Gucci America Inc. v Frontline Processing Corp.

Case Name: Gucci America Inc. v. Frontline Processing Corp.

Case Cite:

Gucci Am., Inc. v. Frontline Processing Corp., 2010 U.S. Dist. LEXIS 62654 (S.D.N.Y. June 23, 2010).
Lexis: 2010 U.S. 62654
2010 U.S. Dist. LEXIS 62654

Facts of the case:
Prior to suing the three defendant credit card processing companies, Plaintiff successfully won suit against the Laurette Company, which was responsible for maintaining "thebagaddiction.com" website. This website was proven to sell many 'replica' luxury products, especially replica's wearing the Gucci name and various trademarks, for prices much less than the authentic product. Additionally, the site was shown to have infringed by incorporating the Gucci name and trade mark throughout the website's content, despite, expressly stating that the products were merely "mirror images" of Gucci products. Laurette eventually admitted to liability as they they willfully and intentionally used, reproduced and/or copied the Gucci marks in connection with their manufacturing, distributing, exporting, importing, advertising, marketing, selling and/or offering to sell their counterfeit products. The court ruled in favor of Gucci, and the website was removed.

Gucci America then sought to sue three additional parties, Durango Merchant Services, Frontline Processing Corporation, and Woodforest National Bank, claiming that the defendants acted as an agent for Laurette Counterfeiters and similar counterfeit website operators, by providing the services and processing electronic payments of known counterfeit goods. Gucci argues that the defendant's services facilitated Laurette Counterfeiter's website by enabling the ability to quickly and efficiently transact sales for the purchase of counterfeit products, further arguing that without the services provided by the three defendants, thebagaddiction.com would not be able to operate or functionally exist.

Procedural Posture:
A manufacturer of designer luxury products, Gucci America Inc., whose principle place of business is New York, charged an online retailer "thebagaddiction.com" and its credit card processing affiliates with trademark infringement, for obtaining and distributing known counterfeit Gucci products to the general public. Gucci successfully proved infringement on the part of thebagaddiction.com for the sale of known counterfeit goods and was now alleging that the three defendant credit card processing companies were liable for infringement, as their services enabled thebagaddiction.com to sell counterfeit items, under the Lanham Act, 15 U.S.C. ßß 1114, 1125, 1116, 1117, contributory trademark infringement and counterfeiting under the Lanham Act; vicarious liability for trademark infringement and counterfeiting under the Lanham Act; and trademark infringement and unfair competition under New York state law, see N.Y. Gen. Bus. Law ßß 360-k, 360-o. The three defendant companies jointly moved to dismiss the suitfor lack of personal jurisdiction and the failure to state a claim pursuant to F.R.C.P. 12(b)(2)(6).

Defendant's motion is denied.

Important Dicta Likely future importance or unanswered questions:
Importantly here, the court relies on the modified form of the Inwood test to determine whether or not the defendant's meet the Seventh Circuit's "control" requirement for contributory liability. Under the Inwood test contributory liability is limited to those who control, directly or indirectely, the party responsible for infringing conduct. The element for requiring control arose out of teh fela market context and is based largely in landlord-tenent principles, however, the concept of control established in Inwood test "laid down no limiting principle that would require defendant to be a "manufacturer or distributor" and whether the venue is online or in brick or mortar is immaterial." Rather the only relevant inquiry for contributory liability is the "extent of control...over the third party's means of infringement."

Critical Analysis:
Here Gucci successfully showed that each of the three credit card processing defendants were subject to personal jurisdiction of selected forum, and showed sufficient evidentiary support to proceed under charge of contributory liability. Contributory liability was relevant charge as there was evidence enough to indicated that Durango intentionally induced trademark infringment, and that both Woodforest and Frontline possessed sufficient control over the infringing transactions and knowingly provided services to a counterfeiter.

Woodforest and Frontline were found to have sufficient control after evaluating their actions in respect to the Supreme Court's conclusion in eBay, that they had essentially "furnished the means of consummating the trademark infringement" because the defendants provided an "essential factor" of the infringement which was the sale and distribution of counterfeit goods. Tiffany, Inc. v. eBay Inc., 600 F.3d 93, 102 (2d Cir. 2010). It is not necessary to prove that the defendants manufactured the goods, it is sufficient to show that the Laurette website was functionally dependent on the defendant's services to demonstrate that the defendant's possessed sufficient control needed for contributory liability finding. Perfect 10, Inc. v. Visa Intern. Serv. Ass'n 494 F.3d 788, 807 (9th Cir. 2007).
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