Internet Platform Held Liable for Counterfeit Sales in a Departure from eBay Case — Hope for Brand Owners

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Luxury brand owner Richemont International Ltd. (“Richemont”) scored an important victory against online counterfeiting this month when the U.S. District Court for the Central District of California granted summary judgment and issued a permanent injunction against internet companies TradeKey (PVT) Ltd. and Sawabeh Information Services Co, whose business-to-business (“B2B”) platforms actively “promoted and facilitated” the sale of counterfeit goods. At issue were Richmont’s world famous luxury brands Chloe SAS (women’s clothing and accessories); Alfred Dunhill Limited (menswear); Officine Panerai AG (timepieces); Montblanc-Simplo GmbH (timepieces, writing instruments); Cartier International A.G. (timepieces, fine jewelry); and Lange Uhren GmbH (timepieces). Notably, the court’s ruling departs from the U.S. Supreme Court’s ruling in Tiffany & Co. v. eBay (2010), which largely insulated B2B platforms from liability for contributory counterfeiting.

The underlying case, Chloe SAS et al. v. Sawabeh Information Services Co (2:11-cv-4147-GAF-MAN) (C.D. Cal. 2011), was filed after an extensive online investigation uncovered over 6,000 sellers of “replica” Chloe, Cartier, and Montblanc products (among others) on TradeKey.com. While “no purchases of the alleged counterfeit goods were made directly from [the B2B platforms],” themselves, the brands argued that the platforms were secondarily liable for counterfeit listings posted by third parties. In connection with this argument, the brands presented evidence that the platforms’ employees encouraged users to “post as many [replica] products as possible” and offered tips about how to “mask” replica products’ “counterfeit nature.”

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