Coach, Inc. et al v. Gata Corporation et al

Filing 69

ORDER granting 57 Motion for Reconsideration re: 52 Order on Motion for Summary Judgment. The court grants defendants' motion for reconsideration (doc. no. 57), but only to the extent allowing defendants to withdraw and amend their answers to Coach's requests for admissions. So Ordered by Magistrate Judge Landya B. McCafferty. (gla)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Coach, Inc. and
Coach Services, Inc.
v.

Case No. 10-cv-141-LM

Gata Corporation
and Martin Taylor

O R D E R
Before the court is defendants‟ motion to reconsider the
court‟s order of April 26, 2011, which granted summary judgment
to Coach, Inc. and Coach Services, Inc. (collectively “Coach”)
on Count I of their complaint against Gata Corporation and
Martin Taylor.

Coach objects.

For the reasons that follow,

defendants‟ motion for reconsideration is granted, but even so,
Coach is entitled to summary judgment on its claim for
contributory trademark infringement.
Withdrawal of Admissions
On December 15, 2010, Coach served defendants with a set of
requests for admissions.

Under a cover letter dated January 19,

2011, defendants‟ counsel served Coach with answers to its
requests.

By letter dated January 27, 2011, Coach‟s counsel

advised defendants‟ counsel that the answers were untimely, and

that Coach would, accordingly, treat the matters covered in its
requests as admitted, by operation of Rule 36(a)(3) of the
Federal Rules of Civil Procedure (“Federal Rules”) unless the
court made a determination to the contrary.
did not respond to Coach‟s counsel.

Defendants‟ counsel

Moreover, defendants did

not move the court to enlarge the time for serving answers to
Coach‟s requests for admissions, and have never formally moved
to withdraw their admissions.
Having given defendants fair warning of its intent to rely
on their admissions, Coach moved for summary judgment on Count I
approximately two weeks later, on February 14, 2010.

In its

summary judgment motion, Coach indicated that it was relying, in
part, on the matters it deemed to be admitted as a result of
defendants‟ untimely response to its requests for admissions.
In its objection to Coach‟s summary judgment motion, defendants
conceded that their answers to Coach‟s requests for admission
may have been two days late and, in reliance on Rule 36(b) and
Pritchard v. Dow Agro Sciences, 255 F.R.D. 164 (W.D. Pa. 2009),
sought to withdraw and/or amend their admissions.
The rule on which defendants rely provides, in pertinent
part:

“A matter admitted under this rule is conclusively

established unless the court, on motion, permits the admission
to be withdrawn or amended.”

Fed. R. Civ. P. 36(b) (emphasis

2

added).

In Pritchard, on which defendants also relied, the

facts were these: (1) the plaintiffs‟ answers to defendants‟
requests for admissions were due on July 21, 2008, 255 F.R.D. at
168; (2) on that date, the plaintiffs asked for, and received
from the defendants, a thirty-day enlargement of time to serve
their answers, id.; (3) on the last day of the agreed-upon time
for serving answers, August 20, the plaintiffs‟ counsel left a
phone message with the defendants‟ counsel indicating that he
would mail answers later that day or the next morning, id.; (4)
on August 25, the defendants‟ counsel received the plaintiffs‟
answers along with a letter apologizing for the delay, id. at
169; (5) at an August 28 case-management conference, the
defendants‟ counsel notified the plaintiffs‟ counsel and the
court of the lateness of the plaintiffs‟ answers, and told the
plaintiffs‟ counsel “that the result of [plaintiffs‟] untimely
response was that the [requests for admissions] were deemed
admitted, unless Plaintiffs filed a motion to withdraw,” id.;
and (6) on September 15, the “Plaintiffs filed [a] Motion to
Withdraw Admissions and to Extend Time for Filing,” id. at 170.
After conducting an extensive analysis under Rule 36(b), the
court in Pritchard granted the plaintiffs‟ motion to withdraw
their admissions.

Id. at 174.

3

Based on the “on motion” language in Rule 36(a) and the
fact that the plaintiffs in Pritchard filed an actual motion to
withdraw their admissions, this court held that because
defendants never formally moved to withdraw their admissions,
the request to do so presented in their objection to Coach‟s
summary judgment motion was insufficient.
Now, in their motion for reconsideration, defendants argue
that the court committed a manifest error of law by failing to
allow them to withdraw and/or amend their answers to Coach‟s
requests for admissions.

