Fendi Adele, S.R.L. v. Ashley Reed Trading, Inc.
507 F. App'x 26 (2013)
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Rule of Law:
A defendant's deliberate failure to inquire about the authenticity of goods after being put on notice of potential trademark infringement constitutes willful blindness, which satisfies the willfulness requirement for an award of profits under the Lanham Act.
Facts:
- Ashley Reed Trading, Inc., along with Scott and James Ressler (collectively, 'Ashley Reed'), was a seller of branded merchandise.
- In 2000 and 2001, multiple fashion designers other than Fendi filed lawsuits against Ashley Reed for trademark infringement.
- In 2001, Fendi Adele S.R.L. (collectively, 'Fendi') sent a cease and desist letter to Ashley Reed, asserting that Ashley Reed was selling infringing Fendi-branded products.
- Despite being on notice, Ashley Reed continued to purchase Fendi-branded goods from suppliers who provided 'sanitized' invoices that obscured the original source of the merchandise, with some suppliers providing no paperwork at all.
- Ashley Reed failed to maintain adequate records of its supplier transactions and did not retain documentation of its purported side-by-side comparisons of its goods with genuine Fendi products.
- A Fendi executive determined that many of Ashley Reed's invoices, some dating back to 2000, were forgeries.
- After Fendi filed its lawsuit, Ashley Reed returned its remaining Fendi-branded inventory to its suppliers instead of allowing it to be inspected and kept no records of the return.
- An expert for Fendi inspected Fendi-branded handbags sold by Ashley Reed in 2005 and 2006 and confirmed they were counterfeit.
Procedural Posture:
- Fendi sued Ashley Reed in the United States District Court for the Southern District of New York for trademark infringement and related claims.
- On summary judgment, the district court found Ashley Reed liable for willful trademark infringement.
- The district court awarded Fendi over $12 million, which included a disgorgement of Ashley Reed's profits from 2005 and 2006, trebled damages, interest, and attorneys' fees.
- Ashley Reed, as Defendant-Appellant, appealed the district court's judgment to the U.S. Court of Appeals for the Second Circuit.
- Fendi, as Plaintiff-Appellee, cross-appealed, arguing the damage award should have included profits from 2001 to 2004 as well.
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Issue:
Does a defendant's failure to investigate the authenticity of its goods, coupled with poor record-keeping and returning potentially infringing merchandise to suppliers post-lawsuit, constitute willful blindness as a matter of law, justifying summary judgment on a trademark infringement claim?
Opinions:
Majority - Per Curiam (Katzmann, Parker, Wesley, Circuit Judges)
Yes. A defendant's actions amount to willful blindness as a matter of law when, after being put on notice of potential infringement, the defendant intentionally shields itself from discovering the truth about the authenticity of its goods. To establish willfulness, a plaintiff must show either that the defendant had actual awareness of the infringing activity or that its actions resulted from reckless disregard or willful blindness. Here, Ashley Reed was put on notice by Fendi's 2001 cease and desist letter and by lawsuits from other designers. Despite this notice, Ashley Reed failed to adequately inquire about the source and authenticity of the goods it purchased, accepted sanitized or nonexistent invoices, and kept no records of its supposed authenticity checks. Furthermore, its decision to return the remaining Fendi merchandise to suppliers after being sued, rather than allowing inspection, is particularly strong evidence of a deliberate attempt to avoid the truth. Given this overwhelming evidence, no reasonable jury could conclude that Ashley Reed acted with sufficient care, and summary judgment on the issue of willfulness was appropriate.
Analysis:
This case clarifies the standard for proving willful blindness in trademark infringement, particularly at the summary judgment stage. The court's decision emphasizes that a combination of suspicious business practices, poor record-keeping, and evasive conduct after being put on notice can be so compelling that it removes any genuine dispute of material fact regarding the defendant's state of mind. This holding strengthens the position of rights holders against infringers who attempt to feign ignorance by deliberately avoiding confirmation of their products' counterfeit nature. It establishes that courts may infer intent as a matter of law from a pattern of conduct that demonstrates a conscious avoidance of the truth.
