Supreme Court Skips Case on Individual Liability for Willful Trademark Infringement

“The Eleventh Circuit…said that a ‘showing of intent or bad faith is unnecessary to establish a violation’ under U.S.C. § 1114(1)(a). All that is required under that provision is that the individual ‘actively and knowingly caused the infringement,’ said the court.”

individual liabilityThe U.S. Supreme Court today denied certiorari to Diamond J Wholesale, LLC, who petitioned the Court in December 2023 to clarify how individual liability for willful trademark infringement by a corporation should be assessed.

The U.S. Court of Appeals for the Eleventh Circuit in August 2023 backed a Georgia district court’s finding that Diamond and its owner, Raj Solomon, willfully infringed trademarks owned by Top Tobacco, L.P., Republic Technologies (NA), LLC, and Republic Tobacco, L.P. (Top Tobacco) for cigarette rolling papers. The ruling upheld an $11 million verdict in favor of the tobacco companies.

Diamond Wholesale argued that the district court had erred in excluding evidence, including witness testimony and invoices, which would have proven that the company’s agents believed they were purchasing the counterfeit products from a legitimate company (Star Importers), and that their infringement could therefore not have been willful.

With respect to the district court’s grant of summary judgment finding Solomon individually liable, Solomon argued that there were genuine issues of fact outstanding as to his state of mind, and that knowledge of infringement is required to establish individual liability under the Lanham Act. But the Eleventh Circuit, citing Chanel, Inc. v. Italian Activewear of Fla., Inc., said that a “showing of intent or bad faith is unnecessary to establish a violation” under U.S.C. § 1114(1)(a). All that is required under that provision is that the individual “actively and knowingly caused the infringement,” said the court. Since Solomon was the sole owner and member of Diamond and conceded that “he was ‘chiefly responsible for buying and selling the counterfeit products and therefore ‘actively caused the infringement as a moving, conscious force,’” this was sufficient for the district court to grant summary judgment.

In a footnote, the court explained that, while willful infringement does require knowledge, such knowledge is “usually a matter for the fact-finder” and the jury found that Solomon had acted willfully.

In its petition, Diamond argued that the Eleventh Circuit did not provide sufficient guidance as to what actions by a corporate officer constitute a “moving, conscious force” behind infringing activity, as articulated by the district court decision. The petition also said the circuits take varying approaches to the topic of individual liability and that:

“[T]he Eleventh Circuit’s own language has been internally inconsistent and vague, as the Court has simultaneously suggested that personal liability must be knowing and significant and that evidence of direct participation is definitive. To the extent the Eleventh Circuit continues to hold that, even if knowledge is irrelevant, an individual’s participation must be a moving and active force, the Circuit has provided no guidance on the line between mere participation and being an active force.”

Furthermore, Diamond argued, while “Mr. Soloman unknowingly acquiesced to the continued purchase of counterfeit goods, he was not the moving force in triggering the infringing activity.”

The Supreme Court’s denial of certiorari upholds the $11 million judgment backed by the Eleventh Circuit.

Image Source: Deposit Photos
Author: hafid007
Image ID: 453186314 

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