Monday, July 10, 2017

Outdoor Industry Product Manufacturers: Beware of Potential TrademarkPitfalls

The outdoors and sporting goods industries are key users of the latest high-tech materials such as specialized fabrics, plastics, etc. Manufacturers in the outdoors and sporting goods industry can sometimes unexpectedly find themselves pulled into trademark infringement and counterfeiting lawsuits in America with these large outdoor and sporting goods companies, in connection with these high-tech materials.
For example, a factory might advertise that it can make garments out of a special type of fabric, only to find out that a large outdoors or sporting goods company owns a trademark that is the same as, or confusingly similar to, the name for that type of fabric. The factory only finds out that the name for the fabric is trademarked when the large outdoor company files an aggressive counterfeiting lawsuit against the factory in the United States. The factory’s use of the name for the fabric might have been completely innocent and merely descriptive, perhaps not even qualifying as true trademark infringement or counterfeiting.
However, large brand owners often do not distinguish between actual counterfeiters and innocent users. These owners often sue large groups of factories in a single lawsuit, and use aggressive tactics to force the defendants to pay large settlement payments—up to USD2 million per trademark in some cases. For example, the mark owner may use tools such as hiring undercover shoppers to order small amounts of products from the factory (made out of the special fabric), and ship the product to the USA to substantiate an infringement or counterfeit claim. Then the mark owner files a lawsuit against the factory and uses court orders to quickly freeze the factory’s PayPal or bank accounts. Instead of receiving the lawsuit documents in Chinese, the factory receives an email in English with links to the lawsuit documents on a website, which is also all in English (for example). They may also receive an email from PayPal, saying their account is frozen. Deadlines for the American court system may not be explained, and by the time the factory has translated and attempted to analyze the legal documents, important deadlines may have passed. Certain documents, such as the list of all the defendants the big outdoor company is suing, may be kept “under seal” so that defendant factories cannot know who else has been caught up in the lawsuit, such as their neighboring factories. This prevents the factories from teaming up to mount a defense. Some factories do not immediately realize the seriousness of the situation, since the notice may look nothing like Chinese court documents, or the factory may incorrectly assume they cannot be sued in American court.
If a factory receives an email notice stating that a trademark infringement or counterfeiting lawsuit has been filed against it in the United States, it is important to get legal help immediately. The filing of the lawsuit initiates deadlines for the defendant to take action and file certain documents with the court. Failure to take action could result in judgement being entered against the defendant, and the plaintiff being able to take all the money in the defendant’s PayPal or bank account, including any future accounts.
Best practices, such as reviewing the factory website periodically to ensure no third party trademarks or other intellectual property are used, can help reduce the chances of finding oneself in a lawsuit.

Cassandra Mercer is an associate at McCoy Russell LLP, an intellectual property law firm based in Portland, OR. Cassi graduated with honors from Lewis & Clark Law School, where she participated in the Lewis & Clark Law Review as a member and Executive Editor. Prior to law school, Cassi studied Classics and Physics at Colorado College, and obtained a master’s degree in Classics from the University of Colorado at Boulder.  At McCoy Russell, Cassi works with clients on a wide variety of trademark matters, including use and registration studies, prosecution of trademark applications, oppositions and appeals, licensing, and portfolio development. Cassi also assists clients with copyright and patent enforcement matters. Originally from Colorado, Cassi moved to Portland to mountaineer in the Cascade Mountains, and quickly became enchanted with the beautiful Pacific Northwest. As someone who formerly worked in the outdoors industry, Cassi can be a bit of a gearhead and enjoys trying out the latest outdoor tech. In her spare time, Cassi can often be found playing outside, whether running in Portland’s fantastic urban green spaces, exploring the Columbia River Gorge, or enjoying the mountains and the coast.


Note that the views expressed herein do not represent the views of any law firm or client, and may not even represent the views of the author. This blog is NOT legal advice and is for informational purposes only. No attorney client relationship can be formed by reading this blog or using any of the information provided. The accuracy of the information provided has not been verified.