Shopping mall administrator held liable in counterfeiting case
In a unanimous ruling, the Sixth Panel of the São Paulo State Court of Appeals has affirmed in part a decision finding that the administrator of a São Paulo shopping mall was liable for the sale of counterfeit clothing and clothing accessories in the mall (Case 502.136-4/5-00, February 14 2008).
The shopping mall at issue was the subject of several police raids and investigations. Moreover, several news reports alleged that counterfeiting activities were taking place in outlets located on the premises.
In his defence, the administrator argued that:
- he was not involved in the commercialization of the counterfeit goods;
- he lacked police power and had no duty to supervise the activities of the retailers;
- he had no access to the goods and could not prevent counterfeiting activities; and
- the mall was duly authorized to operate by the local authorities.
The court found against the administrator based on the following grounds:
- The contractual relationship between the administrator and the retailers was based on the revenue share model, under which the parties have an integrated relationship;
- The contracts between the administrator and the retailers stipulated that the administrator has the right to inspect the shops and that the retailers must not engage in unlawful activities;
- The contracts were executed with Chinese immigrants with temporary visas, which hindered the possibility of filing criminal or civil actions; and
- The administrator must have been aware of the presence of counterfeit goods in the mall.
According to the court, the administrator had the right and the duty to inspect the premises. Moreover, as the administrator shared profits with the retailers, he was liable for the lack of supervision of the outlets.
The administrator will have to pay a daily fine should he fail to take reasonable steps to prevent the sale of counterfeit goods on the premises. The court set the amount of the fine at a level which ensures that it is a sufficient deterrent ($30,000), taking into account the following factors:
- the administrator has the right and power to inspect the outlets and terminate the leasing agreements; and
- the amount of the fine must not be so high as to constitute undue enrichment of the plaintiffs.
Relying on previous case law of the Superior Court of Justice, the court also ordered that the administrator pay $30,000 in damages to the plaintiffs in order to compensate the harm caused to the reputation of the trademarks involved.
The decision may still be appealed to the Superior Court of Justice and the Supreme Court of Justice. Should the decision become final, it will set a strong precedent for landlords who fail to take reasonable action against the sale of counterfeit goods on their premises.
Rodrigo Borges Carneiro, Dannemann Siemsen Advogados, Rio de Janeiro
Copyright © Law Business ResearchCompany Number: 03281866 VAT: GB 160 7529 10