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Court Rules Trademark Infringement Enough to Hold Landlord Liable

Last year, the Eleventh Circuit affirmed a judgment holding that a landlord’s constructive knowledge of its tenant’s trademark infringement is enough to hold the landlord liable.

Several years earlier, Arent Fox represented the plaintiff luxury goods maker in Louis Vuitton Malletier v. Carroll; an action filed to address the sale of counterfeit items. At the outset of the litigation, filed in federal court in New York, a hearing was held to test a new theory – to hold landlords contributorily liable for the sale of counterfeit goods occurring on their premises. While novel at the time, that theory has now been recognized in recent caselaw.

Recent Decision

The Eleventh Circuit in Luxottica Group, S.p.A. v. Airport Mini Mall, LLC confronted what it called a question of first impression for that Court: Whether contributory liability for trademark infringement extends to the landlord. There, luxury eyewear manufacturers filed a contributory trademark infringement action under the Lanham Act against owners of a mall whose subtenants were selling counterfeit eyewear. The Eleventh Circuit stated: “a landlord may be contributorily liable for its (sub)tenants’ direct trademark infringement if the landlord intentionally induces the infringement or knows or has reason to know of the infringement while supplying a service (such as space, utilities, or maintenance) that facilitates it.” As the Eleventh Circuit explained, the United States Supreme Court previously acknowledged the existence of this type of liability in Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 846-48 (1982), a case in which manufacturers had supplied pharmacists with an infringing generic version of a drug whose brand name was trademarked.

The Eleventh Circuit also related the concept of holding a landlord contributorily liable for its tenant’s direct trademark infringement to precedents holding owners of flea markets whose tenants sold counterfeit goods contributorily liable. The precedential value of the Luxottica decision is limited to some extent because the Eleventh Circuit assumed without deciding the legal basis for the liability, as the landlord did not contest that Inwood’s contributory trademark infringement cause of action may be applied to the landlord-tenant context.

Other decisions have held landlords contributorily liable for the conduct of rogue tenants who sell counterfeit goods and commentators have noted the trend

Creative Lawyering

When we filed the complaint in Louis Vuitton Malletier v. Carroll on March 30, 2005, we did not have the luxury – no pun intended – of precedents such as Luxottica. So we had to reason from existing case law and analogize to situations that were similar even if inexact. We cited Inwood and the cases involving flea markets, as did the recent Luxottica decision. Our legal analysis was sound – as well as prescient – as shown by the Eleventh Circuit’s ruling, which also cited these authorities.

Dramatic Courtroom Showdown

A hearing was held on the motion for a preliminary injunction at the United States District Court for the Southern District of New York. We presented legal arguments outlined above and introduced evidence we had developed through painstaking research and investigation. Before the hearing even ended that day, the parties agreed on a framework for monitoring the properties at issue to prevent future infringement, installing signs to warn the public not to buy counterfeit goods, and evict rogue tenants. In another unprecedented aspect of the case, the landlord agreed to split the cost of ongoing monitoring.

Groundbreaking Solution

The creativity we applied in Louis Vuitton Malletier v. Carroll was widely hailed by leading newspapers and periodicals such as The New York Times, The Wall Street Journal, many other general-interest publications, and industry publications. The case was recognized as a “terrific result” and a “breakthrough” in the war against counterfeiters. Legal experts said the “new legal strategy is a smart one.” Calling this solution “the first of its kind,” commentators noted that that case “gives trademark holders a new weapon in the perennial battle against fake designer products, in that it goes beyond requiring the building owner and shopkeepers to stop the sale of knockoff handbags and other bogus merchandise.” Reporters devoted substantial attention to setting forth the Arent Fox legal arguments, noting the case set a strong precedent for other trademark holders to follow. Fortune called the case an “unprecedented action to prevent the sales of counterfeit Louis Vuitton goods” in a stepped-up “fight against the faux” based on “a novel legal theory.”

High-Profile Litigation

Litigating in the glare of a media spotlight poses additional challenges for trial lawyers. Public relations professionals and lawyers familiar with the case but not principally involved in presenting the evidence can help share the media responsibilities, allowing litigators to focus on securing the right result in court.

Budget Matters

The entire Louis Vuitton Malletier v. Carroll action was pending for only a few months, and most of the legal work occurred during the month leading up to that decisive hearing. While litigation sometimes takes a long time and may divert the attention of a company’s management, this case illustrates that impactful litigation can be handled effectively while being economical in the resources applied to address the problem.

Combining cutting-edge legal analysis with incisive evidentiary presentation, while maintaining a disciplined approach to the litigation budget, delivered practical results in Louis Vuitton Malletier v. Carroll and contributed to the development of trademark law in this important area.

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