Coach, Inc. v. Goodfellow
717 F.3d 498, 106 U.S.P.Q. 2d (BNA) 2033, 2013 U.S. App. LEXIS 10976 (2013)
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Rule of Law:
A party is contributorially liable for trademark infringement under the Lanham Act if it knows or has reason to know that another is engaging in trademark infringement and continues to supply a product or service that facilitates the infringement.
Facts:
- Frederick Goodfellow owned and operated The Southwest Flea Market, where he rented booths and storage containers to vendors.
- On January 15, 2010, Coach, Inc. sent a letter to Goodfellow, notifying him that vendors at his flea market were selling counterfeit Coach products.
- On March 26, 2010, the Shelby County District Attorney's Office sent Goodfellow a second letter, again informing him of the ongoing sale of counterfeit Coach items.
- Law enforcement officers raided the flea market on three separate occasions (April 2010, March 2011, and June 2011), seizing thousands of counterfeit Coach products.
- Goodfellow admitted knowing that vendors continued to sell counterfeit products after he received the first warning letter from Coach.
- Goodfellow's remedial measures included distributing pamphlets, posting signs originally intended to warn about counterfeit currency, and holding a poorly attended, voluntary meeting with vendors.
- The flea market staff received no training to identify counterfeit goods, and vendors were not required to sign agreements promising not to sell counterfeit products.
Procedural Posture:
- Coach, Inc. sued Frederick Goodfellow in the U.S. District Court, with the case being decided by a U.S. Magistrate Judge.
- Coach filed a motion for partial summary judgment on the issue of Goodfellow's liability.
- Goodfellow failed to respond to the motion for summary judgment.
- The district court granted partial summary judgment to Coach, finding Goodfellow contributorially liable.
- Goodfellow's subsequent motion to set aside the summary judgment order was denied by the district court.
- A jury trial was held solely on the issue of damages, where the jury found Goodfellow's infringement to be willful and awarded Coach $5,040,000.
- The district court entered judgment on the verdict and also awarded attorney's fees to Coach.
- Goodfellow, as the appellant, appealed the district court's judgment to the U.S. Court of Appeals for the Sixth Circuit.
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Issue:
Can a flea market operator be held contributorially liable under the Lanham Act for trademark infringement committed by vendors renting space at the flea market?
Opinions:
Majority - Judge McKeague
Yes. A flea market operator can be held contributorially liable for trademark infringement by its vendors. Adopting the test from the Supreme Court case Inwood Laboratories, the court held that a party is liable for contributory infringement if it continues to supply a product or service to someone it knows or has reason to know is engaging in trademark infringement. Here, Goodfellow had actual knowledge of the infringing activity from the letters sent by Coach and the District Attorney, as well as from multiple police raids. Despite this knowledge, he continued to supply flea market resources—booths and storage—to the infringing vendors. The court characterized Goodfellow's inadequate remedial efforts and failure to investigate as 'willful blindness' or 'ostrich-like practices,' which is sufficient to establish liability.
Analysis:
This case formally establishes the standard for contributory trademark infringement liability for marketplace operators within the Sixth Circuit. By adopting the 'knows or has reason to know' standard from Inwood and aligning with other circuits, the court clarifies that operators of physical venues like flea markets cannot feign ignorance of blatant infringement. The decision solidifies the principle of 'willful blindness,' meaning a party cannot escape liability by deliberately choosing not to investigate suspicious activity after being put on notice. This precedent strengthens the ability of trademark holders to pursue not only direct infringers but also the third-party entities that provide the essential infrastructure for the infringement to occur.
