Malicious prosecution action against trademark owners fails

In Tommy Hilfiger Licensing Inc v Bradlees Inc (US Dist LEXIS 20427, October 8 2004), the US District Court for the Southern District of New York has ruled that three plaintiff trademark owners did not engage in malicious prosecution during a counterfeiting investigation. The court found that the mark owners had probable cause to initiate the proceedings based on the facts provided by the police.

The case resulted from an investigation into counterfeiting activities in New York City conducted by the New York City Police Department's Organized Crime Investigation Division Trademark Unit (OCID) between August 1999 and June 2000. Several clothing designers assisted OCID and the Bronx District Attorney by contributing approximately $75,000 to OCID to make undercover purchases. During the course of the investigation, an OCID undercover officer (UC 1277) made three purchases of clothing items from M&D Sportswear Corp and Dalia Wallach (president of M&D) through a sales agent named Marty G Mirkin. UC 1277 recorded a number of conversations with Mirkin and Wallach while completing the clothing purchases. Those purchases consisted of clothing featuring the NIKE, POLO (owned by PRL USA Holdings Inc) and ADIDAS trademarks. After examining the clothing, the trademark owners determined that the goods were counterfeits. On several occasions after making the purchases, UC 1277 requested evidence from Mirkin that the goods were authentic. Mirkin produced no evidence and gave only evasive answers as to why no certificate could be produced.

The Bronx District Attorney's office commenced criminal actions against Mirkin and Wallach on counterfeiting charges and a civil forfeiture action against Wallach, Mirkin, M&D and another corporate entity. The criminal charges against Wallach and Mirkin were later dropped.

Tommy Hilfiger Licensing Inc, PRL USA Holdings, Nike Inc and adidas-Salomon AG filed a civil action for counterfeiting and various other trademark causes of action against a number of defendants, including M&D Sportswear and Wallach. The latter filed an answer with counterclaims for malicious prosecution against plaintiffs Nike, PRL USA and adidas, and alleged that these plaintiffs initiated the criminal actions by inducing prosecution by providing false information to OCID - these plaintiffs falsely identified the goods as counterfeits. The plaintiffs unsuccessfully moved to dismiss the counterclaims in 2002. They brought a motion for summary judgment on the counterclaims in 2004 and this was the subject of the US District Court for the Southern District of New York's October 2004 decision.

In granting the plaintiffs' motion for summary judgment, the court examined whether there was probable cause for initiating the proceedings. Although the defendants argued that they did not know, and never suspected, that any of the goods were counterfeit, the court determined that the defendants' knowledge was an issue for the criminal trial. Here, the pertinent inquiry was whether there was probable cause to initiate the proceedings based on the facts developed by the police.

The court found that it was reasonable for OCID, based on a review of all the facts, to conclude that the defendants possessed the requisite knowledge that the goods were counterfeit. Specifically, Mirkin was a M&D sales agent in an important capacity, and Wallach was the president and sole shareholder of M&D and its alter ego. According to the court, it would be unreasonable to conclude that Wallach was unaware of what was going on in the small, closely held business she controlled. OCID had reason to conclude that Wallach and M&D had the requisite knowledge.

Leigh Ann Lindquist, Sughrue Mion PLLC, Washington DC