Given that decisions concerning the

withdrawal of admissions are subject to the discretion of the
trial court, see Fed. R. Civ. P. 36(b); Siguel v. Allstate Life
Ins. Co., 48 F.3d 1211 (1st Cir. 1995) (unpublished table
decision), 1995 WL 98240, at *4 (citing Farr Man & Co. v. M/V
Rozita, 903 F.2d 871, 876 (1st Cir. 1990)), it is not so clear
that failure to allow the withdrawal of an admission could
constitute a manifest error of law.

But, defendants are correct

in pointing out that several courts have held that a formal
motion to withdraw is not necessary.

See 7 James Wm. Moore,

Moore‟s Federal Practice § 36.13, at 36-45 (3d ed. 2010) (“A
formal written motion to withdraw is not necessary.”); United
States v. Petroff-Kline, 557 F.3d 285, 294 (6th Cir. 2009)
(“Despite its failure to have filed a formal motion to withdraw

4

its claimed admissions, the Government‟s filing of a slightly
overdue response effectively served as such a withdrawal.”);
Kirtley v. Sovereign Life Ins. Co. of Cal. (In re Durability,
Inc.), 212 F.3d 551, 556-57 (10th Cir. 2000) (“we have held that
a response to a motion for summary judgment arguing in part that
the opposing party should not be held to its admissions can
constitute a Rule 36(b) motion to withdraw those admissions)
(citing Bergemann v. United States, 820 F.2d 1117, 1120-21 (10th
Cir. 1987)).
Moreover, the Federal Rules indicate a preference for
resolution on the merits.

See Fed. R. Civ. P. 36(b).

And,

“courts are particularly responsive to allowing late answers to
requests for admission when summary judgment is involved.”
Lucas v. Higher Educ. Assistance Found. (In re Lucas), 124 B.R.
57, 58 (Bankr. N.D. Ohio 1991) (citing St. Regis Paper Co. v.
Upgrade Corp., 86 F.R.D. 355 (W.D. Mich. 1980).

Indeed,

“[e]ntry of dismissal as a discovery sanction is a „drastic‟
approach that is „disfavored absent the most egregious
circumstances.‟”

Sadler v. State Farm Fire & Cas. Co., No.

08cv0951, 2008 WL 4960199, at *1 (W.D. Pa. Nov. 19, 2008)
(quoting United States v. $8,221,877.16 in U.S. Currency, 330
F.3d 141, 161 (3d Cir. 2003)).

While defendants in this case

were not nearly as attentive to the litigation of the admissions

5

issue as the plaintiffs in Pritchard were, resolution of a
summary judgment motion against them is, arguably, too stringent
a sanction for their lack of diligence.

Given the paramount

importance of resolving disputes on the merits when possible,
and out of an abundance of caution, the court grants defendants‟
motion for reconsideration to the extent that it allows
defendants to withdraw their admissions and deems their belated
answers to be timely served.
Allowing defendants‟ answers to Coach‟s requests for
admissions, however, does not necessarily entitle defendants to
relief from the court‟s summary judgment order.

Rather, the

court must now perform a summary judgment analysis based upon
the undisputed evidence that remains.
Summary Judgment Standard
Summary judgment shall be granted “if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to a judgment as a matter of law.”
Civ. P. 56(a).

Fed. R.

“The object of summary judgment is to “pierce

the boilerplate of the pleadings and assay the parties‟ proof in
order to determine whether trial is actually required.‟”

Dávila

v. Corporación de P.R. para la Diffusión Pública, 498 F.3d 9, 12
(1st Cir. 2007) (quoting Acosta v. Ames Dep‟t Stores, Inc., 386
F.3d 5, 7 (1st Cir. 2004)).

“[T]he court‟s task is not to weigh
6

the evidence and determine the truth of the matter but to
determine whether there is a genuine issue for trial.”

