Tag Archives: Counterfeiting & Piracy

Knockoff News

Originally posted 2009-10-05 14:36:54. Republished by Blog Post Promoter

Counterfeit Chic’s 69th edition of the karnival of kounterfeits was posted last week!

But, of course

Shoes are dropping all over Europe:

L’Oreal, the world’s largest cosmetics group, has launched legal action against eBay, alleging the online auctioneer does not do enough to combat the sale of counterfeits, the company said on Monday.

We’ve been genuinely interested in this issue for a long time — if you’re new, click here and here.

Credit card companies get green light to profit from, enable Internet piracy

credit_card_logos_10.gif

Reuters reports that in Perfect 10, Inc. v. Visa Intl. Serv. Assn., 494 F.3d 788, 793 (9th Cir. 2007) the Ninth Circuit has affirmed (opinion here), 2-1, a ruling that there is no third-party copyright or trademark liability for credit card companies such as Visa and MasterCard or the banks that process their transactions, arising from their central — essential, really — role in the sale of counterfeit merchandise (including, as in this case, unauthorized copies of dirty pictures) on the Internet:

Writing for the majority, Judge Milan Smith Jr. said credit card processors, unlike Web search providers, do not direct online traffic. “They in no way assist or enable Internet users to locate infringing material, and they do not distribute it,” Smith wrote.

“Here, the infringement rests on the reproduction, alteration, display and distribution of Perfect 10’s images over the Internet,” Smith wrote.

If you didn’t guess from the title, I disagree with this. Why do judges keep missing this? The credit card companies are very much in the profit chain of infringing websites — websites that do nothing but sell counterfeit goods — and they make no serious effort, even when notified, to prevent this activity from occurring.

I am not just shooting from the hip here. I researched this issue extensively for a Very Important Client, and came to the conclusion that, under the right circumstances, liability should, indeed, attach. I cannot understand, for example, why the Ninth Circuit spends so much time focusing on the fact that the credit card companies do not themselves operate the infringing websites the way flea market operators (who have been held contributorily liable) operate the markets where counterfeit items are sold. That is besides the point. I find this language particularly frustrating:

[T]he ability to exert financial pressure does not give Defendants the right or ability to control the actual infringing activity at issue in this case [as would be required to find liabilty]. . . Defendants can only refuse to process credit card payments to the offending merchant within their payment network, or they can threaten to do so if the merchant does not comply with a request to alter content. While either option would likely have some indirect effect on the infringing activity, as we discuss at greater length in our analysis of the Grokster “stop or limit” standard below, so might any number of actions by any number of actors.

Since when is the fact that other things would also work mean that the law will not require a party in a position to prevent illegality — and which is profiting from the transactions — to do what is in its power?

I’m not alone; not by a long shot. The dissenter? Read More…

Best of 2010: Forget breakfast — eBay eats Tiffany’s lunch

Tiffany's NYCThe Second Circuit, unsurprisingly according to most commentators, has affirmed the decision of the Southern District of New York refusing to find eBay liable for contributory trademark infrintgement in the Tiffany v. eBay case.  I have been following the case since before it was filed (yeah, bitter as usual!) and have written bunches of posts on it — see, look?

In terms of the Second Circuit opinion itself, you can find that here.  If at some point I have something really original to say about it–after all the blogging is done by everyone else–you’ll be the first to know. But here’s a little roundup of “takes.” First, the WSJ Law Blog on the thrust of the story:

So long as eBay takes steps to remove listings it knows are bogus — and isn’t otherwise willfully blind to fraudulent sales — it can avoid liability, the court ruled.  Judge Robert Sack, writing for the three-judge panel, seemed to hang his hat on the “market”:

We are disposed to think, and the record suggests, that private market forces give eBay and those operating similar businesses a strong incentive to minimize the counterfeit goods sold on their Web sites . . .

EBay received many complaints from users claiming to have been duped into buying counterfeit Tiffany products sold on eBay. The risk of alienating these users gives eBay a reason to identify and remove counterfeit listings. Indeed, it has spent millions of dollars in that effort. . . .

Tiffany had argued that eBay knew it had a problem with counterfeit items being listed on its Web site and did little to clean it up. EBay insisted the obligation rested with the New York jeweler to identify and alert it to auctions of counterfeit Tiffany silver jewelry.

