By Brian Craig, J.D.
A defendant that takes little or no action to root out infringement may be liable for contributory infringement under the theory of willful blindness.
In a trademark infringement case involving the sale of counterfeit Omega watches on Canal Street in Manhattan against the property’s landlord, the U.S. Court of Appeals for the Second Circuit has affirmed a jury award of $1.1 million and the entry of a permanent injunction. The Second Circuit rejected the landlord’s argument that the watch manufacturer needed to identify a specific infringer to whom the landlord continued to lease property. The appeals court held that if a defendant decides to take no or little action to root out infringement, the court can find contributory infringement under the theory of willful blindness (Omega SA v. 375 Canal, LLC, January 6, 2021, Menashi, S.).
375 Canal, LLC ("Canal") owns the property located at 375 Canal Street in Manhattan. The property has a long history of litigation alleging counterfeiting and trademark violations. In 2012, a private investigator for Omega SA, Swatch SA ("Omega")visited 375 Canal Street and documented his purchase of a counterfeit Omega Seamaster watch. Omega sued Canal for contributory trademark infringement, alleging that Canal had continued to lease space at 375 Canal Street despite knowing that vendors at the property were selling counterfeit Omega goods. The district court denied Canal’s motion for summary judgment. A jury found that Canal had contributorily infringed four of Omega’s trademarks on the counterfeit watch and had done so willfully. The district court entered judgment on the jury award of $275,000 in statutory damages for each of the four marks, totaling $1.1 million, and issued a permanent injunction. Canal appealed.
Denial of summary judgment. The Second Circuit dismissed the appeal of the district court’s denial of summary judgment on the ground that the appeals court lacked jurisdiction to review the denial. That interlocutory decision was not appealable, the appeals court held. Furthermore, once the case proceeds to a full trial on the merits, the trial record supersedes the record existing at the time of the summary-judgment motion.
Jury instructions. The Second Circuit also found no error by the district court’s jury instructions based on a willful blindness theory. The Second Circuit previously held that a defendant may be held liable for contributory trademark infringement despite not knowing the identity of a specific vendor who was selling counterfeit goods, as long as the lack of knowledge was due to willful blindness. Where a defendant knows or should know of infringement and whether that defendant may be liable for contributory infringement turns on what the defendant does next. If a defendant undertakes bona fide efforts to root out infringement, that will support a verdict finding no liability, even if the defendant was not fully successful in stopping infringement. But if the defendant decides to take no or little action, it will support a verdict finding liability. Omega presented evidence to support the willful blindness theory, and the district court’s jury instructions accurately captured that theory. Therefore, the lower court did not err in instructing the jury on contributory infringement.
Evidentiary challenges. Additionally,the Second Circuit rejected the landlord’s evidentiary challenges. The appeals court found no reversible error with the admission of evidence that showed widespread trademark violations of non-Omega marks at 375 Canal Street, evidence relating to Omega’s lost revenues resulting on the day of the sale to the private investigator, or evidence of the personal wealth of Canal’s owners.
Scope of permanent injunction. Finally, the Second Circuit dismissed the challenge concerning the scope of the permanent injunction. Canal argued that the injunction should apply only to the property at 375 Canal Street and not to other properties. The district court’s injunction prohibits infringing action with respect to Omega’s marks, without any geographic limitation, by Canal’s employees or agents. The Second Circuit found no basis for concluding that the district court abused its broad discretion to shape the form of injunctive relief after a jury verdict finding trademark infringement. Therefore, the Second Circuit affirmed the district court’s decision.
Concurring opinion. While Circuit Judge Raymond Lohier agreed with the majority on most issues, Judge Lohier wrote a concurring opinion to address the majority’s dismissal of Canal’s appeal of the pre-trial order denying Canal’s motion for summary judgment on jurisdictional grounds. Judge Lohier argued that the denial of summary judgment presented a purely legal issue and the notice of appeal was timely filed.
This case is No. 19-969-cv.
Attorneys: Robert J. Gunther, Jr. (Wilmer Cutler Pickering Hale and Dorr LLP) for Omega SA and Swatch SA. Avi Schick (Troutman Pepper Hamilton Sanders LLP) for 375 Canal, LLC.
Companies: Omega SA; Swatch SA; 375 Canal, LLC
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