Noonan

v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009) (citations and
internal quotation marks omitted).
“Once the moving party avers an absence of evidence to
support the non-moving party‟s case, the non-moving party must
offer „definite, competent evidence to rebut the motion,‟”
Meuser v. Fed. Express Corp., 564 F.3d 507, 515 (1st Cir. 2009)
(citing Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir.
1991)), and “cannot rest on „conclusory allegations, improbable
inferences, [or] unsupported speculation,‟” Meuser, 564 F.3d at
515 (quoting Welch v. Ciampa, 542 F.3d 927, 935 (1st Cir.
2008)).

When ruling on a party‟s motion for summary judgment, a

trial court “constru[es] the record in the light most favorable
to the nonmovant and resolv[es] all reasonable inferences in
[that] party‟s favor.”

Meuser, 564 F.3d at 515 (citing

Rochester Ford Sales, Inc. v. Ford Motor Co., 287 F.3d 32, 38
(1st Cir. 2002)).
Background
As the court noted in its previous summary judgment order,
along with their failure to move to withdraw their admissions,
defendants have also failed to properly oppose Coach‟s statement
of undisputed facts by “incorporate[ing] a short and concise
7

statement of material facts, supported by appropriate record
citations, as to which the opposing party contends a genuine
dispute exists so as to require a trial.”

LR 7.2(b)(2).

Rather, they operate as if their denials of various requests for
admissions count as actual affirmative summary judgment
evidence.

In any event, the following recitation of the facts

to which the relevant law will be applied is drawn largely from
Coach‟s properly supported statement of undisputed facts.
However, as explained above, the court also draws upon
defendants‟ answers to Coach‟s requests for admissions.1
Coach manufactures and sells high-end purses, handbags, and
other similar items.

It also holds an extensive portfolio of

intellectual property including trademarks, trade dress, and
copyrights.
Gata operates a flea market in Derry, New Hampshire (“Flea
Market”).

Taylor is Gata‟s sole owner and shareholder.

Dep. (doc. no. 38-2) 7.2
Market.

Id. at 18.

Taylor

He also works regularly at the Flea

Among other things, he runs the ticket

1

As a practical matter, the principal effect of allowing
defendants to amend their admissions is the loss of several
admissions concerning defendants‟ knowledge of counterfeit
merchandise at the Flea Market from 2005 through the date of the
first raid on the Flea Market in 2009.
2

Except where otherwise noted, all references to Martin
Taylor‟s deposition are to the more complete version appended to
defendants‟ objection to Coach‟s motion for summary judgment.
8

booth and patrols the Flea Market to check for illegal
merchandise.

Id.

In 2005, Chinese vendors from New York first began renting
spaces at the Flea Market.

Taylor Dep. 46.

Those vendors have

since come to predominate over vendors Martin refers to as the
“yard sale people.”

Taylor Dep. 47:1.

With the increase in

Chinese vendors from New York has come a corresponding increase
in the number of purses offered for sale at the Flea Market.
Id. at 66-68.
The Flea Market requires purse vendors to pay a rental fee
for booth space that is higher than the fee paid by vendors who
do not sell purses.

Horton Dep. (doc. no. 31-9) 18.

Counterfeit Coach purses are distinguishable from authentic ones
on the basis of both workmanship and price, with authentic Coach
purses selling for $300, on average, and counterfeits selling at
the Flea Market for less than $20.

Walden Dep. (doc. no. 31-10)

12.
The Flea Market has been raided by federal and state lawenforcement officers on at least four occasions, starting in
June of 2009.3

Defs.‟ Admiss. (doc. no. 38-3) # 17.

Those raids

resulted in the seizure of, among other things, counterfeit
Coach purses.

Id. # 18.

The raids also resulted in the arrest,

3

Subsequent raids took place in October and December of
2009, and January of 2010.
9

prosecution, and conviction of several vendors for selling,
among other things, counterfeit Coach merchandise.
20.

Id. ## 19-

In addition, surveys conducted by Powers & Associates (a

private detective agency), the federal Bureau of Immigration and
Customs Enforcement, and the Derry Police have enumerated dozens
of vendors offering, collectively, thousands of counterfeit
items for sale at the Flea Market in early 2008, May of 2008,
the end of 2008, June of 2009, October of 2009, and December of
2009.

Powers Decl. (doc. no. 31-6) ¶¶ 8, 9, 10, 12, 15, 16, 17.