But that’s not the whole story, exactly, though it mostly is.  As Law.com’s Corporate Counsel explains:

The court sent the case back to the district level for more discussion of whether eBay may be guilty of false advertising because it promotes the presence of “Tiffany” products on its site in both direct advertisements and paid ads that pop up when users search for Tiffany on Google and other search engines.

Those ads could be deemed false, because eBay is aware that “a significant portion” of goods advertised as Tiffany items on eBay are actually counterfeit, the court said. (The exact percentage of counterfeit Tiffany items among all those advertised is in dispute). EBay has pointed out that its site contains a special “About Me” page for Tiffany (and controlled by Tiffany) in which users are told that any Tiffany item advertised for sale on eBay is likely to be a fake.

To win a false advertising claim, Tiffany will have to produce evidence that consumers were confused by the advertisements, the court said. So far, Tiffany has not produced that sort of evidence, which usually comes in the form of consumer surveys.

Read More…

Best of 2010: Gucci v. Frontline Processing: Giving credit for infringement where it’s due

First posted July 12, 2010.

This is an adaptation of a summary and analysis of the recent decision in Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367 (S.D.N.Y.), discussed here casually earlier. Jane Coleman’s definitive online treatise Secondary Trademark Infringement has recently been updated and the impact of this decision integrated into the text; a full update is planned for September. The complete analysis of Gucci, including full citations, can be found here.

The essential role played by credit card companies in online trademark infringement was recognized in Gucci America, Inc. v. Frontline Processing Corp. In that case, the court allowed contributory infringement claims to go forward against companies that had established credit card processing for an online counterfeit merchant. The payment for the counterfeit goods sold on its website was part of the infringing process, the court reasoned, drawing on Judge Kozinski’s dissent in Perfect 10, Inc. v. Visa Intern. Serv. Ass’n, and most of the infringing sales – of which the companies allegedly knew or should have known – were consummated using credit cards.

Gucci v. Frontline arose out of successful trademark infringement litigation brought by Gucci, the well-known manufacturer of luxury goods, against an online merchant operator of a website called “TheBagAddiction.com,” in which the owners admitted to liability for selling counterfeit Gucci products. Thereafter, Gucci turned to the three companies that had helped the merchant obtain credit card services, alleging both vicarious and contributory liability for trademark infringement. One of the three defendants, Durango Merchant Services acted as a middleman, while the other two, Frontline Processing Corporation and Woodforest National Bank, provided credit card processing services to the merchant.

In rejecting the defendants’ motion to dismiss, the court allowed the contributory liability claims to go forward as to all three defendants, but on different legal theories in accordance with their roles. As to Frontline and Woodforest, the court found the pleadings sufficient to allege contributory trademark infringement, based on their knowledge and control over the infringing activity on the website. As to the middleman, Durango, the court found the pleadings sufficient to allege contributory infringement based on an inducement theory.

As to Frontline and Woodforest, the court also found the pleadings stated a claim for contributory trademark infringement, based on the defendants’ knowledge and control over the infringing activity on the website. Citing eBay and Perfect 10, the Gucci court reiterated the direct control and monitoring test, stating that

[e]ven if a defendant does not seek out and intentionally induce a third-party to commit trademark infringement, it may still be held liable for the infringement if it supplied services with knowledge or by willfully shutting its eyes to the infringing conduct, while it had sufficient control over the instrumentality used to infringe.

Moreover, an allegation of the defendants’ general knowledge that infringement is taking place is not sufficient. “[A] service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods,” the court emphasized, citing further language in Tiffany that “’Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.'”

Both credit card processing companies either knew or should have known that they were servicing an infringing site, under the facts alleged, the court concluded. In both cases, a Durango agent had a dual role as both an employee of his company and a sales representative for the two credit card companies, and the court consequently accepted the allegations charging the companies with his knowledge. Thus, regarding Frontline, Gucci alleged that that company was aware of customers’ written acknowledgement of purchasing “replicas” as directed by the Durango agent. Read More…

Best of 2012: Fees, won’t you stay

Originally posted March 30, 2012.Courthouses arrayed, Foley Square

The Second Circuit, just yesterday (March 29, 2012) has issued an opinion called Louis Vuitton v. Ly USA, Inc. (08-4483-cv(L)) sure to bring joy to the hearts of trademark counterfeiting enforcers everywhere.  This was one of those major counterfeiting-ring busts, and there have been lawyers and federal marshals scuttling about for a long time on all this business.  The defendants were convicted of trafficking in counterfeit goods, conspiring to do so, and smuggling.  The appealed all the bad things that happened to them in the civil case — massive damages, attorneys’ fees, the usual.

