Coach prevails in suit against flea market owner who facilitated counterfeit sales

Good news for fashion trademark owners (and others): Counterfeiters AND facilitators can be found liable for infringement.

On May 31, 2013, in Coach, Inc., et al. v. Goodfellow, the United States Court of Appeals for the Sixth Circuit entertained the question: Can a flea market operator be held contributorially liable for trademark infringement by vendors? Plaintiff (Coach) originally brought suit under the Lanham Act, alleging that a Memphis flea market operator is liable for sales of counterfeit products at his flea market, even though the flea market owner was not doing the selling.

Invoking Inwood Laboratories. Inc. v. Ives Laboratories, Inc., in which the Supreme Court held that liability under the Lanham Act includes those who facilitate the infringement, the appellate court upheld a jury award of $5M in damages.

Background: Frederick Goodfellow owned and operated a Memphis flea market doing business as The Southwest Flea Market as a sole proprietorship. The flea market rented seventy-five to one hundred booths to vendors at the rate of $15 per day Thursday through Sunday each week.

On January 15, 2010, Coach sent a letter to Goodfellow, notifying him of counterfeit sales of Coach products at the flea market, advising him of the potential violation of both federal and state laws, and demanding that all sales of counterfeit Coach products cease.

On March 26, 2010, the Shelby County Office of the District Attorney General notified Goodfellow that counterfeit sales of Coach items were continuing at the flea market and that Goodfellow was in willful disregard of the law.

On April 23, law enforcement officers raided the flea market and seized evidence of counterfeiting.

On June 10, Coach filed for judicial relief. After a Coach investigator discovered continuing sales of counterfeit Coach products in February 2011, law enforcement officers conducted another raid on March 4, 2011, and still another on June 23, 2011, at which more than 4,600 counterfeit Coach products were seized and the flea market was shut down.

One of the key factors in this case was the flea market owner’s indifference to the counterfeiting. Though some minor, remedial moves to stem counterfeiting were employed, the court listed what was not happening:

  1. The flea market’s employees never received any training to identify counterfeit goods;
  2. There was no evidence any vendors had been expelled or rejected for selling counterfeit products.
  3. There was no evidence vendors even had been questioned as to whether their goods were counterfeit or authentic;
  4. The flea market did not have a license to sell Coach products;
  5. No one inquired of vendors if they had licenses;
  6. Vendors were not required to sign a statement agreeing, as a condition of renting a booth, that they would not sell counterfeit products;
  7. Even after some discussions with vendors about counterfeiting, Goodfellow admitted knowing that infringement continued.
Taking all into account, the court found: “Thus, even if we consider all the evidence of remedial measures, it fails to undermine the district court’s conclusion that Goodfellow engaged in 'ostrich-like practices.'"

The jury at the District Court level awarded $240,000 per mark for twenty-one total infringed marks and granted Coach permanent injunctive relief. That judgment plus attorneys’ fees was upheld by the Sixth Circuit.