For Trademark Infringement of Replica Website Customers
Manufacturers that sell branded goods may have a new point of attack against those companies that sell knock-off goods - you know, those counterfeits sometimes euphemistically styled as replicas - in the form of a lawsuit against their credit card processors.
A recent holding in the Southern District of New York that fashion giant Gucci could proceed against a credit card processor and two banks that supplied services to the acknowledged seller of "replica" Gucci items, on the theory that the defendants had contributed to trademark infringement. Gucci America, Inc. v. Frontline Processing Corp., Civil Action No.: 09-cv-6925 (June 23, 2010)
As anyone involved in trademark and copyright enforcement can tell you, the counterfeiters and gray marketers are wily and elusive. Every week there are numerous default judgments entered against companies that simply faded away after they got caught.
Gucci America, Inc., the plaintiff in this action, tried a different approach. The company filed suit alleging that the banks and processors targeted the high-risk websites - including soliciting sellers of replica goods - and that they had direct knowledge of the nature of the infringement. Thus, Gucci claim, they knew they were doing business with counterfeiters, but continued to process the sales.
The defendants moved to dismiss the complaint. District Judge Harold Baer held that Gucci could bring such a claim if it could show that the defendants either "intentionally induced" the website to infringe or "knowingly supplied services" and "had sufficient control over infringing activity to merit liability." Moreover, the element of knowing conduct could be satisfied by a showing wilfull blindness.
The judge went on to find that Gucci's complaint was sufficient to withstand the motion to dismiss because it had alleged such facts as the defendants' participation in efforts to reduce chargebacks, their review of the website's content and because - in the case of one of the defendants - the targeting of high-risk replica vendors in the market for credit card services.
The Gucci decision is important because similar attempts to pursue third party service providers have previously failed. Of particular note was the court's decision in Tiffany v. E-Bay, Inc., 576 F. Supp. 2d 463 (S.D.N.Y. 2008), in which the high-end retailer sued E-Bay for failing to block sellers of counterfeit Tiffany jewelry. Unlike in the Tiffany case, however, the court held in this action that Gucci's allegations provided a clear factual basis from which to find the direct involvement of the defendants.
The case has since settled. On October 1, 2010, the court entered a judgment on consent in which the defendants agreed to be enjoined against future acts of infringements. The specific terms of the settlement were not included in the consent judgment.
Contact McDaniel & Park, P.C. to discuss your specific needs with a lawyer in the New York City or Hackensack area.
