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Playnation Play Systems, Inc. v. Velex Corp.

United States Court of Appeals, Eleventh Circuit

September 24, 2019

PLAYNATION PLAY SYSTEMS, INC., d.b.a. Gorilla Playsets, Plaintiff - Appellee,
v.
VELEX CORPORATION, d.b.a. Gorilla Gym, Defendant-Appellant, KIRIL ALEXANDROV, et al., Defendants.

          Appeal from the United States District Court for the Northern District of Georgia D.C. Docket No. 1:14-cv-01046-RWS

          Before MARCUS, JULIE CARNES, and KELLY, [*] Circuit Judges.

          MARCUS, Circuit Judge

         PlayNation Play Systems, Inc., a company that makes and sells children's playground equipment, won a trademark infringement verdict against Velex Corporation. This is the case's second trip to our Court: in an earlier appeal, we affirmed the district court's judgment in part, upholding the entry of a permanent injunction preventing Velex from infringing on PlayNation's mark, but vacating an award of damages. PlayNation Play Sys., Inc. v. Velex Corp., 924 F.3d 1159, 1171 (11th Cir. 2019). After the district court entered its injunction, PlayNation discovered that Velex continued to sell and distribute goods using the infringing mark. The district court held Velex and its two officers and shareholders, Peter Velikin and Kiril Alexandrov, in civil contempt of court, found them jointly and severally liable for compensatory damages in the amount of $1, 500, and awarded PlayNation attorneys' fees and costs in the amount of $46, 462.25.

         In this appeal, Velex argues that it made all reasonable efforts to comply with the injunction and that Velex and its officers should not be held liable for the actions of third parties that, they say, caused the infringing products to be sent to customers. Velex further argues that the district court erred by awarding attorneys' fees in the absence of willful or grossly negligent noncompliance with the injunction. Because the district court did not abuse its considerable discretion in holding Velex and its officers in contempt or in awarding PlayNation attorneys' fees and costs, we affirm.

         I.

         Plaintiff PlayNation Play Systems, Inc., makes children's outdoor playground equipment which it sells under the trademark "Gorilla Playsets." Velex Corp., in turn, sells doorway pullup bars -- suitable for all ages -- with attachable accessories for children, like swings and gymnastics rings, under the trademark "Gorilla Gym." After PlayNation learned that Velex was using the "Gorilla Gym" name for its children's equipment, it sued for trademark infringement.

         The parties stipulated that PlayNation's mark was valid, that it had priority over Velex's mark, and that Velex was using the mark without PlayNation's consent. After a bench trial, the district court found that there was a likelihood of confusion at the retail level, making Velex liable for trademark infringement under the Lanham Act, 15 U.S.C. § 1114(1). The court granted injunctive relief barring future infringement, awarded damages in the amount of $150, 188, and canceled Velex's federal trademark registration. The court set out the injunction this way:

The Court therefore enters a permanent injunction against Defendant enjoining it from:
(1) developing, manufacturing, importing, using, marketing, selling, offering for sale, distributing, or installing any children's playground equipment or related accessories under the GORILLA GYM Name, or any variant thereof that is a colorable imitation or otherwise likely to be mistaken for or confused with PlayNation's GORILLA PLAYSETS Mark;
(2) using its trade name "GORILLA GYM" or "GORILLA GYM INDOOR PLAYGROUND" for the development, manufacture, import, use, marketing, sale, offering for sale, distribution, or installation of any children's playground equipment or related accessories, or any variant thereof which is a colorable imitation of or otherwise likely to be mistaken for or confused with PlayNation's GORILLA PLAYSETS Mark;
(3) otherwise infringing upon PlayNation's GORILLA PLAYSETS Mark; and
(4) otherwise unfairly competing with PlayNation or engaging in any deceptive trade practice, trading off of PlayNation's reputation or goodwill, or injuring PlayNation's reputation.

         Velex moved to modify the injunction, asking for permission to continue using the "Gorilla Gym" name for 45 days and to sell already-boxed goods for another 90 days, among other things. The court denied the motion, explaining that Velex "essentially [sought] permission to continue to infringe upon Plaintiff's mark." Following a separate appeal, this Court vacated the damages award but affirmed all other aspects of the district court's decision, including the grant of injunctive relief. We held that the district court erred in awarding damages for willful infringement on PlayNation's trademark based solely on the fact that Velex continued to sell Gorilla Gym goods after being served with PlayNation's complaint. PlayNation Play Sys., Inc., 924 F.3d at 1170. The Court explained that if that were enough to establish willful infringement, "a valid trademark holder [would] risk[] losing all of its profits if it [did] not immediately cease selling its trademarked product upon receiving a complaint indicating it may be violating the law." Id.

         After the district court entered the injunction, PlayNation discovered that Velex continued to infringe on its mark online, including on its website and on its Amazon page. Velex had changed the brand name first to "GymX" and then to "Gym1, " but it did not remove all appearances of the words "Gorilla Gym" from its online presence. Velex also failed to remove all of the infringing goods from the stream of commerce. Two customers who ordered equipment after the injunction was entered and after Velex renamed the products received "Gorilla Gym" branded equipment. A third customer had ordered a Gym1 playset and received emails indicating that he had purchased an item from "Gorilla Gym CA." This shipment was canceled by Velex two days after PlayNation filed its initial motion for contempt, which cited the other two offending shipments.

         PlayNation's amended motion for contempt asked the court to enter a citation for civil contempt against Velex and its sole shareholders and corporate officers, Peter Velikin and Kiril Alexandrov, and to request that the U.S. Attorney prosecute the three for criminal contempt under Federal Rule of Criminal Procedure 42(a)(2). Velex argued that it had taken more than reasonable efforts to comply and noted that the injunction only prevented it from using the mark in connection with "children's playground equipment or related accessories, " so its mere use of the words "Gorilla Gym" did not violate the injunction. It also claimed that the products that were shipped in violation of the injunction were sent in error.

         First, Velex explained that one customer, James Carsten, received the Gorilla Gym product because an employee "inadvertently entered the wrong sku" -- "stock keeping unit, " a code identifying a particular product -- for his Amazon order. This mistake caused Capacity LLC, the company Velex contracted with for shipping and handling services, to send out the old Gorilla Gym product. Velex said that for the other customer who received an infringing product, Matthew Thornton, Capacity had violated Velex's instructions to remove the products from Gorilla Gym boxes and place them into generic brown boxes. Velex added that it canceled the order of the third customer, Daniel Goldgeier, simply "because it had been mistakenly shipped, " without any further explanation of the nature of the mistake or who made the error. In its reply, PlayNation said that another ...


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