to Bulgari.
Defendants facilitate sales of Counterfeit BVLGARI Products by designing the Defendant Internet Stores so that they appear to unknowing consumers to be authorized online retailers, outlet stores, or wholesalers selling genuine BVLGARI Products. See Docket Entry 11 at ¶ 17. The Defendant Internet Stores look sophisticated and accept payment in U.S. dollars. Id. Numerous Defendant Domain Names also incorporate the BVLGARI Trademarks into the URL, and oftentimes Defendants include Bulgari's copyright-protected content, images, and product descriptions on their websites to make it very difficult for consumers to distinguish such counter-feit sites from an authorized retailer. Id. Some of the Defendant Internet Stores even go so far as to admit to selling counterfeit products, explicitly stating that they are offering "replica" or "fake" BVLGARI Products for sale. Id. at ¶ 16. Bulgari has not licensed or authorized Defendants to use any of the BVLGARI Trademarks, and none of the Defendants are authorized re-sellers of genuine BVLGARI Products. Id. at ¶ 17.
The Defendant Internet Stores accept payment via Western Union, credit card and/or PayPal and ship the Counterfeit BVLGARI Products in small quantities via international mail to minimize detection by U.S. Customs and Border Protection. Id. at ¶ 18. Defendants further per-petuate the illusion of legitimacy by offering "live 24/7" customer service and using indicia of authenticity and security that consumers have come to associate with authorized retailers, including the McAfee® Security, Verisign®, Visa®, MasterCard®, and PayPal® logos. Id.
Defendants also deceive unknowing consumers by using the BVLGARI Trademarks without authorization within the content, text, and/or meta tags of their websites in order to attract various search engines crawling the Internet looking for websites relevant to consumer searches for BVLGARI Products. Id. at ¶ 19. Additionally, upon information and belief, Defendants use other unauthorized search engine optimization (SEO) tactics to increase website rank. Id. As a result, links to Defendants' websites show up at or near the top of popular search results and misdirect consumers searching for genuine BVLGARI Products. Id.
Defendants go to great lengths to conceal their identities and often use multiple fictitious names and addresses to register and operate their massive network of Defendant Internet Stores. Id. at ¶ 20. Many of Defendants' names and addresses used to register the Defendant Internet Stores are incomplete, contain randomly typed letters, or fail to include cities or states. Id. Other Defendant Domain Names use privacy services that conceal the owners' identity and contact information. Id. On information and belief, Defendants constantly register new Defendant Internet Stores using the identities listed in Schedule A to the Complaint, as well as other unknown fictitious names and addresses. Id. Such Defendant Internet Store registration patterns are one of many tactics used by the Defendants to conceal both their identities and the full scope and interworking of Defendants' massive counterfeiting operation. Id. Another tactic commonly used by Defendants to thwart enforcement efforts is to constantly change the location to which the Defendant Domain Names redirect. Id.
Even though Defendants operate under multiple fictitious names, many similarities between the Defendant Internet Stores indicate a coordinated effort to sell Counterfeit BVLGARI Products. Id. at ¶ 21. For example, many of the Defendant Internet Stores have virtually identical layouts, even though different aliases were used to register the respective domain names. Id. In addition, Counterfeit BVLGARI Products for sale in the Defendant Internet Stores bear similar irregularities and indicia of being counterfeit to one another, suggesting that the Counterfeit BVLGARI Products were manufactured by and come from a common source and that Defendants are interrelated. Id. The Defendant Internet Stores also include other notable common features, including use of the same domain name registration patterns, unique shopping cart platforms, accepted payment methods, check-out methods, meta data, HTML user-defined variables, domain redirection, lack of contact information, identically or similarly priced items and volume sales discounts, the same incorrect grammar and misspellings, similar hosting services, similar name servers, and the use of the same text and images, including content copied from Bulgari's official bulgari.com website. Id.
On July 1, 2014, this Court granted Bulgari's ex parte Motion for Entry of a (1) Temporary Restraining Order, (2) Domain Name Transfer Order, (3) Asset Restraining Order, (4) Expedited Discovery Order, and (5) Service of Process by Email and Electronic Publication ("the TRO"). See Docket Entry 33. The TRO was extended by the Court and will expire on July 29, 2014, pursuant to Federal Rule of Civil Procedure 65(b)(2). See Docket Entry 26. The TRO authorized Bulgari to provide notice of these proceedings and the preliminary injunction hearing to Defendants by electronic mail at the e-mail addresses identified in Schedule A to Bulgari's Complaint and electronic publication at the Defendant Domain Names that have been transferred to Bulgari's control. TRO at ¶ 8. Since and pursuant to entry of the TRO, dozens of PayPal accounts associated with Defendants' websites have been frozen. See Docket Entry 35-1, at ¶ 2. In addition, Bulgari is in the process of requesting transfer of the Defendant Domain Names. Id.
On July 11, 2014, Plaintiff filed a motion for preliminary injunction. See Docket Entry 34. On July 16, 2014, the Court held a hearing on Plaintiff's motion for a preliminary injunction. No Defendant appeared at the preliminary injunction hearing or submitted any written objection to the motion. For the reasons set forth below, the Court recommends that the TRO be converted to a preliminary injunction against Defendants, so that they remain enjoined from the manufacture, importation, distribution, offer for sale, and sale of Counterfeit BVLGARI Products during the pendency of this litigation. As part of the Preliminary Injunction, the Court recommends that Defendant Domain Names remain in Bulgari's control and Defendants' PayPal accounts and funds remain frozen until completion of these proceedings.
i) Standard for Preliminary ...