Jack Ellis

Pakistan-based online B2B trading platform TradeKey has been found liable for contributory trademark counterfeiting by a California federal court in a case brought by Swiss luxury brand owner Richemont. The court’s decision – which includes a permanent injunction against TradeKey – illustrates how brand owners can hold overseas-based e-commerce sites accountable for selling fake goods.

An extensive undercover investigation collected evidence suggesting that TradeKey had knowingly allowed the sale of fake Richemont products by third-party vendors through its website. When an incognito investigator asked a TradeKey employee if their company had a “problem” with the sale of counterfeits, they were told that “it did not” and that the e-commerce platform “relies” on the “replica industry” for a “whole lot of revenue”.

The case is therefore somewhat different from previous rulings centered on online auction sites. In the 2010 Tiffany v eBay decision, the US Court of Appeals for the Second Circuit had affirmed that the burden of proving that a ‘middleman’ trading platform (in that case, eBay) may be liable for trademark infringement lies with the trademark owner. “I don’t expect this decision to affect the defence that eBay asserted in the Tiffany case because the facts are very different,” comments Susan Progoff, partner at Dorsey & Whitney. “Courts seem to be able to distinguish between legitimate businesses and businesses that are, or support, counterfeiting. The court found that the sale of counterfeit products was a large component of TradeKey’s business and that TradeKey was actively involved in editing listings to hide the nature of the counterfeit products that were being sold.”  In contrast, the evidence in Tiffany v eBay showed that although fake goods were available to buy on eBay, the company removed such listings when it received notice from the brand owner that they represented counterfeits.

While the ruling against TradeKey is unlikely to have a significant impact on the precedent set in Tiffany, the fact that a permanent injunction has been placed on the e-commerce platform represents an important victory, not just for Richemont but for brand owners in general. While applying only to the United States, the injunction will enable US courts to hold TradeKey liable for contempt if it continues to sell counterfeits of Richemont’s products over the internet and if such activities are deemed to be targeting US consumers and businesses. “Other courts faced with similar fact patterns have awarded significant damages by ordering credit card companies and other processors of financial transactions to freeze the defendant’s accounts and have awarded the proceeds in those accounts to trademark owners,” Progoff explains. “Courts have also enjoined processors of financial transactions from doing business with defendants and transferred to plaintiffs the domain names used for websites that sell counterfeit products. While these remedies have not stopped counterfeit activity, they have provided some relief to US trademark owners whose marks are being counterfeited by sellers located overseas.”

The findings of this year’s WTR Global Benchmarking Survey revealed that online policing is rapidly becoming one of the most time-consuming activities for in-house trademark counsel. When asked to identify which online marketplaces present the toughest policing challenges, 38.3% of corporate counsel selected eBay, with 29.8% highlighting Alibaba.

But beside these e-commerce giants, counsel also underlined the difficulties posed by the growth of regional trading platforms – with TradeKey specifically identified as one of those sites taking up an increasing amount of trademark departments’ time. By proving that TradeKey had willingly facilitated the sale of counterfeits and obtaining an injunction against the website, Richemont and its legal and investigative teams have struck a victory for all brand owners.

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