Michael Kors is going after counterfeits – but instead of looking to the web, the fashion brand is taking on a notorious flea market. According to the complaint that counsel for Michael Kors filed in a federal court in Connecticut this week, C.G.C. Enterprises, Inc., Charles Cheslock, Digsny, Taylor & Hobbes, LLC, and Richard Lebov (“the defendants”) are on the hook for the operation of a New Haven, Connecticut flea market, one with a reputation for being a haven for illegal fashion knockoffs, including infringing and counterfeit Michael Kors products.
Counsel for Michael Kors alleges in the brand’s complaint that since the 1990s, the defendants have run The Boulevard, a sweeping flea market located less than 10 minutes from Yale University’s campus. Not only does the sale of counterfeit goods at The Boulevard date back “over 20 years,” so does the defendants’ knowledge of such sales, according to Kors, which points to the 1996 arrest and conviction of Boulevard-occupant Abdallah Saad Ibrahim for selling counterfeit goods at the flea market as proof.
Since then, the defendants – such as Cheslock, who is the president and owner of CGC, the company that runs the flea market, and Lebov, who is owner of the company that owns the land on which the flea market is located on – have failed to take action to prevent such widespread sales of MK-branded fakes. While the defendants, themselves, are not offering up any fake products for sale, they are on the hook for contributory trademark counterfeiting, infringement, and dilution, and unfair competition, nonetheless.
Why? Because the defendants – who rent out space to third-party vendors – “retain both the right and ability to control [the] actions” of the flea market’s occupants while they are operating within its confines, and by refusing to “take any action necessary to stop the illegal [counterfeiting] activity,” the defendants become liable, as well.
“Despite their general and specific knowledge of the ongoing illegal counterfeiting activity at the flea market, the defendants have turned a blind eye to the activities of the [counterfeit sellers] and created a safe haven and marketplace for which counterfeit Michael Kors merchandize has been and continues to be sold,” Kors asserts in its complaint. While the flea market’s grounds have become inundated with fakes, “the defendants have lined their pockets with the [counterfeit sellers’] rent money and continue to stick their heads in the sand when it comes to the source of said rent money, which are the proceeds of illegal activities.”
With this in mind, Michael Kors has asserted claims of trademark counterfeiting, infringement, and dilution, unfair competition, false designation of origin, and unfair trade practices against the unnamed sellers, themselves, as well as the named defendants. The fashion brand is seeking injunctive relief to bar the defendants from continuing to engage in such behavior, and damages, including any profits that the defendants made in connection with their sale of counterfeit or otherwise infringing MK products.
The case follows from a string of flea market-specific counterfeiting cases filed in the U.S. over the past few decades, which stem largely from a 1992 ruling from the Seventh Circuit Court of Appeals, which 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. Several years later, in 1996, the Ninth Circuit observed in Fonovisa, Inc. v. Cherry Auction, Inc. that a flea market operator "cannot disregard its vendors' blatant trademark infringements with impunity" and held that a flea market operator was liable for contributory trademark infringement because it knew or had reason to know of the infringing activity.
Fast forward to 2004, and the U.S. 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.
More recently, handbag company Coach was successful in two related suits. Following a 2010 suit 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 in Coach’s favor. In 2013, the New York-based fashion brand sued Swap Shop Flea Market, and settled for over $5 million. Thereafter, Louis Vuitton sued the same market and its owners, and settled out of court in the midst of trial in the U.S. District Court for the Southern District of Florida, but not before it was awarded an injunction against the defendants.
*The case is Michael Kors, LLC v. Cheslock et al, 3:19-cv-01364 (D. Conn.)