Under the Lanham Act, (15 U.S.C. 1051, et seq.), a trademark owner can bring suit against any entity that infringes its trademark.
Among the recoverable damages are disgorgement of the infringer’s profits from the sale of infringing goods, 15 U.S.C. 1117(a). However, where the infringement constitutes counterfeiting, those damages can be trebled or the trademark owner can elect to recover statutory damages, amounting to potentially $2 million per mark infringed, 15 U.S.C. 1117(b), 1117(c).
The Sale of Counterfeit Goods
When the counterfeiting is intentional, the trademark owner may also recover attorney fees. Under the Lanham Act, not only does the actual seller of the counterfeit goods face potential liability, but a party may be contributorily liable by “providing goods or services necessary” for counterfeiting, with the intent that such goods or services would be used to counterfeit, 15 U.S.C. 1117(b)(2).
In a recent case, Yes Assets, LLC, a company owned by Jerome and Jenny Yeh, owned and managed a shopping center that contained several storefronts and a large, enclosed open space that provided room for over 120 different vendor booths that served as a discount mall or flea market. Yes Assets provided utilities, parking and building maintenance and repair services to the center. The Yehs appointed their daughter to manage the property. Airport Mini Mall, LLC, a company which was owned and operated by one of the Yeh’s sons, leased the discount mall space from Yes Assets and sub-leased the booth space to individual vendors. These vendors sold a variety of goods. Some of the vendors sold sunglasses.
While Yes Assets owned and managed the center and Airport Mini Mall sub-leased booth space in the discount mall area, Luxottica Group, S.p.A. and its subsidiary, Oakley, Inc., owners of the trademarks Ray-Ban® and Oakley® , learned there were significant sales of counterfeit Ray-Ban and Oakley sunglasses by numerous vendors at the discount mall.
In fact, Luxottica and Oakley sent several letters to Yes Assets and Airport Mini Mall alerting them to the problem and identifying the vendors that were selling the counterfeit items. During that same time period, there were at least three separate raids on the center aimed at seizing counterfeit goods. On each occasion, Yes Assets and Airport Mini Mall received copies of the subpoena and search warrants that identified the targeted subtenant vendors and the nature of the goods at issue.
At one point, Yes Assets and Airport Mini Mall met with authorities to discuss the rampant sales of counterfeit goods and how to address the problem.
But sales of counterfeit sunglasses continued unabated and no subtenants were evicted. In fact, Airport Mini Mall extended and renewed subleases with some subtenant vendors identified in the subpoena and by Luxottica and Oakley as counterfeiters.
Luxottica and Oakley ultimately sued Yes Assets and Airport Mini Mall, as well as the Yehs, and their children individually, claiming they were contributorily liable for the sale of counterfeit goods by their subtenant discount mall vendors by providing the means to those vendors to engage in that activity.
A jury returned a verdict in plaintiffs’ favor and awarded damages of $1.9 million. The defendants appealed, and the Eleventh Circuit affirmed, finding sufficient evidence to support the verdict. Luxottica Group, S.p.A. v. Airport Mini Mall, LLC, 932 F.3d 1303 (11th Cir. 2019).
Noting the issue of a landlord’s contributory trademark infringement liability was a question of first impression in the Eleventh Circuit, the court found that application of the concept to the landlord-tenant relationship was consistent with general principles of tort liability. As to the specific contributory trademark infringement issue, the Court noted plaintiff had to first establish there was direct infringement of its trademark by some other entity, and second, the defendant intentionally induced that infringement or supplied goods or services to the infringer with either actual or constructive knowledge of the resulting infringement. Additionally, a party’s willful blindness to some fact or circumstance can constitute constructive knowledge of that same thing.
Reviewing the facts, the court held there was sufficient evidence to establish contributory infringement by defendants. To the first prong, there was no question Luxottica and Oakley’s trademarks were counterfeited. On the second prong, the court noted the defendants supplied services to the parties that sold the counterfeit items.
The history of raids on the premises, subpoena and search warrants provided to defendants, letters from plaintiffs complaining about specific vendors, meetings with authorities and defendants physical presence at the property showed that defendants had at least constructive knowledge of the counterfeiting and their repeated failures to take any action when provided with knowledge constituted willful blindness to such activities.
Luxottica makes it clear that a property owner may face contributory trademark infringement liability for acts of tenants in the Eleventh Circuit. However, simply owning property without taking any role in leasing or managing the property is not enough to trigger liability, Coach, Inc. v. Swap Shop, Inc., 916 F. Supp. 2d 1271 (S.D. Fla. 2012). Rather, the landlord must have some knowledge of or at least willful blindness to infringement by its tenant.
After Luxottica, to avoid this fate, landlords who actively manage properties should be aware of their tenant(s) activities and be prepared to take action immediately if they suspect or have knowledge of any trademark infringement or counterfeiting by such tenant.
This article was originally published in the November 2019 issue of Res Gestae, the monthly publication of the Lee County Bar Association.