Over a year ago, Coach brought a lawsuit against Preston Henn, the landlord and owner of the Swap Shop flea market in Fort Lauderdale, Florida. The lawsuit, which was brought in federal court in Fort Lauderdale, alleged that Henn and his wife, Betty, turned a willfully blind eye to vendors selling counterfeit Coach products. The suit followed more than a year of warnings, letters from lawyers, raids by federal and local law enforcement agents, and an investigator sent by Coach to hunt for the counterfeit merchandise. The Coach goods sold at the Swap Shop were "cheap, inexpensive and inferior in quality" and were "blurring and tarnishing the distinctive quality" of the brand, according to lawyers for Coach. Cut to present day and it looks as though the suit will actually make it to the courtroom (as opposed to settling, like many similar cases do), and we’re here to predict the outcome.
Henn, a wealthy 82-year-old entrepreneur, says of the situation, “We’ve done everything we can to stop it. I've banned the vendors from selling anything that looks like a Coach product, I've banned them from selling counterfeits, I've even banned them from selling used Coach products.” He believes that it’s impractical to expect him to patrol what’s being sold by each of the more than 2,000 vendors at the flea market, especially in light of the fact that the Swap Shop attracts more than 10,000 shoppers on weekends. And in hopes of giving jurors the full effect, Henn and his counsel have asked U.S. District Judge William Dimitrouleas to agree to bring the jurors to the Florida-based flea market so that they can experience firsthand the “extraordinary hustle and bustle of the Swap Shop."
Whether the jurors will get to go on the field trip or not and what impact it will have on their decision if they do are things we can’t predict. What we can do, though, is look at what other cases have said when it comes to flea market owners being held liable for their vendors’ actions.
In the 90s, two very important decisions paved the way in terms of flea market owner liability. In 1992, the Seventh Circuit held in Hard Rock Cafe Licensing Corp. v. Concession Services, Inc. that a flea market operator can be liable for trademark violations by its vendors if it knew or had reason to know of them. And in 1996, the Ninth Circuit observed in Fonovisa, Inc. v. Cherry Auction, Inc. that a flea market operator "can not disregard its vendors' blatant trademark infringements with impunity" and held that aflea market operator was liable for contributory trademark infringement because it knew or had reason to know of the infringing activity.
In 2004, the United States District Court for the Eastern District of California held that Richard Sinnott, the owner and operator of Marysville Flea Market, was liable for the actions of his vendors, who were selling “pirated or counterfeit music.” Sinnott was found to be liable for contributory copyright infringement because he had knowledge of direct infringement (he had been notified that the vendors were selling music illegally) and he contributed to the direct infringement (by operating the flea market and providing support services). The court also found him liable for vicarious copyright infringement because of his right and ability to control the vendors and because he benefited from the direct infringement.
And in keeping with the notion that courts are unwilling to allow a flea market owner to shirk responsibility simply because he or she is not the one making the actual sale, is an extremely recent lawsuit brought by the clearly litigious Coach against Frederick Goodfellow, a Memphis, Tennessee-based flea market owner. The Court of Appeals for the Sixth Circuit affirmed a $5 million damages award against Goodfellow, finding him guilty of contributory trademark infringement. Despite the fact that Goodfellow took “remedial measures” – notifying vendors that selling counterfeit goods was prohibited and offering a voluntary meeting with vendors – the court still found that he facilitated continued infringing activity because he failed to “deny access to offending vendors or take other reasonable measures to prevent use of flea market resources for unlawful purposes.” In its decision, the court took into account that Goodfellow had been put on notice by Coach of the infringing goods, and thus knew or should’ve known that counterfeit goods were being sold by vendors.
As for Henn, there’s no denying that he knew about the direct infringement of his vendors because Coach had been notifying him for quite some time. As if that’s not notice enough that something illegal is going on in your flea market, there are also the raids on the Swap Shop to consider. And while Henn claims that he banned vendors from selling counterfeit goods, a remedial measure similar to Goodfellow’s, there’s nothing to suggest that Henn investigated to find the vendors selling infringing goods or denied rental space to said vendors.
So, a word to the wise and a warning to flea market owners (including Henn): case after case has found that you can and likely will be held responsible for the infringing actions of your vendors. So there’s really no hiding behind the excuse that you aren’t directly involved in selling the infringing goods.
Jennifer Williams is a recent law student grad, who writes about fashion, the legal avenues available for protecting it, and the ways in which the laws are falling short. For more from Jennifer, visit her blog, StartFashionPause, or follow her on Twitter.