uxury fashion brand Tory Burch scored a victory in the Northern District of Illinois Eastern Division, as the court granted its motions for a temporary restraining order, domain name transfer order and other relief against a syndicate of Chinese counterfeiters selling counterfeit goods across the internet. The unnamed defendants were using hundreds of interactive websites and online marketplaces to sell low quality, fake Tory Burch products, in addition to using various tactics to conceal their identities.
Lanham Act Claims
The court held that Tory Burch demonstrated a likelihood of success on the merits as it showed that its mark is protected under the Lanham Act and that the defendants’ counterfeit mark was likely to cause confusion among consumers. In deciding the question of likelihood of confusion, the court applied the Seventh Circuit’s seven part test: (1) similarity between the marks in appearance and suggestion; (2) similarity of the products; (3) area and manner of concurrent use; (4) degree of care likely to be exercised by consumers; (5) strength of complainant’s marks; (6) actual confusion; and (7) intent of defendants to palm off their products as that of another. Eli Lilly & Co. v. Natural Answers Inc., 233 F.3d 456, 461-62.
Although Tory Burch showed no evidence of actual confusion (and the court stated that this was “neither surprising nor fatal” at this point in litigation), the other factors weighed heavily in its favor – making the analysis overall a slam dunk. Under the third factor, “area and manner of concurrent use,” the court noted that although the defendants do not appear to be selling products through physical retailer stores, “they, like the plaintiffs, seek to target consumers and generate sales through the internet.” The defendants’ digital sales also factored into the court’s analysis of factor four, as the court noted that although some internet consumers may be sufficiently sophisticated to know they are buying knockoffs, the “standard of care to be exercised by the reasonably prudent purchaser will be equal to that of the least sophisticated consumer in the class.” Moreover, the fact that defendants were selling their counterfeit goods at prices only slightly below the retail price for authentic Tory Burch products also led the court to state that internet shoppers may simply believe they had found a bargain.
Internet search also played into the “likelihood of confusion” analysis under factor seven. Citing to Eli Lilly, 233 F. 3d at 464-65, the court stated that an internet user searching for a product may be “diverted” by infringing domain names and metatags to a competing website and then “decide to use the offerings of the infringing site.” Here, therefore, the court held that consumers who genuinely intend to search for and purchase Tory Burch products may find themselves on defendants’ online marketplaces for counterfeit goods and, even if they realize that the site is not owned by Tory Burch, the consumers may decide to purchase at reduced prices. Thus, the defendants were clearly capitalizing illegally on Tory Burch’s strong mark, good will and reputation.
Tory Burch also sued defendants under the Anticybersquatting Consumer Privacy Act (“ACPA”). Under ACPA, a person alleged to be a cybersquatter is liable to the owner of a protected mark, “without regard to the goods or services of the parties,” if that person (1) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and (2) registers, traffics in, or uses a domain name that is identical or confusingly similar to or dilutive of a mark that is distinctive or famous. 15 U.S.C. §1125(d)(1)(A).
Having held that Tory Burch is “inherently distinctive and famous and that consumers identify Tory Burch trademarks with Tory Burch’s high quality products” and that defendants used domain names confusingly similar to Tory Burch’s own www.toryburch.com domain, the court set about the bad faith analysis. The court held that “nearly every factor” in the nine part test for bad faith weighed in favor of a finding of bad faith.
Likelihood of Irreparable Harm and Balancing of Harms
In analyzing whether to grant the temporary restraining order requested by Tory Burch, the court balanced the likelihood of irreparable harm to Tory Burch with the public interest. The court found irreparable harm and no adequate remedy at law because “as long as defendants continue to use Tory Burch marks, logos and product descriptions to sell products purporting to be authentic Tory Burch products, plaintiffs will have no control over the quality of goods that enter the market bearing Tory Burch marks.” Moreover, the court stated that the presence of hundreds of websites selling identical products “will undoubtedly result in a loss of exclusivity over the sale of products bearing the Tory Burch marks and a loss of future sales.” On the question of balancing of harms, the court held that the public interest would be served by issuing a temporary restraining order, thus reducing the chance for consumer confusion and deception.
Accordingly, the court granted the temporary restraining order in addition other measures including transferring the offending domain names to Tory Burch’s control and freezing defendants’ financial assets.
While a relatively straightforward case, the Tory Burch decision is a victory for fashion brands struggling to deal with overseas pirates using the internet to peddle cheap knockoff goods. Overseas piracy remains a major priority for U.S. intellectual property owners in both the trademark and copyright arenas so the ability to promptly obtain injunctive relief is critical.
More broadly, the intersection of trademark infringement and internet search remains a hot topic, with courts analyzing a number of recent cases where infringing goods or services deliberately played on trademarks to manipulate search engine results or advertising algorithms. See CDAS Partner Eleanor M. Lackman’s article in Bloomberg BNA, Decoding Rosetta Stone, for more. The legal complications in this emerging area have led some to question the role of internet service providers in permitting and passively profiting from online intellectual property infringement.
If you have any questions about this article, please contact an attorney in the CDAS Trademark and Brands Practice Group.
Filed in: Fashion and Apparel, Legal Blog, Trademarks and Brands
April 10, 2013