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Maryland District Court Finds Contributory Liability for Copyright Violation Due to Willful Blindness

Coach, Inc. et al. v. Farmers Market & Auction
Civil Action No. AW-11-01239 (D. Md. Aug. 7, 2012)
by Gregory L. Arbogast, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this case, Plaintiffs, Coach, Inc. and Coach Services, Inc. (collectively, “Coach”), brought suit against Defendants, Farmers Market & Auction and Benjamin H. Burroughs (“Burroughs”) (collectively “the Market Defendants”), asserting direct and contributory claims for trademark infringement and counterfeiting, trade dress infringement, false designation of origin and false advertising, trademark dilution and copyright infringement. The U.S. District Court of Maryland denied the Market Defendants’ Motion to Dismiss, holding that contributory claims for the aforementioned claims are cognizable causes of action.

On June 10, 2008, the Farmers Market & Auction site was raided by the St. Mary’s County Sheriff’s Department. Police seized over 600 counterfeit Coach items. Ten (10) vendors were prosecuted. On June 12, 2010, police conducted a second raid of the same site and retrieved approximately 50 counterfeit Coach items. Later that month, Coach sent the Market Defendants a cease and desist letter. Burroughs responded, stating that Farmers Market & Auction distributed a flier prohibiting the sale of bootleg merchandise. Coach sent another letter in response, requesting that Burroughs police the flea market.

On January 15, 2011, a Coach investigator visited the Farmers Market & Auction. He observed at least 45 counterfeit Coach handbags being sold at various booths. The investigator purchased two (2) of the counterfeit handbags. On November 5, 2011, a Coach investigator, along with police, visited the site and observed vendors selling counterfeit Coach items. Coach filed a complaint on May 9, 2011.

Coach brought numerous direct and contributory claims for copyright and trademark infringement under the Lanham Act, 15. U.S.C. § 1114, alleging that the Market Defendants knew or should have known of the alleged violations and permitted them to continue. Under the Lanham Act, individuals are exposed to liability if they,

use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive . . .

15 U.S. C. § 1114.

As to the claim for contributory trademark counterfeiting and infringement, the Market Defendants argued that the Lanham Act only imposes contributory liability manufacturers and distributors. Additionally, they argued that there is no duty to police their place of business to prevent trademark violations. As to the claims for contributory trade dress infringement, contributory false designation of origin and false advertising, and contributory trademark dilution, the Market Defendants argue that none of those claims are cognizable causes of action. Finally, they contend that Coach failed to plead its copyright infringement claim with sufficient specificity and that there is a heightened pleading requirement for copyright cases.

The Court rejected all of the arguments made by the Market Defendants. With regard to the trademark counterfeiting and infringement claims, the Court found that contributory liability does not only apply to manufacturers and distributors; but additionally, while a duty to police one’s place of business for unknown violations does not exist, there is a duty to prevent known ongoing violations. Moreover, “willful blindness” may constitute actual knowledge under the Lanham Act. Due to the raids, seizures, notification letters and correspondence, the Market Defendants were put on sufficient notice of the violations, thus their failure to act constituted “willful blindness,” exposing them to liability.

Furthermore, the Court found that all of the contributory claims were, in fact, cognizable causes of action and the Market Defendants merely misinterpreted or ignored the case law establishing those claims. The same facts that constituted “willful blindness” for the contributory trademark counterfeiting and infringement claim also established that the Market Defendants were willfully blind to the trade dress infringement, false designation of origin and false advertising and trademark dilution claims. Lastly, the Court found that the heightened pleading requirement did not exist, and even if it had, Coach sufficiently plead the claim.

For the reasons stated above, the U.S. District Court for Maryland denied the Market Defendants’ Motion to Dismiss.