There were two key holdings, both buffeted by extensive and thoughtful discussion.  One was that there’s just about no way the Circuit Court will second-guess a District Court’s refusal to enter a stay of a civil action pending resolution of parallel criminal proceedings, and the court is not shy about saying so.  The second concerned the split among courts as to whether a prevailing plaintiff in a trademark counterfeiting case may be awarded both statutory damages and attorneys’ fees.

First, the stay question… if “question” is the right word; this opinion sure doesn’t leave much room for doubt.  After explaining all the reasons a stay of a civil case, with all that required disclosure, might be a good idea for someone concerned about compromising his Fifth Amendment rights, the court says, well, still, it would be “extraordinary” to really go ahead and enter one:

[T]he Constitution rarely, if ever, requires such a stay.  .  .  .  The existence of a civil defendant’s Fifth Amendment right arising out of a related criminal proceeding thus does not strip the court in the civil action of its broad discretion to manage its docket. . .

District courts have formulated multi-factor tests to apply in deciding whether, in light of these hazards to the defendants in the civil proceedings against them, to grant a stay of those proceedings. . . .  We think the tests do little more than serve as something of a check list of factors we ought to consider as we review the district court’s action for abuse of its discretion.  Even if we were to choose or formulate a test and apply it, we would not be able to reverse the district court solely because we disagreed with its application of the test. . . . A decision so firmly within the discretion of the district court will not be disturbed by us absent demonstrated prejudice so  great that, as a matter of law, it vitiates a defendant’s constitutional rights or otherwise gravely and unnecessarily prejudices the defendant’s ability to defend his or her rights.  There may well be cases where the Constitution requires a stay.  But a plausible constitutional argument would be presented only if, at a minimum, denying a stay would cause “substantial prejudice” to the defendant.

Indeed, so heavy is the defendant’s burden in overcoming a district court’s decision to refrain from entering a stay that the defendants have pointed to only one case in which a district court’s decision to deny a stay was reversed on appeal, and that case was decided more than thirty years ago.

Bill of Rights …. docket management.  Hmm.  There’s a compelling juxtaposition for you!  I suppose it’s the kind of “juxtaposition” that a defendant appealing a civil verdict gets when he’s been convicted of every act claimed in the civil case.  This enabled the court to note the significant public benefit arising from not staying the civil case, which had already been under steam for a year before the indictment.  Moreover, the District Court evidently offered significant alternatives to managing confidentiality issue to the defendants, who weren’t too eager to avail themselves of it.  Plus there were lots of things — record, merchandise, computers — that got “lost.”  Plus these guys were evidently well layered with lawyers.

Bad facts, or certainly bad defendants, make “bad law.”  These were bad defendants, and now the Circuit is trying to be pretty clear on this:  Crooks, stay away from complaining about a stay.  It won’t play.  Okay? [UPDATE:  On the other hand, I have recently asked the Circuit to consider drawing the line at some point, in particular where all charges were dropped against my client.  Still waiting for an argument date.]

The second is an important, and more groundbreaking (if unsurprising), decision on an important question:   Read More…

Best of 2012: SOPA box

Lawyer's break, Herald SquareOriginally published on January 18, 2012.

You don’t need a link to find out what’s going with the SOPA “Blackout,” or all that other stuff.  It’s all over the place, beyond those with a special interest in intellectual property.  [UPDATE:  But here’s one anyway.]

Real news over an IP issue?  Not quite.

Rather, the news and the attention arise from the fact that the threatened power-grab that SOPA represents goes far beyond IP, or “enforcement,” or “brands,” or even “piracy.”

Oh, those are all real things, real concepts.  But their meaning has become so distorted in the public and political debate and spin that they get scare-quotes here today.  It is precisely by turning piracy into a mission-critical bogey-man that the strong-IP advocates have perhaps, for once, overplayed their hands.

A few years ago “civil libertarians” told us our liberties were at an end because of the Homeland Security Act and related policy changes arising from terrorist threats.  Those protests were mainly sincere, but they turned out to be overstated.  For most of us, life in America is pretty much like it was before, except mainly at the airport.

