Court Orders Target Internet Companies In Trademark Disputes

SOPA without SOPA

The trademark bar is divided about these court actions, much as copyright lawyers were about the Stop Online Piracy Act (SOPA). SOPA sparked heated rhetoric: Shortly after the legislation was introduced in the House on Oct. 26, 2011, opponents claimed it would end the Internet as we know it by shutting down popular websites. The legislation called for court remedies against online companies that copyright infringers use to sell pirated goods, collect money or advertise. It has been dormant since a mid-December Judiciary Committee markup.

Joseph Gioconda of New York-based Gioconda Law Group, who represents plaintiffs in some trademark cases, says: “We have been doing this in the absence of SOPA for over two years.” Brand owners are simply availing themselves of the nuances of existing laws as counterfeiting spikes, Gioconda says. “The only way to stop it is to be really aggressive and ' as sophisticated as the counterfeiters.”

Cases often end with default judgments against the defendants. Those judgments are ballooning as plaintiffs pull in more defendants to combat what they describe as increasingly sophisticated counterfeiting networks. For example, an $864 million default judgment in March in the Southern District of New York in True Religion Apparel v. Lee, 11-cv-08242, http://bit.ly/Myzl4M, followed 2011 court orders against third-party domain registries. The case involved the sale of counterfeit jeans, sportswear, accessories and other items on many websites, and the orders required registries to disable all infringing domain names.

In the Northern District of Illinois, two of several cases brought by Uggs boot-maker Deckers Outdoor Corp. culminated in a $686 million default judgment against counterfeiters in April. Deckers filed both cases against hundreds of John Does “in the People's Republic of China or other foreign jurisdictions with lax trademark enforcement legal systems.” The company claimed the defendants sold counterfeit products with the “Ugg” trademark.

The temporary restraining orders issued in Nov. 2011 and this January called for domain registries to disable domain names used to sell the counterfeits. The orders also required financial organizations, including PayPal, to stop defendants from transferring or disposing of money and other assets. They further required a wide range of third parties to turn over records about the defendants.

Extraordinary Remedies

The spike in rulings involving third parties is linked to brand owners' long-term battle with counterfeiting online, says Stephen Gaffigan, a Fort Lauderdale, FL, solo practitioner who represents plaintiffs in several Florida cases.

“Sort of like any legal theory or legal remedy, after it's done the first time more people begin to see it and request it,” Gaffigan says. “It's been a successful strategy and brand holders have begun to adopt it.”

Another attorney likens the recent court orders to a turning over to a publisher a recovered stolen printing apparatus.

“These are extraordinary remedies,” counters Andrew Bridges, a San Francisco litigation partner at Fenwick & West, who represents brand owners, ISPs and online services, but who isn't involved in any of these cases. “When it's not cybersquatting, transferring a domain is like transferring a printing press. A domain name is a communications facility.”

Bridges adds that luxury or sports brands have orchestrated most of the recent domain seizures and rulings against third parties: “In SOPA, the discussion was all about counterfeit pharmaceuticals killing Americans, but the reality is it's [cases about] unauthorized NFL jerseys.”

Other orders, such as a March TRO in Herms International v. John Doe 1, 12-cv-01623, http://bit.ly/MPvxOU, in the Southern District of New York, are far broader. Herms sued several named individuals and numerous John Does. The company stated which websites each defendant runs to sell fake Herms-branded goods. The TRO required registries to lock domain names. It also required many third parties to “immediately cease rendering any such services” to the domain names.

The Next Step

Earlier cases have demonstrated that a criminal counterfeiter operating anonymously from a foreign country is unlikely to comply with court orders, Gaffigan says: “The courts have necessarily gone to the next step and gone to cutting off the means by which the counterfeiters are committing their crimes.”

These orders are a creative way to give relief to rights owners dealing with criminal networks, Gaffigan says. Counterfeit trafficking has shifted from smuggling fake goods into the United States through shipping containers to an e-commerce model, and the legal strategies have changed in tandem, says Justin Gaudio, an attorney at Chicago-based Greer, Burns & Crain, whose firm represents Deckers in the cases involving Uggs. Gaudio says brand owners and third parties often work together on cases.

But other lawyers believe the orders raise the same concerns SOPA raised.

Many of the orders are ex parte and entered without an appearance by the defendant or third parties, says Peter Toren, a partner at Weisbrod Matteis & Copley in Washington, DC, whose practice includes trademark work but who isn't involved in the cases.

“It certainly does raise concerns of under what standards judges are entering those injunctions [and] whether there's due process,” Toren says.

A proposed law to combat digital piracy stalled last year in the face of widespread public opposition, but district courts are embracing its controversial remedies against Internet companies that do business with alleged infringers in trademark cases.

Through mid-July, at least 18 orders affecting alleged infringers and intermediaries ' domain-name registries, payment processors, search engines and Internet service providers (ISPs) ' have sprung up in the Northern District of Illinois, the Southern District of Florida and the Southern District of New York.

