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$5M Award Upheld for Coach in Trademark Infringement Lawsuit

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By Kelly Cheung on June 03, 2013 10:01 AM

Counterfeit sellers are not the only ones on the hook for trademark infringement. The facilitators like flea markets operators are also liable, according to the Sixth Circuit.

The Sixth Circuit upheld a jury award to Coach of over $5 million for trademark infringement. A Memphis flea market operator was held contributorialy liable for its vendors who sold counterfeit Coach products violating trademarks. The jury awarded Coach $240,000 per mark for a total of 21 infringed marks.

The owner of the Southwest Flea Market or 3rd Street Flea Market, Frederick Goodfellow, argued on appeal that the Lanham Act does not provide for contributory liability in a trademark infringement. He argued that he should not be held liable for the infringing acts of others. He asserted that he was not a part of a partnership with the infringing vendors or had any sort of control or authority over them.

The court clarified that contributory liability is different from vicarious liability. Although there is no evidence that Goodfellow worked in partnership with the infringing vendors, it doesn’t mean he wasn’t contributing to the infringement. The court refers to the first Supreme Court case to recognize contributory or secondary liability for trademark infringement.

In Inwood Laboratories. Inc. v. Ives Laboratories, Inc., the Supreme Court held that liability under the Lanham Act includes those who facilitate the infringement. The Court stated that where a “distributor 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, [it] is contributorialy responsible for any harm done as a result of the deceit.”

The Sixth Circuit notes that since the Supreme Court’s ruling, the liability has applied to flea market operators like Goodfellow. In the Seventh Circuit, the court held that a flea market operator could be liable because it deliberately failed to investigate suspected infringing activity by its vendors and by allowing the vendor to continue using its flea market resources, the operator can be subject to contributory liability. Similarly, the Ninth Circuit held that a flea market operator that knew or had reason to know of the infringing activity was contributorialy liable.

Goodfellow was notified by Coach of the infringing activity, but chose to ignore it. Goodfellow went so far as to not do anything about the infringing activity even after Coach served him with a lawsuit. When law enforcement raided his flea market even after the lawsuit was filed, there were more than 4,600 counterfeit products being sold there.

Goodfellow failed to deny access to the offending vendors or prevent them from using his resources for unlawful purposes, or even to reasonably investigate the matter. Handing out pamphlets randomly and incompletely to some vendors addressing counterfeit products was not enough. It was also not enough that he asked many vendors to leave in a one-year period. The court considered the overall breadth and duration of the infringing activities to find that he did not reasonably respond.

The court stated that Goodfellow should have done more to stop and prevent the infringing activity from happening. In fact, the court describes his failure to take proper measures as “ostrich-like practices.” Because of his “willful” facilitation of the trademark infringement by his vendors, the judgment is affirmed in favor of Coach.

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