If, however, there had been a serious and widespread degradation in the quality and quantity of our civil rights because of the “new world” that the September 11th attacks, we would have something serious to discuss.  In fact it is still something serious to discuss.  How much are we, indeed, prepared to give of our privacy, our freedom of movement, our personal space, for what may or may not be enhanced physical safety?  Important, fundamental questions.

But I’ll be damned if I’m going to stand by while my rights, or those of my clients, are sold down the river to protect the franchises of Sony, Coach and Universal.  And that’s what makes this more than an “IP” issue, and why it’s news, and why it matters.

Gibson argues for brand on the merits

Since the beginning I’ve been blogging about the attempts by Gibson and Fender, the makers of fine guitars, to avoid copycat competition via the trademark and litigation route.  My most recent post on the progress of that campaign is here, where I wrote:

[T]he main reward for a great, original product is a successful business based on that product.  Intellectual property notwithstanding, the best way to protect most great ideas is by consistently excellent execution, high quality, responsive customer service, continued innovation and overall staying ahead of the competition by delivering more value.  . . .  [I]f an enterprise can’t fathom protecting its value proposition without some kind of gaudy trademark protection, ultimately something has to give.

Fender, according to the record in this opinion, understood the truth well for decades.  It warned consumers to stick with its quality “originals” and not to be fooled by “cheap imitations,” and it flourished.  But for all these years, Fender never claimed to think the sincerest form of flattery was against the law.  Only in the feverish IP-crazy atmosphere of our current century did the company deem it “necessary” to spend a fortune that could have been used on product development, marketing or any darned thing on a quixotic quest for a trademark it never believed in itself.  That is more than an impossible dream — it’s a crying shame.

Fake rock star with fake Gibson

Fake rock star with fake Gibson

Gibson is beginning to make its arguments to consumers on the merits, now, instead.  Via @megLG (Megan Langley Grainger), Gibson is now online with what looks like a blog post that shows you, with words and music — well, no, that would actually have been really compelling, but at least with words and pictures — how to tell the difference between a counterfeit Gibson and the real thing.

The piece is pretty interesting, especially for a former guitar player, although it is entirely about counterfeit Gibson guitars (bearing the GIBSON name and trademark), which are clearly a trademark infringement.  That’s not the same as knockoffs — copies of unprotectible elements of the guitar style meant to evoke the Gibson (or Fender) “look” — which is what I’ve written about in the past.

Unfortunately for Gibson, they hired someone out of the RIAA copywriting program and gave this very cool, informative and interesting post the leaden title, “Gibson Leads Industry Fight Against Counterfeit Gibsons,”  instead of “Is Your Gibson the Real Thing?” or “How to Spot a Fake Gibson.”  Read More…

Give the man credit

Federal squares

Let's hear it for New York

Judge Harold Baer of the U.S. District Court for the Southern District of New York (the “home court” for LIKELIHOOD OF CONFUSION®)  has never been afraid to stick his neck out, at least a little bit.  He’s done it this time in the battle of, or rather by, the brands against trademark counterfeiting.   In a decision dated June 23rd, Judge Baer has bucked the trend against finding secondary trademark liability against hardly any party that profits from counterfeiting by denying a motion to dismiss claims of contributory trademark infringement brought by Gucci against a group of credit card processing companies in Gucci America Inc. v. Frontline Processing Corp., et al. (The decision is here.)

This is a favorite topic of mine, and obviously a still developing area of law.  Three years ago almost to the day I wrote the following in these very pixels:

Reuters reports that in Perfect 10, Inc. v. Visa Intl. Serv. Assn., 494 F.3d 788, 793 (9th Cir. 2007) the Ninth Circuit has affirmed (opinion here), 2-1, a ruling that there is no third-party copyright or trademark liability for credit card companies such as Visa and MasterCard or the banks that process their transactions, arising from their central — essential, really — role in the sale of counterfeit merchandise (including, as in this case, unauthorized copies of dirty pictures) on the Internet:

Writing for the majority, Judge Milan Smith Jr. said credit card processors, unlike Web search providers, do not direct online traffic. “They in no way assist or enable Internet users to locate infringing material, and they do not distribute it,” Smith wrote.“Here, the infringement rests on the reproduction, alteration, display and distribution of Perfect 10′s images over the Internet,” Smith wrote.