The last survey in 2008, both of the surveys in October of 2009,
and the survey in December of 2009 all revealed counterfeit
Coach merchandise being offered for sale at the Flea Market.
Id. at 10, 15, 16.
By letter dated August 4, 2009, Coach‟s manager of
intellectual property informed Taylor of Coach‟s concern over
the sale of counterfeit Coach purses at the Flea Market and
directed Taylor to take various steps to curtail those sales.
Taylor Dep., Ex. 7 (doc. no. 31-5, at 28).

Prior to the first

raid, defendants had no procedures in place to prevent the sale
of counterfeit merchandise.

Defs.‟ Admiss. # 22.

Even after

the raid, and after receiving Coach‟s letter, defendants never
provided Flea Market employees with any training on how to

10

detect counterfeit merchandise or how to uncover surreptitious
sales of counterfeit merchandise.

Id. ## 28, 29.

At some point after the initial raid, defendants posted a
sign stating that no Coach merchandise could be sold at the Flea
Market.

Defs.‟ Admiss. # 25; Taylor Dep. 69.

Taylor testified

that the Flea Market adopted a policy that any vendor seen
selling counterfeit merchandise would have to give up his or her
spot, Taylor Dep. 69-70, but that no vender had ever had his or
her spot taken away under that policy, id. at 70.

He also

testified about an inspection of vendors‟ booths in August of
2010 that resulted in the confiscation of counterfeit goods but
no ejections of the offending vendors.

Id. at 73-75.

And, at

no point did defendants ever inspect vendors‟ merchandise before
allowing them to set up.

Defs.‟ Admiss. # 26; Taylor Dep. 95.

After the initial raid in June of 2009, surveys continued
to show that vendors at the Flea Market were offering
counterfeit Coach merchandise for sale.
17.

Powers Decl. 15, 16,

In a November 3, 2010, deposition, Gata employee Richard

Horton testified that between early April and early July of
2010, he saw purses and wallets with Coach trademarks offered
for sale at the Flea Market.

Horton Dep. (doc. no. 31-9) 22-31.

He further testified that when he found vendors with counterfeit
goods, he confiscated the merchandise and gave it to Taylor.

11

Id. at 32-34.

Horton estimated that over the course of the year

preceding his deposition, he confiscated counterfeit goods from
vendors, and turned them over to Taylor, between twenty-five and
fifty times.

Id. at 35.

Horton explained that vendors

generally kept counterfeit goods in their vehicles, id. at 31,
and that he observed vendors retrieving counterfeit goods from
their vehicles before selling them to customers, id. at 32.
Even so, defendants never inspected vendors‟ vehicles to
determine whether they were bringing counterfeit goods to the
Flea Market.

Taylor Dep. 72.

On March 20, 2010, Andrea Powers of Powers & Associates
visited the Flea Market at Coach‟s request.

Powers Decl. ¶ 25.

That day, Powers was able to purchase counterfeit Coach
merchandise from four vendors, all of whom concealed the
counterfeit merchandise in their booths, and took care to wrap
Powers‟ purchases and place them inside her tote bag, out of
view.

Id. ¶ 27.

On one visit to the Flea Market after the

initial raid, while Powers was waiting to speak with a vendor
about purchasing a counterfeit Coach purse, she overheard an
employee of the Flea Market tell a vendor with counterfeit
merchandise on display that such goods had to be kept under the
table rather than out in the open.

12

Id. ¶ 24.

This suit arises from Coach‟s allegations that numerous
vendors at the Flea Market have sold goods that infringe and/or
tarnish their trademarks, trade dress, and/or copyrights.

In

Count I of its complaint, the only claim at issue here, Coach
asserts that Gata and Taylor are liable for contributory
trademark infringement because, with actual knowledge of or
willful blindness to the infringing conduct of Flea Market
vendors, they have permitted those vendors to sell items that
infringe Coach‟s trademarks.
Discussion
Coach moves for summary judgment on Count I, arguing that
on the undisputed facts, it is entitled to judgment as a matter
of law that defendants are liable for contributory trademark
infringement.

Without properly identifying any factual disputes

that would preclude summary judgment, defendants argue that: (1)
summary judgment is rarely granted in willful blindness cases;
(2) the standard for establishing willful blindness is exacting;
and (3) the evidence does not support summary judgment.
Defendants‟ third argument is based, in large measure, on a
page-long list of “important denials” contained in its answer to
Coach‟s requests for admissions and testimony from Taylor‟s
affidavit and deposition.

