Landlord of counterfeit watch seller found liable for contributory trademark infringement. OMEGA v. 375 CANAL

Landlord of counterfeit watch seller found liable for contributory trademark infringement. OMEGA v. 375 CANAL

United States trademark law grants the owner of a trademark the right to exclude others from using the trademark in a way that is likely to cause consumer confusion.  Trademark infringement is the unauthorized use of a trademark in a manner that is likely to cause confusion, deception, or mistake about the source of the products which bear the trademark.  A trademark owner can combat trademark infringement by filing a lawsuit against the alleged infringer.  The lawsuit can request an injunction to prevent the infringing activity as well as monetary damages for infringement which has occurred.

When people think about trademark infringement they typically think of direct infringement, where the person who is accused of trademark infringement is the person selling the infringing products.  Other legal theories exist that can impose liability on a trademark infringement defendant even when the defendant is not the person directly infringing on a trademark.  Contributory infringement is not expressly imposed by the Lanham Act, however the United States  Supreme Court has recognized that “liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another.” See INWOOD LABORATORIES, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982).

In INWOOD LABORATORIES, manufacturers had supplied pharmacists with a generic version of a drug whose brand name was trademarked.  Some of those pharmacists mislabeled bottles of generic pills as trademarked pills.  The plaintiff sued the generic manufacturers instead of the pharmacists on the theory that the generic manufacturers contributed to the trademark infringement. The Supreme Court held that “if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.”

The relationship a contributory infringer selling products to a direct infringer is relatively straight forward. The question then becomes what other business relationships will make a vendor liable for contributing to the trademark infringement of a customer?

OMEGA SA, SWATCH SA, v. 375 CANAL, LLC, 19-969-cv (C.A.F.C. 2021) is an example of a case where a landlord was found to be contributory liable for the infringement of its tenants.

Defeated in this case owns 375 Canal Street in Manhattan. The property has a long history of litigation alleging
counterfeiting and trademark violations. In 2006 and again in 2009, the City of New York sued Defendant for nuisance resulting from the sale of counterfeited merchandise at 375 Canal Street.  In both cases the Defendant settled with the city and agreed to stop selling counterfeit products.  During a police sting in December 2010, revealed that counterfeit Omega watches were being sold at 375 Canal Street.  A private investigator hired by the Plaintiff confirmed that counterfeit Omega watches were being sold.

In September 2012, Plaintiff sued Defendant for contributory trademark infringement.  Plaintiff alleged that Defendant continued to lease space at 375 Canal Street despite knowing that vendors at the property were selling counterfeit Omega goods.  The District Court found in favor of the Plaintiff and awarded a verdict of $1.1 million.

Defendant appealed the decision to the Court of Appeals for the Second Circuit.  On appeal, Defendant’s primary argument was that the district court did not require Plaintiff to demonstrate that Defendant continued to lease space to a specific, identified vendor who Defendant knew or should have known was infringing Plaintiff’s trademarks.

The Second Circuit rejected Defendant’s argument.  At trial Plaintiff had demonstrated that Defendant was willfully blind to the trademark infringement taking place at 375 Canal.  Willful blindness allows a defendant to be held liable for contributory trademark infringement despite not knowing the identity of a specific vendor who was selling counterfeit goods, as long as the lack of knowledge was due to willful blindness.   Because Plaintiff had introduced evidence that Defendant was willfully blind to the trademark infringement of its tenants, the Second Circuit affirmed the district court’s decision.

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