George G. Mahfood and David B. Rosemberg, with Broad and Cassel. (J. Albert Diaz)
If commercial landlords catch wind of tenants selling counterfeit merchandise, they’d better do something about it — or risk losing a lawsuit.
That’s the takeaway from a $1.9 million judgment secured by Miami lawyers David Rosemberg and George Mahfood, who believe the case is the first time a jury has applied a 1992 federal appellate court decision to find contributory trademark liability against a flea market landlord who isn’t also the market’s owner/operator.
The Broad and Cassel partners represent the trademark holders for two high-end brands of sunglasses, Ray-Ban and Oakley. Law enforcement raids of a College Park, Georgia, indoor flea market, the Old National Discount Mall, turned up thousands of counterfeit sunglasses and other items. When brand owner Luxottica S.p.A. sent investigators back to the flea market months after one raid, knockoff Ray-Bans were still for sale, the plaintiffs said.
Luxottica and Oakley Inc. sued the flea market’s operator, along with the property owner and managers, in Atlanta federal court. Another Georgia case 25 years earlier, Mini Maid Services v. Maid Brigade Systems, led the U.S. Court of Appeals for the Eleventh Circuit to rule that a franchisor’s “bad faith refusal to exercise a clear contractual power to halt the infringing activities of its franchisees” could lead to a finding of contributory trademark infringement.
In the flea market case, property owner Yes Assets LLC could have terminated the lease of flea market operator Airport Mini Mall LLC because the lease requires the company to comply with trademark laws, plaintiffs counsel argued — but that didn’t happen. By the same token, Airport Mini Mall could have terminated its leases with its own tenants, who ran the booths selling the merchandise.
“For example, there was a large raid in November of 2014,” Mahfood said. “There were probably 20 vendors inside this discount mall who were arrested and from whose booths counterfeit goods had been seized. Well, in January of 2015, the landlord [Airport Mini Mall] renewed the leases from nearly all of those people, despite the fact that there was clear evidence of arrests and letters from three different brand manufacturers saying ‘Here are the people who were involved in counterfeiting.’”
Rosemberg and Mahfood have experience in such cases, including obtaining a $5.5 million settlement from the Swap Shop in Fort Lauderdale on behalf of Coach Inc. They said they were prepared for the usual defenses: One, that the flea market owner doesn’t sell anything, the subtenants do; and two, that flea market owners don’t have the expertise required to detect counterfeit merchandise.
The plaintiffs argued a booth selling sunglasses presented as Ray-Bans or Oakleys, packaged as new and priced at $15 to $20 apiece just doesn’t pass the smell test.
“If these items were authentic or genuine, they would have a value of hundreds of thousands of dollars,” Rosemberg said. “Courts have found it doesn’t take a rocket scientist to find out these products are fake.”
After a two-week trial before U.S. District Judge Amy Totenberg, the jury decided Feb. 28 to award $100,000 for each of 19 trademark violations found from 2008 to 2016. Jurors found seven counterfeit Ray-Ban trademarks were in use, along with 12 counterfeit Oakley trademarks.
The jury found Airport Mini Mall, Yes Assets and some of the family members involved in the property’s ownership and management engaged in contributory trademark infringement, but found none of them acted willfully. That still leaves them on the hook for the $1.9 million judgment.
Defense lawyers Marvin Dikeman and Andrei Ionescu of Webb Zschunke Neary & Dikeman in Atlanta did not respond to a request for comment.
The plaintiffs lawyers said it’s rare for a case like this one to go to trial, and its outcome is critical, not only for the plaintiffs themselves but for other trademark holders who might find themselves in the same situation.
“When there’s clear notice to the owner that illegal activity is going on on the premises, jurors will pay attention to that,” Mahfood said.
Case: Luxottica Group et al v. Airport Mini Mall et al
Case no.: 1:15-cv-01422-AT
Description: Trademark infringement
Filing date: April 29, 2015
Verdict date: Feb. 28, 2017
Judge: U.S. District Judge Amy Totenberg
Plaintiffs attorneys: David Rosemberg and George Mahfood, Broad and Cassel, Miami; Rachel Krause, Lewis Brisbois Bisgaard & Smith, Atlanta
Defense attorneys: Marvin Dikeman and Andrei Ionescu, Webb Zschunke Neary & Dikeman, Atlanta
Verdict amount: $1.9 million