From the Flea Market to the Online Marketplace: How Brand Owners are Fighting to Keep Infringers at Bay

By Bruce Siegal
November 21, 2019

“Flea markets, swap meets and other brick-and-mortar shopping venues reported verdicts and settlements in the last 10 years that confirm commercial landlords/owners can be held liable for the trademark infringement activity of their tenants.”

https://depositphotos.com/82138082/stock-illustration-internet-shopping-concept.htmlTrademark and copyright enforcement remains a significant challenge for licensors of popular brands across sports, entertainment, fashion and other industries. The Organization for Economic Cooperation and Development, a group of three dozen industrial countries, estimates counterfeit goods account for 3.3% of global trade.

Brand owners cannot rely on the belief that their trademark and copyright registrations will be respected, and they cannot confine their enforcement to demand letters and traditional intellectual property litigation. Rather, a brand owner must avail itself of additional approaches to address both traditional and newer platforms offering infringing products.

We continue to see an increase in online infringements, especially in connection with certain e-commerce sites and targeted advertisements on social media. Under the current law, enforcement against online providers can be difficult, particularly when compared to traditional infringement hot sports in the brick-and-mortar marketplace.

Flea markets, swap meets and other brick-and-mortar shopping venues reported verdicts and settlements in the last 10 years that confirm commercial landlords/owners can be held liable for the trademark infringement activity of their tenants, with courts around the country extending liability for trademark infringement beyond just the party selling infringing products.

Third Party Liability – Supreme Court Precedent

In Inwood Laboratories., Inc. v. Ives Laboratories., Inc., 456 U.S. 844 (1982), the U.S. Supreme Court held that a third party could be contributorily liable for trademark infringement in certain circumstances. In Inwood, involving independent pharmacists labeling a generic version of a drug under the brand-name label, the manufacturer of the brand-name drug sought to hold the manufacturer of the generic version responsible. The Supreme Court held that a manufacturer could be liable for infringing activity if it “intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement.” Here, the defendant manufacturer provided services and support that facilitated the direct infringement.

Traditional Infringement Hot Spots

Following this lead by the Supreme Court, two federal circuits further extended liability for contributory infringement to commercial landlords/owners. The courts in each of those cases held that the landlords of properties that hosted flea markets were contributorily liable for the infringing activities of vendors.

Hard Rock Café Licensing Corp. v. Concession Services., Inc., 955 F.2d 1143 (7th Cir. 1992) involved a vendor selling shirts that infringed Hard Rock’s trademarks. Fonovisa Inc. v. Cherry Auction Inc., 76 F.3d 259 (9th Cir. 1996) concerned a vendor selling fake recordings and infringing on Fonovisa’s trademarks and copyrights.

In Fonovisa, the Ninth Circuit adopted the Seventh Circuit’s reasoning in Hard Rock, the courts holding that the landlords knew or should have known of the infringing activities from prior incidents and did not act to prevent sale of the infringing product.

In addition, the Ninth Circuit ruled that Cherry Auction could be vicariously liable for copyright infringement, since the swap meet had the ability to control the activities of vendors (including the right to terminate vendors for any reason) and obtained a financial benefit from their activities (including vendor rental fees, customer admission and parking fees). The court also held Cherry Auction liable for contributory copyright infringement because it materially contributed to the sale of counterfeit merchandise by providing the site and facilities for known infringing activity.

Taking this a step further, some courts have concluded that a commercial landlord could be liable for contributory infringement when its retail tenants, rather than simple vendors, committed trademark infringement.

Recently, the Eleventh Circuit, in Luxottica Group, S.p.A. v. Airport Mini Mall, LLC, Case No. 18-10157 (11th Cir. 2019), affirmed a ruling in favor of luxury eyewear manufacturer, Luxottica. In this trademark infringement dispute involving a discount mall selling knockoffs of Ray-Ban and Oakley brands, the Eleventh Circuit held that the willful blindness by the mall’s landlords to their tenants’ specific acts of infringement amounted to constructive knowledge sufficient to hold the landlords liable for contributory trademark infringement under the Lanham Act. The court affirmed liability under the “know or has reason to know” standard for contributory trademark infringement.

The court rejected the defendants’ argument that the plaintiffs failed to prove knowledge because they did not provide notice to the defendants that specific retailers in the mall were infringing. However, the court found that law enforcement had conducted three raids of the mall, executing search warrants, arresting subtenants, and seizing alleged counterfeits of Luxottica’s eyewear. Luxottica also twice sent letters notifying defendants that their tenants were selling unauthorized product. Despite the raids, letters and meetings with law enforcement, defendants took no action to evict the infringing tenants.

As a result of these and similar cases, operators of malls, flea markets, and other retail spaces are or should be aware of exposure, and, accordingly, should monitor the activities of their tenants and act if they suspect infringement – even more so if the operator gets a demand letter.

The Online Marketplace Challenge 

The Luxottica Group case distinguished the leading case regarding online marketplace providers, Tiffany v. eBay Inc., 600 F.3d 93 (2d Cir. 2010). Tiffany sued eBay for allegedly infringing goods listed for sale by users of eBay’s platform. The Second Circuit held that a service provider, such as eBay, could be liable for contributory trademark infringement, but only if it had knowledge of specific acts of infringement, rather than general knowledge or a reason to believe that its service is being used for infringing purposes.

