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. 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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