Non-Vessel Carrier Cleared of Direct Trademark Infringement Liability by Federal District Court

Shine Shipping and Shine International (Shine), companies that arrange for the shipment of goods with vessel operating carriers, were found not to be directly liable for the shipment of counterfeit Nike footwear by the U.S. District Court for the Southern District of New York, in a Sept. 30 opinion (Nike, Inc. v. B&H Customs Services, Inc., et al., S.D.N.Y. #20-01214).

There is a possibility that Shine may be held liable under contributory infringement of the Lanham Act, but the court said that it was not able to rule on that question due to a genuine dispute of facts in front of the court. Judge Jesse Furman instructed both Shine and Nike to prepare for a trial on the contributory infringement question, although he did suggest settling the case before the case reaches that point.

Shine Shipping and Shine International are foreign non-vessel operating common carriers that were contacted by a Chinese company I/O Interconnect to arrange five shipments from China to the U.S. in 2017-18. The shipments were represented to Shine to be for a Hong Kong-based firm called IO Innovative Electronic Co. For these five shipments, the house bill of lading listed Zhong Wang Lighting Factory as the Chinese shipper and "Artiva" as the U.S. consignee receiving the shipments. The HBL also listed the contents of the shipments as lamps, as opposed to the counterfeit Nike shoes that were actually in each shipment.

Shine contracted with vessel operator K-Line America for the first two shipments and Maersk Line A/S for the remaining three. For all five shipments, though, Shine tapped Hana Freight LLC as the consignee to receive the shipments. Shine also employed CTS Global Supply Chain Solutions to arrange shipping with Maersk. For each shipment, Hana used B&H Customs Brokers to act as its broker, and also worked with Tom Lee, the putative president of Artiva. Hana then received a customs power of attorney from Lee for the brokers to use, which was returned in the name of "Artiva USA Inc.," the court said. B&H then turned around and filed customs paperwork for the shipments using the name "E-Ko Image, Inc.," doing business as Artiva ("E-Ko"), and not Artiva USA.

Artiva had been an operating name of the California company E-Ko image, which does import lamps and furniture. But a review of California’s online corporate records would have revealed that the name Artiva had been forfeited by E-Ko two years earlier, in 2015, and Artiva’s operations suspended. Nor did any corporate records mention any Tom Lee. The real shippers were using a stolen identity.

CBP seized the fifth shipment in November 2019 after finding out that it contained counterfeit Nike shoes. Shine said that this was the first time it had heard that the five shipments contained illegal products. Nike then brought a case in federal court against nearly every party involved, landing settlements with B&H Customs in May 2020 (see 2005130023) and Hana in September 2020 (see 2009300061). Nike then turned its attention to Shine, alleging that the non-vessel carrier directly engaged in trademark infringement under the Lanham Act.

Shine made two arguments, both of which the court agreed with. The first found that under Sections 1114 and 1125(a) of the Lanham Act, a defendant must "use" a plaintiff's mark in commerce in connection with its own goods and services. "[Section 1125(a)'s] language, like the language in Section 1114, makes plain that the infringer must have some intention to sell, advertise, or distribute the infringing product or service in order for strict liability to attach," the opinion said. "Mere unwitting transportation of another’s goods is not enough under the language of either provision." Even if transportation constitutes use, the transportation in this case was not in connection with Shine's goods or services, Shine argued.

Shine also argued that holding transporters strictly liable would run against the theory of "contributory infringement" adopted by the Supreme Court in 1982, "which found that a distributor or manufacturer is liable for infringement of its customers only if it induces the customer to infringe or knows or should know about the infringement." Shine says it "would make little sense" to find transporters strictly liable based on violations committed by their customers when other service providers are only liable if they "induce another to infringe a trademark or know or have reason to know" that their customers are infringing on a trademark.

Having dismissed Shine's direct liability under the statute, the court then said that a trial was necessary to determine if Shine is guilty of contributory infringement on Nike's trademark. Since there is genuine dispute over whether Shine knew or should have known that I/O Interconnect or IO Innovative were shipping counterfeit goods, the claims cannot be dismissed and must be settled through further litigation. Nike says Shine should have known ever since there was a problem with "identity theft" after it received a customs power of attorney in the name of Artiva USA but using the federal tax ID number of E-Ko. Shine said that it didn't learn the shipment had counterfeit goods until CBP seized it and that it "did not know that the name of the shipper and consignee it had been provided by its customer was inaccurate at the time of the shipment."