According to a recent decision, recipients of cease and desist letters should do more than perform cursory remedial measures.
Consistent with similar situations in the U.S. Court of Appeals for the Seventh, Ninth and Second Circuits, the Sixth Circuit affirmed liability of a flea market operator for contributory trademark infringement for failure to stop the sale of counterfeit goods at the market despite numerous warnings.Coach Inc. v. Frederick Goodfellow, 717 F.3d 798 (6th Cir. 2013).
Plaintiffs, Coach, Inc. and Coach Services, Inc., who design and sell the famous Coach handbags, filed suit under the Lanham Act against Defendant, Frederick Goodfellow, who owned and operated a flea market in the Memphis area. After Goodfellow failed to take action in response to letters from Coach and the local district attorney informing him that counterfeit sales of Coach products were occurring at the flea market, Coach filed suit. In a raid by law enforcement officers, counterfeit Coach products were seized. Goodfellow admitted knowing that vendors were selling counterfeit Coach products, but did not take any effective remedial measures.
The district court granted summary judgment on liability to Coach after Goodfellow failed to respond to Coach’s motion for summary judgment. After a jury trial on damages, Coach was awarded just over $5 million dollars in damages based upon willful infringement of 21 of Coach’s marks. The district court also awarded Coach attorneys’ fees and costs, finding the case exceptional based on Goodfellow’s failure to litigate liability, and the jury finding of willful infringement.
The Sixth Circuit affirmed the district court’s summary judgment, finding that Goodfellow was contributorily liable for the vendors’ actions. In particular, the court noted Goodfellow’s failure to undertake reasonable remedial measures after receiving actual notice of ongoing infringing activity. Goodfellow’s knowledge that vendors were engaging in trademark infringement was established by his receipt of the letters from Coach and the district attorney. Furthermore, Goodfellow’s remedial measures taken after receipt of these letters were insufficient. In this case, Goodfellow distributed pamphlets to vendors, but they were distributed randomly and incompletely. He posted a sign stating “counterfeit is prohibit [sic],” but evidence established that this was intended to address an issue with counterfeit currency, not products. Finally, he called a meeting with vendors, but attendance at the meeting was voluntary and the meeting was scheduled for a day on which the flea market was not open. As a result, the Sixth Circuit found no clear error in the district court’s ruling and affirmed liability.
This case is consistent with Inwood Labs v. Ives Labs, a 1982 Supreme Court decision, and other circuit court decisions from the Seventh, Ninth and Second Circuits that applied Inwood and found flea market operators subject to liability for trademark infringement by vendors.
As demonstrated, recipients of cease and desist letters should take care to ensure remedial measures are effectively implemented to avoid potential claims of contributory liability.