If you didn’t guess from the title, I disagree with this. Why do judges keep missing this? The credit card companies are very much in the profit chain of infringing websites — websites that do nothing but sell counterfeit goods — and they make no serious effort, even when notified, to prevent this activity from occurring. . . . I’m not alone; not by a long shot. The dissenter? Only Alex Kozinski, who also recognizes that the majority errs — really, in my view, demonstrates real intellectual dishonesty — in that they

recognize, as they must, that helping consumers locate infringing content can constitute contributory infringement but they consign the means of payment to secondary status. … But why is locating infringing images more central to infringement than paying for them?

Here Judge Baer, considering the facts as alleged in the Gucci case, had no problem overcoming the high (too high, I’ve argued) standard set by the Second Circuit in Tiffany v. eBay for a finding of  “willful blindness“:

Here, Gucci has made substantial factual allegations about the knowledge of all three defendants.   Read More…

Fees, won’t you stay

Courthouses arrayed, Foley SquareThe Second Circuit, just yesterday (March 29, 2012) has issued an opinion called Louis Vuitton v. Ly USA, Inc. (08-4483-cv(L)) sure to bring joy to the hearts of trademark counterfeiting enforcers everywhere.  This was one of those major counterfeiting-ring busts, and there have been lawyers and federal marshals scuttling about for a long time on all this business.  The defendants were convicted of trafficking in counterfeit goods, conspiring to do so, and smuggling.  The appealed all the bad things that happened to them in the civil case — massive damages, attorneys’ fees, the usual.

There were two key holdings, both buffeted by extensive and thoughtful discussion.  One was that there’s just about no way the Circuit Court will second-guess a District Court’s refusal to enter a stay of a civil action pending resolution of parallel criminal proceedings, and the court is not shy about saying so.  The second concerned the split among courts as to whether a prevailing plaintiff in a trademark counterfeiting case may be awarded both statutory damages and attorneys’ fees.

First, the stay question… if “question” is the right word; this opinion sure doesn’t leave much room for doubt.  After explaining all the reasons a stay of a civil case, with all that required disclosure, might be a good idea for someone concerned about compromising his Fifth Amendment rights, the court says, well, still, it would be “extraordinary” to really go ahead and enter one:

[T]he Constitution rarely, if ever, requires such a stay.  .  .  .  The existence of a civil defendant’s Fifth Amendment right arising out of a related criminal proceeding thus does not strip the court in the civil action of its broad discretion to manage its docket. . .

District courts have formulated multi-factor tests to apply in deciding whether, in light of these hazards to the defendants in the civil proceedings against them, to grant a stay of those proceedings. . . .  We think the tests do little more than serve as something of a check list of factors we ought to consider as we review the district court’s action for abuse of its discretion.  Even if we were to choose or formulate a test and apply it, we would not be able to reverse the district court solely because we disagreed with its application of the test. . . . A decision so firmly within the discretion of the district court will not be disturbed by us absent demonstrated prejudice so  great that, as a matter of law, it vitiates a defendant’s constitutional rights or otherwise gravely and unnecessarily prejudices the defendant’s ability to defend his or her rights.  There may well be cases where the Constitution requires a stay.  But a plausible constitutional argument would be presented only if, at a minimum, denying a stay would cause “substantial prejudice” to the defendant.

Indeed, so heavy is the defendant’s burden in overcoming a district court’s decision to refrain from entering a stay that the defendants have pointed to only one case in which a district court’s decision to deny a stay was reversed on appeal, and that case was decided more than thirty years ago.

Bill of Rights …. docket management.  Hmm.  There’s a compelling juxtaposition for you!  I suppose it’s the kind of “juxtaposition” that a defendant appealing a civil verdict gets when he’s been convicted of every act claimed in the civil case.  This enabled the court to note the significant public benefit arising from not staying the civil case, which had already been under steam for a year before the indictment.  Moreover, the District Court evidently offered significant alternatives to managing confidentiality issue to the defendants, who weren’t too eager to avail themselves of it.  Plus there were lots of things — record, merchandise, computers — that got “lost.”  Plus these guys were evidently well layered with lawyers.

Bad facts, or certainly bad defendants, make “bad law.”  These were bad defendants, and now the Circuit is trying to be pretty clear on this:  Crooks, stay away from complaining about a stay.  It won’t play.  Okay?

The second is an important, and more groundbreaking (if unsurprising), decision on an important question:   Read More…