Flea market owner potentially liable for contributory infringement

In Coach Inc v Sapatis (No 12–CV–506–PB, 2014 WL 2815746), in a recent development of the war against counterfeiting, Judge Paul Barbadoro of the US District Court for the District of New Hampshire has denied summary judgment to Alaina E Paul, the owner, manager and sole member of the limited liability corporation that owns and operates the Londonderry Flea Market, New Hampshire.

During the summer of 2011, private investigators working for Coach Inc purchased a number of counterfeit Coach products from vendors at the Londonderry Flea Market. Following the investigation, a number of cease and desist letters were sent to the vendors selling the counterfeit merchandise. Paul was at the concession stand at the time of the inspection and one of her employees accompanied the investigators during the inspection. The investigators returned to inspect the flea market on multiple occasions over the next year, and identified a number of vendors selling counterfeit Coach goods over several visits. As a result, Paul received a letter from Coach alleging that counterfeit Coach products were being sold and that those responsible for the flea market’s operations could be held liable if they failed to stop the activity. A similar letter was sent to Paul on May 2012.

In evaluating Coach’s claims of contributory infringement, Judge Paul Barbadoro explained that actions taken or knowledge obtained by a corporation via its agents is not imputed to its officers simply due to their positions within the corporation. However, this does not translate into the automatic immunisation of corporate officers from personal liability for conduct undertaken on the corporation’s behalf. In this case, the court found that Paul’s personal contributory liability was dependent on her own knowledge and control over the vendors’ alleged infringement, regardless of whether her actions or omissions were taken in an official or personal capacity.

The court then explained that the facts of this case permitted a reasonable jury to find that Paul had sufficient knowledge of the specific acts of trademark infringement at the flea market.

First, Paul was present at the flea market and aware of the ongoing inspections. Second, since her own employee accompanied the investigators during the inspection and, thus, had first-hand knowledge of the infringing vendors’ activities, the court found that Paul was likely to have been wilfully blind to the vendors’ unlawful conduct if she had failed to ask her employee to identify infringing vendors. Further, the court concluded that Paul’s responsibilities and conduct at the flea market permitted a reasonable inference that she had sufficient control over the infringing activities because of her close proximity to the infringing vendors and her right and ability to police their conduct. As owner, manager and sole member of the company that owns and operates the flea market, Paul was ultimately responsible for the decision to enter into, terminate or refrain from terminating vendors’ lease agreements.

The court found that this was sufficient to render Paul potentially liable for contributory infringement, thus denying her motion for summary judgment.

Laura Beléndez-Ferrero, Ferraiuoli LLC, Puerto Rico