Luxury brand owner Richemont International Ltd.
("Richemont") scored an important victory against online
counterfeiting this month when the U.S. District Court for the
Central District of California granted summary judgment and issued
a permanent injunction against internet companies TradeKey
(PVT) Ltd. and Sawabeh Information Services
Co, whose business-to-business ("B2B") platforms
actively "promoted and facilitated" the sale of
counterfeit goods. At issue were Richmont's world famous luxury
brands Chloe SAS (women's clothing and
accessories); Alfred Dunhill Limited (menswear);
Officine Panerai AG (timepieces);
Montblanc-Simplo GmbH (timepieces, writing
instruments); Cartier International A.G.
(timepieces, fine jewelry); and Lange Uhren GmbH
(timepieces). Notably, the court's ruling is in contrast to the
U.S. Supreme Court's ruling in Tiffany & Co. v.
eBay (2010), which largely insulated B2B platforms from
liability for contributory counterfeiting.
The underlying case, Chloe SAS et al. v. Sawabeh
Information Services Co (2:11-cv-4147-GAF-MAN) (C.D. Cal.
2011), was filed after an extensive online investigation uncovered
over 6,000 sellers of "replica" Chloe, Cartier, and
Montblanc products (among others) on TradeKey.com.
While "no purchases of the alleged counterfeit goods were made
directly from [the B2B platforms]," themselves, the brands
argued that the platforms were secondarily liable for counterfeit
listings posted by third parties. In connection with this argument,
the brands presented evidence that the platforms' employees
encouraged users to "post as many [replica] products as
possible" and offered tips about how to "mask"
replica products' "counterfeit nature."
The TradeKey decision came out differently than
Tiffany & Co. v. eBay most likely due to the
defendants' comparative levels of culpability. Whereas eBay was
found by the court to have had minimal control over the listings on
its site and had not spent any time screening for counterfeits (or
indeed trying to lure them to the site), despite having spent
millions of dollars responding to counterfeiters and removing
infringing product listings to boot. By contrast, the
TradeKey defendants heavily relied on the "replica
industry" for a "whole lot of revenue" and stated to
private investigators that they had no "problem" with
their users selling counterfeit goods.
Under the ruling, the particular B2B platforms are prohibited from
displaying listings either using counterfeit marks or in response
to search queries for the marks or confusingly similar marks.
Likewise, the marks may not be used as keywords, adwords, or any
other type of metadata, and the platforms may not promote the idea
of selling counterfeit or replica products on their sites.
Plaintiffs in this case have not yet filed for damages, although
they are expected to do so by the end of this year. In the interim,
the TradeKey ruling will have far-reaching implications
for both brand owners and e-commerce and B2B platforms alike. What
is most clear is that B2B platforms may not simply turn a blind eye
towards counterfeiting activity while reaping substantial profits
from counterfeit sales and passively resisting brand owners'
attempts to enforce their trademarks and copyrights.
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