Most are temporary restraining orders, but several are combined with preliminary injunctions. They range in severity and number of third parties. Some orders involve transferring counterfeiters' domain names so the plaintiff can direct traffic to a website about the lawsuit. Others require domain-name registries to disable domain names that sell counterfeit goods. Still others freeze counterfeiters' financial accounts associated with payment websites, such as PayPal Inc.

SOPA without SOPA

The trademark bar is divided about these court actions, much as copyright lawyers were about the Stop Online Piracy Act (SOPA). SOPA sparked heated rhetoric: Shortly after the legislation was introduced in the House on Oct. 26, 2011, opponents claimed it would end the Internet as we know it by shutting down popular websites. The legislation called for court remedies against online companies that copyright infringers use to sell pirated goods, collect money or advertise. It has been dormant since a mid-December Judiciary Committee markup.

Joseph Gioconda of New York-based Gioconda Law Group, who represents plaintiffs in some trademark cases, says: “We have been doing this in the absence of SOPA for over two years.” Brand owners are simply availing themselves of the nuances of existing laws as counterfeiting spikes, Gioconda says. “The only way to stop it is to be really aggressive and ' as sophisticated as the counterfeiters.”

Cases often end with default judgments against the defendants. Those judgments are ballooning as plaintiffs pull in more defendants to combat what they describe as increasingly sophisticated counterfeiting networks. For example, an $864 million default judgment in March in the Southern District of New York in True Religion Apparel v. Lee, 11-cv-08242, http://bit.ly/Myzl4M, followed 2011 court orders against third-party domain registries. The case involved the sale of counterfeit jeans, sportswear, accessories and other items on many websites, and the orders required registries to disable all infringing domain names.

In the Northern District of Illinois, two of several cases brought by Uggs boot-maker Deckers Outdoor Corp. culminated in a $686 million default judgment against counterfeiters in April. Deckers filed both cases against hundreds of John Does “in the People's Republic of China or other foreign jurisdictions with lax trademark enforcement legal systems.” The company claimed the defendants sold counterfeit products with the “Ugg” trademark.

The temporary restraining orders issued in Nov. 2011 and this January called for domain registries to disable domain names used to sell the counterfeits. The orders also required financial organizations, including PayPal, to stop defendants from transferring or disposing of money and other assets. They further required a wide range of third parties to turn over records about the defendants.

Extraordinary Remedies

The spike in rulings involving third parties is linked to brand owners' long-term battle with counterfeiting online, says Stephen Gaffigan, a Fort Lauderdale, FL, solo practitioner who represents plaintiffs in several Florida cases.

“Sort of like any legal theory or legal remedy, after it's done the first time more people begin to see it and request it,” Gaffigan says. “It's been a successful strategy and brand holders have begun to adopt it.”

Another attorney likens the recent court orders to a turning over to a publisher a recovered stolen printing apparatus.

“These are extraordinary remedies,” counters Andrew Bridges, a San Francisco litigation partner at Fenwick & West, who represents brand owners, ISPs and online services, but who isn't involved in any of these cases. “When it's not cybersquatting, transferring a domain is like transferring a printing press. A domain name is a communications facility.”

Bridges adds that luxury or sports brands have orchestrated most of the recent domain seizures and rulings against third parties: “In SOPA, the discussion was all about counterfeit pharmaceuticals killing Americans, but the reality is it's [cases about] unauthorized NFL jerseys.”

Other orders, such as a March TRO in Herms International v. John Doe 1, 12-cv-01623, http://bit.ly/MPvxOU, in the Southern District of New York, are far broader. Herms sued several named individuals and numerous John Does. The company stated which websites each defendant runs to sell fake Herms-branded goods. The TRO required registries to lock domain names. It also required many third parties to “immediately cease rendering any such services” to the domain names.

The Next Step

Earlier cases have demonstrated that a criminal counterfeiter operating anonymously from a foreign country is unlikely to comply with court orders, Gaffigan says: “The courts have necessarily gone to the next step and gone to cutting off the means by which the counterfeiters are committing their crimes.”

These orders are a creative way to give relief to rights owners dealing with criminal networks, Gaffigan says. Counterfeit trafficking has shifted from smuggling fake goods into the United States through shipping containers to an e-commerce model, and the legal strategies have changed in tandem, says Justin Gaudio, an attorney at Chicago-based Greer, Burns & Crain, whose firm represents Deckers in the cases involving Uggs. Gaudio says brand owners and third parties often work together on cases.

But other lawyers believe the orders raise the same concerns SOPA raised.

Many of the orders are ex parte and entered without an appearance by the defendant or third parties, says Peter Toren, a partner at Weisbrod Matteis & Copley in Washington, DC, whose practice includes trademark work but who isn't involved in the cases.

“It certainly does raise concerns of under what standards judges are entering those injunctions [and] whether there's due process,” Toren says.