Nike Holds Broker Accountable for Counterfeits

First it was Coach and now it’s Nike that’s looking to brokerage firms for accountability when it comes to the manufacture and sale of counterfeit goods. This indicates to us that a new form of brand protection may be afoot when it comes to counterfeit goods. No, it’s not an overhaul of the current laws or stronger protections, but it is, nonetheless, reason for hope. Most importers hire brokerage firms to handle the details related to the importation of goods. And while it may often be true that the broker simply holds the containers filled with goods without the wherewithal to know what’s inside, there are instances when the brokerage firm knew or should’ve known of the infringing goods.

Not too long ago, we told you about Coach's $8 million success against a brokerage firm. In that case, Coach’s strongest argument was that fraudulent documents had been filed to allow for the importation of the counterfeit goods, making it an open-and-shut case of someone knowing about the infringing goods. And now Nike has brought a similar suit against a Customs broker, claiming that the broker should have known that the trademark infringers were importing illicit goods. Nike is relying on the fact that an invalid Power of Attorney was attached to the goods in question, which should have alerted the broker that the goods were not authentic. It has yet to be seen if this will be persuasive enough to satisfy the “know or should have known” requirement.

Suits against brokerage firms raise a lot of questions. Most importantly, in our opinion, is whether the broker should be held responsible for someone else’s wrongdoing? And we think that the Coach case got it right, if the broker knows about it or should know about it, why not? Counterfeiters may be a lot of things, but being unaware of the loopholes is not one of them. They know not to use their real identities when importing counterfeit goods, which makes it nearly impossible to hold them accountable. So, when you’ve got a broker that is actually in on the scheme (or merely overlooks suspicious behavior and/or documentation), it seems only fair to make him take the fall.

Perhaps this will raise the level of diligence taken to stop counterfeit goods before they ever have the chance to reach consumers.