Operation Turnlock: Swap Shop

A 5.5 million dollar settlement between Coach, a luxury leather goods retailer, and Swap Shop of Ft. Lauderdale, FL has been reached. Preston and Betty Henn has owned the Swap Shop since 1963, it is open 7 days a week and is regarded as Florida’s most popular tourist attraction after Disney World. Swap Shop has over 2, 000 vendors and in the 1990’s more than 12 million people had visited the establishment. This settlement is a result of a lawsuit that Coach filed in March 2012, after sending Henn several Cease and Desist letters and a raid conducted by Immigration and Customs Enforcement in December of 2011, which resulted in the seizure of 55 products bearing the Coach insignia.

According to Coach, Henn as the flea market owner was sued for contributory trademark infringement because he aided the vendor’s infringement of Coach’s marks. The legal standard for contributory trademark infringement states that one must either encourage the direct infringer to violate the law, or at minimum know of the violations and continue to do business with the direct infringer. Henn’s response to Coach’s allegations was that he “couldn’t police thousands of vendors”. The amount of the settlement is small compared to the potential results had the case proceeded to a jury. Two million dollars could have been awarded for every claim of trademark infringement found.

This lawsuit is not out of the normal, in fact it is part of Coach’s nationwide litigation strategy that pursues counterfeiters regardless of how small or big to protect against dilution and devaluation of the brand. Coach’s Operation Turnlock was created in May 2009, which couples with existing law enforcement and governmental agencies and other brands to protect against trademark infringement of Coach’s mark. This zero tolerance policy pursues counterfeiters on the internet as well. Since 2009, Coach has been awarded 573 domain names that were used as a part of the sale of counterfeit products. Coach monitors mainstream auction sites such as eBay and independent websites to find infringers.

This case illustrates that although the majority of the cases that Coach pursues are against sellers who directly infringe and sell Coach’s marks, Henn falls within in the minority of cases Coach pursues against flea market owners and landlords. A similar case, Fonovisa, Inc. v. Cherry Auction, Inc., 76 F. 3d 259 (9th Cir. 1996) established that “while Cherry Auction is not alleged to be supplying the infringing recording themselves, it is supplying the necessary marketplace for their sale in substantial quantities”’, which made Cherry Auction liable for contributory trademark infringement. This case places a future implication on flea market owners and landlords that allow the sale of counterfeit goods can be found liable for contributory trademark infringement due to their inaction. As a result, owners and landlords will have to actively police and have familiarity of what their vendors are selling in an effort to avoid contributory trademark infringement claims.

By Jasmin Brooks, Associate Editor and 2015 J.D. Candidate

photo credit: https://www.flickr.com/photos/jessaa/4866344455 jessaax via http://photopin.com and http://creativecommons.org/licenses/by/2.0

#copyright #fashion #ip #trademark