Authored by Naresh Kilaru and Mark Sommers
The United States District Court for the Southern District of New York recently awarded luxury-brand retailer Tory Burch sweeping injunctive relief against more than 40 defendants that sold counterfeit versions of Tory Burch products online. The decision shows the continued willingness of courts to impose broad remedial measures to counter the increasingly sophisticated methods that counterfeiters are employing to evade liability.
Tory Burch filed suit in December of 2010 after discovering that more than 200 different Web sites were selling counterfeit versions it's signature ballet flats, handbags and accessories. All of the Web sites were designed to appear to be Tory Burch's official Web site or some other legitimate US-based Web store authorized to sell genuine Tory Burch products. For instance, each Web site was written in English, accepted payment in US dollars, used domain names incorporating Tory Burch's trademarks (e.g., buytoryburch.com, toryburchstore.com, toryburchonline.com), and copied original photos, proprietary designs, and detailed products descriptions directly from Tory Burch's Web site.
To avoid detection, the defendants (all of whom were believed to be based in China) went to great lengths to conceal their identities by using multiple false identities and addresses in their domain-name registrations and shipping information. Tory Burch moved ex parte for a temporary restraining order, preliminary injunction, and asset restraining order, all of which the courts granted. Even after the defendants' Web sites were disabled by the domain-name registries pursuant to the preliminary injunction, however, the defendants simply continued their sales of counterfeit products through different Internet Web sites. Based on the limited discovery that Tory Burch was able to obtain from third-party merchants, the defendants' counterfeiting operations were highly lucrative, with certain accounts showing more than $100,000 in proceeds from the sales of the counterfeit products.
After the defendants failed to appear at any of the hearings, file a response to Tory Burch's moving papers, or otherwise appear in the action, the court granted Tory Burch's motion for default and a permanent injunction. In addition to enjoining the defendants' counterfeiting activities, the injunction extended to all third parties that were providing services to the defendants in connection with such activities, including Internet service providers (ISPs), registries, registrars, and Web sites such as Alibaba.com, Tradekey.com, iOffer.com, EC21.com, Ecplaza.net and DIYtrade.com. As to damages, the court held that each defendant was liable for $4 million in statutory damages (a total of $164 million), which represented $2 million for willful infringement of the TORY BURCH name and another $2 million for willful infringement of Tory Burch’s logo. As partial payment for the statutory damages, the court ordered that funds currently held in various PayPal accounts controlled by the defendants be released to Tory Burch.
The Court also granted Tory Burch ongoing injunctive relief by providing a mechanism for Tory Burch to take down additional infringing websites and recover any newly discovered assets without the need to file another suit. Specifically, the court ordered that in the event Tory Burch discovered any additional infringing websites controlled by defendants, Tory Burch had the ongoing authority to serve the permanent injunction on the appropriate domain registries and registrars and that such registries and registrars would have to immediately disable the domain names. Unless an objection was filed within thirty days, the domain names would then be transferred to Tory Burch. Moreover, the court ordered that in the event Tory Burch discovered additional assets or accounts belonging to or controlled by any defendant, Tory Burch had the ongoing authority to serve the permanent injunction on any party controlling such accounts and that such account holders would have to immediately freeze such assets. Again, unless an objection was filed within thirty days, the account holder would then be required to transfer those assets to Tory Burch.
This case highlights the willingness of courts to grant broad injunctive relief to stop counterfeiters who may otherwise be able to evade liability by quickly adjusting their operations with the use of different names and/or Web addresses. So long as counterfeiters accept payment in US dollars and choose to use websites with an extension (e.g., ".com") that is controlled by a U.S. registry, this type of injunctive relief should be effective.
Reprinted with permission from the IP Litigator, published by Aspen Law and Business. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.