District Court Finds Broker, Forwarder Infringed Nike Trademarks, Orders Broker to Pay Damages
A customs broker will pay $240,000 in damages, and a freight forwarder a still undetermined amount, after the New Jersey U.S. District Court on July 19 held both liable for trademark infringement related to shipments of counterfeit Nike sneakers for which they arranged entry and transportation. The court found the arrangement of transportation and creation of documents related to the shipments constituted the “use in commerce” of the trademarks under the Lanham Act, rejecting the forwarder’s argument that it had no physical control or knowledge of the contents of the shipments.
The forwarders, City Ocean Logistics and City Ocean International, claimed they were innocent service providers who had no reason to know their services were being used by counterfeiters. But the Lanham Act, which governs trademark infringement, is a “strict liability statute” without any consideration of intent, the district court said. Anyone that uses a counterfeit mark in commerce is liable, it said. Intent only matters when calculating damages for a Lanham Act violation, the district court said.
Several courts have recently held that arranging for transportation constitutes “use of commerce” under the Lanham Act, the court said. Just like in those cases, City Ocean was actively involved in arranging for the transportation of the counterfeit Nike footwear, it said. City Ocean created a bill of lading that identified the goods as ceramic tile, and identified the shipper and ultimate consignee as two parties it never had contact with. It also arranged for their placement on a cargo ship, and provided the broker named in the lawsuit, Eastern Ports, with the power of attorney to act as broker in the name of an importer it had also never contacted.
In short, City Ocean “played an active role in arranging for transportation” of the counterfeit footwear, “including by taking responsibility for the goods and making representations regarding the nature of the goods.” It “materially participated in the transportation” of the footwear,” constituting use in commerce under the Lanham Act, the district court said. The court also found City Ocean violated customs laws against importation of unauthorized goods with a recorded trademark under 19 USC 1526. The amount of damages was not calculated by the court, though a related order says it retains jurisdiction to do so at a later date.
The broker, Eastern Ports, had not defended itself in the case after its lawyer withdrew in 2013 (see 13090601). The court found Eastern Ports in default, holding it liable for trademark infringement for reasons similar to those related to City Ocean. And because Eastern Ports was found in default, the court also held that Eastern Ports intended to counterfeit Nike’s shoes, absent any evidence or argument to the contrary. Damages for trademark infringement may only rise above $200,000 if the infringement was willful.
Accordingly, Nike argued Eastern Ports should pay damages at $400,000 for each of the eight trademarks infringed, for a total of $3,200,000. But the containers were seized before they were sold, so Nike didn’t suffer any actual lost profits. There were also only limited trademarks covering footwear involved. In the end, the court ordered Eastern Ports to pay $30,000 per infringed trademark, for a total of $240,000. It also issued an injunction barring Eastern Ports from involving itself in the importation, distribution and sale of goods that infringe Nike trademarks.
Email ITTNews@warren-news.com for a copy of the court’s opinion.
(Nike, Inc. v. Eastern Ports Custom Brokers, Inc., et al., D.N.J. 2:11-cv-4390, dated 07/19/18, Judge Cecchi)