Protecting Your New York Company’s Brand from Online Counterfeiters

TheNorthFace2.JPGOnline counterfeiting is fast surpassing physical markets in terms of losses sustained by trademark owners. Counterfeiters often register websites whose domain names bear deceptive similarities to the actual brands, a practice known as cybersquatting. Federal law has prohibited cybersquatting since the 1990’s, but enforcement can be difficult. A New York federal court case gave trademark owners additional means to fight cybersquatting and counterfeiting in 2010 by holding that the federal Lanham Act allows not only monetary and injunctive relief against cybersquatters, but also injunctive relief against internet registries and internet service providers (ISPs).

The internet has enabled piracy and counterfeiting, once limited to street vendors and marketplaces, to expand globally. The Office of the U.S. Trade Representative (USTR) which monitors other countries’ enforcement of intellectual property rights laws and treaties, estimates that counterfeiting and piracy cost the American economy $48 billion in 2011. It periodically publishes a report on “Notorious Markets,” internet sites and other markets believed to be “engaged in substantial piracy and counterfeiting, ” such as websites and hosting services based in China that sell counterfeit products to other businesses and to the public.

A major breakthrough for trademark owners’ rights came in September 2010, in a default judgment granted in The North Face Apparel Corp., et al v. Fujian Sharing Import & Export Ltd. Co., et al, No. 1:10-cv-01630 (S.D.N.Y.) The plaintiffs, owners of the North Face and Polo Ralph Lauren brands, filed suit against a group of defendants who operated a network of more than a hundred websites in China that shipped counterfeit goods directly to U.S. consumers. The defendants owned thousands of websites using the plaintiffs’ marks, such as ilovethenorthface.com and poloshirtssale.com.

The court found that the defendants had violated the plaintiffs’ trademark rights under the Lanham Act, 15 U.S.C. § 1114, and the Anticybersquatting Protection Act, 15 U.S.C. § 1125(d). It awarded the plaintiffs $78 million in damages and enjoined the defendants from further trademark infringement and cybersquatting. Collection of the judgment seemed unlikely, but that was not the key feature of the court’s order. Notably, the court also directed the domain name registrars to disable the infringing domain names and transfer them to the plaintiffs.

In December 2010, the court held the defendants in contempt for continuing to use many of the websites and dealing in counterfeit goods. The court directed domain name registrars to transfer the web addresses, internet service providers to deny service to the websites, and ecommerce sites like eBay to delete all accounts and listings associated with the defendants. After the plaintiffs moved to hold Public Interest Registry (PIR) in contempt for failing to abide by the court’s order, the court found that it lacked personal jurisdiction because PIR was a non-party. It did have the authority under the Lanham Act, however, to enjoin PIR and other entities from “aiding and abetting” the defendants’ ongoing violations of the order. Continuing to list the domain names, hosting the websites, or providing internet service could be construed as aiding and abetting, and could be the subject of a contempt motion.

Small business attorney Samuel C. Berger handles a variety of legal matters for New York and New Jersey entrepreneurs and businesses. We offer fixed-fee legal-service packages that enable our clients to understand their rights and obligations, grow their businesses, and prosper according to their goals. To schedule a confidential consultation to see how we can best assist you, please contact us today online or at (212) 380-8117.

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Photo credit: By Raysonho @ Open Grid Scheduler / Grid Engine (Own work) [CC0], via Wikimedia Commons.