Online vendors may avoid liability through “safe harbors.” For example, safe harbor laws protect “Internet Service Providers” or “ISPs” from the consequences of their users’ actions and user generated content. To be eligible for safe harbor, the ISP must adopt and reasonably implement a notice and takedown procedure for copyright and trademark infringement claims, as well as a policy for termination in certain circumstances of repeat infringers, which eBay, Amazon and similar online auction sites have established.

eBay’s procedure, called the Verified Rights Owner (VeRO) program, permits intellectual property owners to request the removal of listings it claims in good faith are infringing the owner’s patent, copyright, or trademark rights, through the filing of a simple form called a Notice of Claimed Infringement

Amazon offers takedown down tools as well – from Report a Violation (their basic takedown procedure) to Brand Registry and Project Zero (automated protections which use information about seller’s brands to proactively remove suspected infringing or inaccurate content).

Outside eBay, Amazon and websites with similar protections, all online auction and sales sites are subject to the Digital Millennium Copyright Act (DMCA), which provides similar protections for claims of copyright infringement only.

Takedown procedures have glaring weaknesses. Unauthorized dealers often simply repost the listing using a different name. The process is cumbersome and inefficient due to the high volume of user-generated content displayed across any given platform. It also does not create deterrence due to lack of any financial penalty.

As noted above, Amazon launched Brand Registry in 2017, which allows brands to register logos and intellectual property with Amazon so it can spot and remove listings when infringements are tagged. More than 200,000 brands have joined the program. Nevertheless, as the extensive availability of fake products shows, these systems are failing to stanch the flow of dubious goods.

In response, some brands and trade groups are pushing to change liability laws that shield online retailers from financial responsibility.  

Brand Owners Fight On

In addition, brand owners, including collegiate institutions, have attempted to push online providers to take more proactive steps.

For example, The Ohio State University (OSU) had some success against the online print-on-demand business model. Over the past several years, OSU obtained Consent Judgments and Permanent Injunctions in settlement agreements reached with such print businesses, including Teespring, Skreened Ltd. and Sunfrog, companies that were directly involved in the printing and selling of infringing OSU product.

However, OSU, in The Ohio State University v. Redbubble, Inc., 2:17-cv-01092-ALM-CMV (S.D. Ohio March 29, 2019), lost yardage in an action for direct trademark infringement against online marketplace provider Redbubble, which provides a platform for independent artists to design the items that are listed on Redbubble’s website. Once a customer places an order, the third-party manufacturer produces the product, and another party ships the finished item to the buyer.

The court found that Redbubble’s actions resemble those of an auction house as opposed to companies that themselves manufacture and ship infringing products to a customer and granted Redbubble’s cross-motion for summary judgment.

OSU has appealed to the Sixth Circuit.

In April 2017, growing frustration with repeated online advertisements and sales offers for unlicensed collegiate-branded merchandise led to 30 schools filing a lawsuit against the platform GearLaunch alleging trademark infringement. GearLaunch provides independent third-party customers with tools for building and operating an online e-commerce business. Such third-party customers can customize their website address and designs via tools supplied by GearLaunch, which then handles the customer’s payment processing, production, shipping, and customer service directly with buyers.

GearLaunch reached a settlement with all schools in late October 2017, and has assumed a more proactive approach in monitoring its sites and removing infringing products.

A recent case against Amazon may open the door for more actions against online marketplaces.

In Oberdorf v. Amazon.com Inc., No. 18-1041, 2019 WL 2849153 (3d Cir. July 3, 2019), the Third Circuit characterized Amazon as a “seller” of products offered by third parties through Amazon Marketplace. As such, Amazon could be strictly liable for harm caused by a defective dog collar purchased from the marketplace. The Third Circuit found that Amazon should be considered a “seller” based on Amazon’s substantial control over third-party vendors and its ongoing relationship with the vendors.

Before Oberdorf, federal courts consistently held that Amazon is not a “seller” for purposes of product liability, and in other contexts, because Amazon did not fit the definition of a “seller” in terms of traditional contractual analysis.

Some have questioned whether this case might signal a shift in how courts decide to impose seller liability on Amazon and others providing online marketplaces. Time will tell whether we see broader developments in the law surrounding infringement liability for online marketplaces. For now, online marketplaces are paying attention.

At this stage, the common theme in the world of online enforcement is volume. Given the ease of use and the accessibility to millions of consumers around the world, addressing these issues can be like a game of “whack-a-mole,” having little effect: take down ten sites and ten more pop back up. The key is to have strong resources to tackle these issues, the know-how to address them appropriately, and the persistence to resolve them. Staying ahead of infringers in the online world keeps brand owners and their counsel on their toes.

Image Source: Deposit Photos
Vector ID: 82138082
Copyright: branchecarica 

The Author

Bruce Siegal

Bruce Siegal is a member of Taylor English’s Intellectual Property and Entertainment, Sports and Media Departments, where he focuses on sports brand protection and enforcement, trademark licensing, contract negotiation, marketing and business operations. Formerly the SVP and General Counsel of the Collegiate Licensing Company, Siegal has vast experience in trademark enforcement actions and anticounterfeiting efforts.

For more information or to contact Bruce, please visit his Firm Profile Page.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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