In a recent article for IP Watchdog, Michael Goldberg and Felicity Kohn examined the various means of protecting branded apparel intellectual property assets.
"Branded apparel companies face many challenges in protecting their IP assets, including the unavailability of copyright protection for fashion designs, the length of time necessary to secure a design patent, the challenge of securing secondary meaning required for a trade dress claim before the market is flooded with knock-offs, and the geographic and practical impediments to pursuing counterfeiters, who are often foreign-based and/or judgment proof," the authors wrote.
Recently, however, several courts have taken steps to bolster the options available to apparel companies facing the scourge of knockoff goods, namely: (1) expanding the scope of potential contributorily liable actors; and (2) broadening the means of freezing and attaching assets of foreign counterfeiters.
Expanding the Scope of Potentially Liable Actors
"Rather than attempting to enforce a money judgment against a defendant who is judgment proof or located overseas, a more effective strategy may be to bring contributory infringement claims against the website(s) hosting the infringing goods or even credit card companies processing payments for the infringing goods," Goldberg and Kohn explained.
For example, in Gucci America, Inc. v. Frontline Processing Corp., Gucci prevailed against the defendant credit card processing companies' attempt to dismiss claims for contributory trademark infringement. The court found that the credit card companies met the test for contributory infringement, namely, that they either (1) intentionally induced the website to infringe by selling counterfeit goods, or (2) knew, or were willfully blind to the fact, that the Gucci-branded products on TheBagAddiction.com were counterfeit, and the service they provided gave them control and ability to monitor the unlawful activity.
The court reasoned that one company had intentionally induced trademark infringement because it promoted itself to "high risk merchant accounts," including those that sell "replica products," and boasted that 95% of merchant accounts are approved, and further found that all three defendant credit card companies could be liable for contributory trademark infringement under the second test set out above.
Similarly, not long after the Gucci America decision, a California federal court found two offshore internet companies liable for contributory infringement for hosting counterfeit content. In that case, Chloe SAS et al v. Sawabeh Information Services Co., the court granted partial summary judgment for the plaintiffs against the internet company defendants, finding no material question of fact that the counterfeit goods were sold through the defendants' websites and that they actively promoted and facilitated the sale of such goods. Evidence included the fact that the defendants maintained "Replica Products" and "Replica Retention" sales divisions and that an employee of one company represented to the plaintiffs' investigator that "counterfeiting is one of the two biggest industries featured" on that website. The court also determined that the defendants exercised control over the infringing activity because they "prevent members from making any changes to listings" and "choose[] and add[] keywords to premium members' products which drives the search engine optimization of these listings."
"By enlarging the scope of parties who may be contributorily liable for infringement to include credit card processing companies and web hosts, among others, the Court provided recourse to trademark owners whose valuable IP had been infringed and offered a powerful disincentive to companies that may seek to trade off of and profit from this illicit conduct," said Goldberg and Kohn.
Expanding Access to Counterfeiters' Assets
Moreover, in recent years, many courts have also displayed a willingness to freeze or attach foreign counterfeiting defendants' accounts with companies with branches located in the U.S.
In Tory Burch v. Yong Sheng Int'l Trade Co. Ltd., luxury brand Tory Burch obtained a permanent injunction and judgment of $4 million against each of 41 companies in China selling knock-offs of its products. Following the entry of a default judgment and permanent injunction, the court froze the defendants' Pay Pal accounts and released those sums to Tory Burch.
Alternatives to Filing Suit: Partnering with Websites to Eliminate Counterfeit Goods
"While these Court rulings have added to the arsenal of alternatives available to branded apparel companies, these entities continue to explore other avenues to protect their IP, including preemptive agreements with leading websites," Goldberg and Kohn said.
In 2015, Kering, the corporate owner of luxury brands Gucci and Yves Saint Laurent, among others, sued the notorious website Alibaba for contributory trademark infringement due to the prevalence of counterfeits on its service, along with the individual sellers. After protracted negotiations, the two entities ultimately reached a settlement. According to recent press coverage, the two companies are partnering to use Alibaba's increasingly sophisticated technology to locate counterfeits on its websites.
To read the full article, visit IP Watchdog.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
