Your Security Partner

Are Intermediaries in Supply Chains Legally Responsible for Counterfeit Goods?

Trust in the Supply Chain

Intermediaries refer to all parties in the supply chain. They include raw material suppliers, manufacturers, distributors, shipping companies, transport operators, payment processors and retailers. Retailers include both brick and mortar and ecommerce web sites. An Intermediary can also be a landlord who rents space to any party in the supply chain.

Intermediaries are clearly vital to the manufacture and delivery of goods. They are also vulnerable to criminal activities and counterfeiters exploit them.

Many people think of recent high profile cases related to copying digital content. P2P file sharing services Kazaa, Mininova and the Pirate Bay were all found liable for authorizing copyright infringements and were directly liable for unauthorized communication to the public.

According to the 2015 BASCAP study on the “Roles and Responsibilities of Intermediaries”, laws are different in every country/jurisdiction, however, in general “the law condemns parties who have actual or constructive knowledge of infringement and play some sort of causal or participatory role. Key factors that the courts consider, in addition to knowledge, are: 1) failure to exercise control or take steps to prevent continuing infringement; 2) the receipt of revenues derived specifically from the infringing activity; and 3) specific steps taken to promote or encourage infringement.”

The bottom line is that intermediaries are legally responsible for counterfeit activity and there is plenty of precedence to prove it. Below are examples of liability directed at intermediaries from the BASCAP study. Blackseal allows investigators, intermediaries and consumers alike to test the authenticity of a product.

Ecommerce Websites

Tiffany (NJ) Inc. v. eBay Inc., the court found that generalized knowledge that trademark infringement was occurring was not sufficient for action, but willful blindness could be a cause for action.”

Chloe SAS v. Sawabeth Info Svcs. Co., the court found that the web platform TradeKey fell on the wrong side of the line in its complicity with the transactions occurring on its site.”

“In Gucci America, Inc. v. MyReplicaHandbag.com, following a default judgment in favor of Gucci, Chloé and Alfred Dunhill against defendants claimed to be distributing counterfeit handbags and wallets. The court ordered third-party financial institutions to liquidate all of the assets they held for the defendants, and to give those assets to the claimants. Over $500,000 was recovered.”

ISPs

“In Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., trademark and copyright infringement was occurring on websites hosted by the ISP. At trial, the jury found the hosting ISP liable and awarded Louis Vuitton $10.8 million in damages.”

Payment Processors

“In Gucci America, Inc. v. Frontline Processing Corp., the court found that intermediaries could be liable for (contributory) trademark infringement under a number of circumstances.”

Shipping

“Europe — In a ruling in interim proceedings against China Shipping, the Summary Judge of the Rotterdam District, confirmed that article 6 and 11 of regulation 1383/2003 does not give the carrier the right to claim payment by the rights holder of the demurrage costs.”

Shopping Mall

“In April 2011, the Brazilian Superior Court of Justice found the 25 de Março Shopping Mall in Sao Paulo liable for reselling counterfeit products. It imposed a daily penalty of R$50,000 (about $30,000 USD) if the Mall did not stop marketing and selling counterfeit items from Nike, Louis Vuitton, and Oakley, who had sued for damages. The Court ordered the payment of moral damages to these companies.”

LandLords

“China — In July 2011, the Beijing Higher People's Court issued decisions that clarified the duty of care for the Silk Street Market and other landlords. It affirmed the
 2010 rulings of the lower courts, which had specified the landlord's duty to take reasonable measures in dealing with infringers. It also found that failure to do
so could make the landlord jointly liable.”

Banks

“In Gucci America, Inc., et al. v. Curveal Fashion, the magistrate ordered the New York office of the United Overseas Bank to produce relevant account documents after obtaining information showing [the defendant's] transfer of $900,000 into accounts at UOB Malaysia. UOB refused to comply with the subpoena, and the district court held UOB in contempt of court, awarded Plaintiffs attorneys' fees, and imposed a fine of $10,000 per day for each future day of noncompliance. The two parties settled the case with a $250,000 payment from UOB.”

Customs Broker

“In the US, in Coach Inc. et al v. Celco Customs Services Co. and Shen Huei Feng Wang, a jury found a customs broker liable for $8 million for contributory trademark infringement.”

About this Blog

The TrustPoint Innovation Blog covers security industry topics relating to Certificates, Elliptic Curve Cryptography (ECC), Machine-to-Machine (M2M) Communication, Near Field Communication (NFC), Vehicle-to-Vehicle (V2V) Communication, and more.

Recent Posts