Is It Time to Ditch the Requirement that Counterfeits be ‘Stitch-for-Stitch’ Copies?

“If the Fifth Circuit agrees with the Ninth Circuit, it may dissuade district courts, even outside of these circuits, from perpetuating the ‘stitch-for-stitch’ requirement for counterfeits.”

counterfeitsThe Lanham Act provides for special remedies in cases of trademark infringement “involving” the use of a “counterfeit” mark. 15 U.S.C. § 1117(b), (c); 15 U.S.C. § 1127. Absent “extenuating circumstances,” if the use of a counterfeit mark is intentional and knowing, the Act requires entry of judgment of three times the amount of actual damages or profits found, as well as an award of attorney’s fees. 15 U.S.C. § 1117(b). Alternatively, in any case of infringement “involving” a counterfeit mark, the Act provides for awards of statutory damages of up to $200,000; it provides for statutory damages of up to $2,000,000 if the use of the counterfeit mark was willful. 15 U.S.C. § 1117(c).

The availability of these special remedies is significant because it can be both costly and difficult to obtain meaningful monetary awards in trademark infringement cases. The special remedies increase the potential for meaningful monetary recovery by a plaintiff, which can also provide plaintiffs with leverage to negotiate for early settlements.

The Act defines “counterfeit” as “a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” 15 U.S.C. § 1127. And the Act refers to the use of counterfeit marks that are identical to registered marks, not counterfeit products that appear identical to genuine products. 15 U.S.C. § 1116(d), 1117(b), (c); 15 U.S.C. § 1127. In our view, a straightforward interpretation of the Act allows access to the special remedies in cases that involve knock-off products, as well as cases where an identical logo or word mark is used on the same type of product that is in the plaintiff’s trademark registration, even if the defendant’s products and/or their packaging do not resemble the plaintiff’s products.

The ’Stitch-for-Stitch’ Requirement

Nonetheless, numerous federal district courts have denied trademark owners access to the Act’s special remedies for counterfeiting on the grounds that the infringing products were not “stitch-for-stitch” copies of the trademark owner’s products. In other cases, district courts have required, if not stitch-for-stitch copying, that the parties’ products at least appear similar in order for a plaintiff to access the Act’s special remedies for counterfeiting.

We discussed this issue in an article published in the May-June issue of the Trademark Reporter. There, we argued that denying access to the Act’s special remedies for counterfeiting because the infringing products were not “stitch-for-stitch” copies was inconsistent with the text of the Act. Instead, we argued, access to the Act’s special remedies for counterfeiting requires only (1) a finding of trademark infringement and (2) that the trademark infringement involved the use of a counterfeit mark. In our view, while the similarity of the products themselves is directly relevant to whether infringement occurred, it is not relevant to whether the defendant’s mark was a “counterfeit,” as defined by the Act.

Appellate Courts Weigh In

We noted in the article that no appellate court had yet weighed in on this issue. That has now changed. The Ninth Circuit recently rejected the argument that “counterfeiting” required “stitch-for-stitch” copying. Y.Y.G.M., SA v. Redbubble, Inc., 75 F.4th 995, 1004-05 (9th Cir. 2023).

In that case, the plaintiff Y.Y.G.M. SA, doing business as Brandy Melville, sued defendant Redbubble, Inc., for trademark infringement and counterfeiting. Brandy Melville owns a registration for its Brandy Melville Heart Logo for various products, including clothing, home goods, and stickers. Redbubble operates an online marketplace where third-party artists are able to upload artwork to be used by customers for “print on demand” products. One or more third-party artists uploaded a copy, or a near copy, of the Brandy Melville Heart Logo, allowing it to be placed on various goods and sold to consumers through Rebubble’s marketplace.

After a trial, a jury found (among other things) that Redbubble was liable for contributory trademark infringement for the sale of products bearing a copy of the Brandy Melville Heart Logo, and that copy of the Brandy Melville Heart Logo used on the products was a “counterfeit” under the Act. Y.Y.G.M. SA v. Redbubble, Inc., No. 2:19-cv–04618-RGK-JPR, 2021 WL 4816618, at *2 (C.D. Cal. July 27, 2021). In our view, these findings were all that was required for Brandy Melville to access the Act’s special remedies for counterfeiting – (1) infringement that (2) involved a counterfeit mark. The district court disagreed. It rejected the jury’s verdict and entered judgment as a matter of law for Redbubble finding that Brandy Melville had failed to present evidence that any infringing products were “similar to . . . let alone stitch-for-stitch’ copies of Plaintiff’s products.” Id.

On appeal, the Ninth Circuit reversed. It found that that “text [of the Lanham Act] does not require counterfeit goods to be exact replicas of existing merchandise” and noted that the district court should have instead “evaluated whether [the] evidence supported a likelihood of confusion without requiring a stitch-for-stitch copy.” Y.Y.G.M., SA, 75 F.4th 1004-05.

The same issue is currently pending before the Fifth Circuit in Gibson Brands, Inc. v. Armadillo Dist. Enter. Inc., 5th Cir. No. 22-40587. There, the jury found (1) that defendant Armadillo infringed plaintiff Gibson’s trademarks and (2) that the infringement involved the use of a counterfeit mark. Gibson Brands, Inc. v. Armadillo Dist. Enter., Inc., — F.Supp.3d —-2023, 121 Fed. R. Evid. Serv. 173, 2023 WL 2815156, *1 (E.D. Tex. Apr. 6, 2023). There also, Armadillo argued that it could not be liable for counterfeiting because its products were not identical to Gibson’s products. Id. at *24-25. Unlike in the Brandy Melville case, however, the district court rejected this argument, finding that an “approach that looks toward the entire product skimps over the Lanham Act’s plain language. Specifically, the Act defines “counterfeit” as a mark— making no reference to the product as a whole.” Id.

Looking Ahead

Armadillo appealed the district court’s decision and briefing is underway before the Fifth Circuit. We look forward to another appellate decision on this issue. If the Fifth Circuit agrees with the Ninth Circuit, it may dissuade district courts, even outside of these circuits, from perpetuating the “stitch-for-stitch” requirement. If the decisions are contradictory, it may tee up the issue for consideration by the Supreme Court.

Image Source: Deposit Photos
Author: 72soul
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