Keep Your Eyes Open: Protecting Trademarks Through Active Litigation

Industry-specific trade shows offer manufacturers the opportunity to market their products and keep tabs on trends in their industry. However, these shows also provide an opportunity for manufacturers to identify counterfeit models of its products offered on the market. Bond Manufacturing (“Bond”), which produces outdoor heating units, arrived at the 2013 National Hardware Show in Las Vegas and discovered counterfeit versions of its products being exhibited at a nearby booth. Bond’s president was assisting with setting up the company’s booth when he noticed goods bearing Bond’s trademark at an exhibition booth operated by Bond’s previous business partner, Xiamen Hwaart Composite Material. The counterfeit goods included various products, including patio heaters, fire pits, and fireplaces. Combating counterfeiters is part of the daily routine for manufacturers like Bond, but identifying the sources of counterfeit products is typically challenging in the age of Internet commerce as counterfeiters are rarely bold enough to market their ersatz products out in the open in the light of day, particularly when the counterfeiter is your former business partner.

Bond promptly brought an action in the United States District Court for the District of Nevada captioned Bond Manufacturing Co. v. Xiamen Hwaart Composite Material, Ltd., et al., seeking a preliminary injunction, permanent injunction, and damages. Bond’s complaint alleged that the unauthorized products copied the trade dress, and “appear[ed] to be exact knock-offs of Bond products in every detail, because they were unlawfully made by Bond’s former manufacturer to Bond’s specific, proprietary designs.” The Court ultimately entered an order for seizure of the goods, enjoining the defendants from further selling the goods, and required Bond to post a bond of $3,000.

On Monday, January 12, 2015, District Court Judge Andrew P. Gordon for the District Court for the District of Nevada entered a $7 million judgment for willful counterfeiting of goods, along with $100,000 for willful trademark infringement. He also ordered the defendant company and co-defendants, Jimmy Chen and Tina Wu, to pay interest on the judgment and over $350,000 in attorneys fees, as well as $8,208.89 in costs.

This case demonstrates the value in the active assertion of trademark rights, especially in circumstances involving counterfeiting where the trademark owner wishes to obtain court approval for seizure of counterfeit goods and products that infringed the trademark. Fast response to infringement is a vital component in trademark protection, particularly when counterfeiting is involved. Obtaining a preliminary injunction and seizure order is the primary goal at the initial stage as it serves to protect immediately the trademark and consumers and maintains the market integrity. Also, brand owners should understand that federal trademark counterfeiting laws are robust and provide district courts with the ability to award significant damages, treble damages, and attorneys fees.

It should be noted that most circuit courts, including the Third Circuit, require that district court judges order trademark owner plaintiffs seeking preliminary injunctive relief to post a bond. Further, as we have previously addressed, preliminary injunctions in the trademark context require proof of irreparable harm following the Third Circuit’s August 2014 holding that plaintiffs seeking preliminary injunctive relief under the Lanham Act are no longer entitled to a presumption of irreparable harm.

Gibbons will continue to monitor developments in trademark protection in the federal courts.

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