But, as the court has already noted,

13

defendants nowhere identify any specific genuine dispute over a
material fact that would preclude summary judgment for Coach.
A. Contributory Trademark Infringement
The Lanham Act identifies several forms of conduct that
constitute actionable trademark infringement.
1114(a) & 1125(a).

See 15 U.S.C. §§

Liability under the Lanham Act may be

imposed not just on direct infringers, but also on those who
induce or facilitate the infringing conduct of others.

See

Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 853-54
(1982)).

In a case that involved claims that a generic drug

manufacturer was liable for contributory trademark infringement,
the United States Supreme Court explained:
[I]f a manufacturer or distributor intentionally
induces another to infringe a trademark, or if it
continues to supply its product to one whom it knows
or has reason to know is engaging in trademark
infringement, the manufacturer or distributor is
contributorially responsible for any harm done as a
result of the deceit.
Id. at 854 (citing William R. Warner & Co. v. Eli Lilly & Co.,
265 U.S. 526 (1924); Coca-Cola Co. v. Snow Crest Bevs., Inc., 64
F. Supp. 980 (D. Mass. 1946)).

The doctrine of contributory

trademark infringement has been extended from the factual
context in which it first arose into settings substantially
analogous to the one presented here.

14

In a case involving a claim of contributory trademark
infringement brought against the operator of a flea market that
included vendors selling infringing goods, the Seventh Circuit
held “that the Inwood Labs. test for contributory liability
applie[d]” and that the flea-market operator could “be liable
for trademark violations by [a vendor] if it knew or had reason
to know of them.”

Hard Rock Cafe Licensing Corp. v. Concession

Servs., Inc., 955 F.2d 1143, 1149 (7th Cir. 1992).

The court

went on to hold that the knowledge requirement could be met by a
demonstration of willful blindness, id. (citation omitted),
which it defined as follows: “To be willfully blind, a person
must suspect wrongdoing and deliberately fail to investigate.”
Id. (citation omitted).

The court further explained that “the

„reason to know‟ part of the standard for contributory liability
requires [the defendant] to understand what a reasonably prudent
person would understand.”

Id.

Ultimately, the court of appeals

vacated the trial court‟s decision in favor of the trademark
owner, after a bench trial, because the trial court used a
standard for knowledge that was more akin to negligence than
willful blindness.

Id.

In another flea-market case, the Ninth Circuit reversed the
trial court‟s dismissal of a claim for contributory trademark
infringement against a swap meet, explaining that “Hard Rock

15

Cafe‟s application of the Inwood test is sound; a swap meet can
not disregard its vendors blatant trademark infringements with
impunity.”

Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259,

265 (9th Cir. 1996).
In Tiffany (NJ) Inc. v. eBay Inc., a case in which the
defendant was the operator of an on-line marketplace, the Second
Circuit restated the Inwood test to make it more applicable to
an accused contributory infringer that provides services rather
than goods:
[W]hen applying Inwood to service providers, there
are two ways in which a defendant may become
contributorially liable for the infringing conduct of
another: first, if the service provider “intentionally
induces another to infringe a trademark,” and second,
if the service provider “continues to supply its
[service] to one whom it knows or has reason to know
is engaging in trademark infringement.”
600 F.3d 93, 106 (2d Cir. 2010) (quoting Inwood, 456 U.S. at
854).

In the district court order holding the defendant not to

be liable for contributory infringement that was affirmed in
Tiffany, the trial judge explained: “Willful blindness requires
„more than mere negligence or mistake‟ and does not lie unless
the defendant knew of a high probability of illegal conduct and
purposefully contrived to avoid learning of it, for example, by
failing to inquire further out of fear of the result of the
inquiry.”

Tiffany (NJ) Inc. v. eBay, Inc., 576 F. Supp. 2d 463,

16

515 (S.D.N.Y. 2008) (quoting Nike Inc. v. Variety Wholesalers,
Inc., 274 F. Supp. 2d 1352, 1369-70 (S.D. Ga. 2003)).
B. Defendants‟ Arguments Against Summary Judgment
Based on their objection to Coach‟s motion for summary
judgment, defendants appear to concede the underlying acts of
direct trademark infringement by Flea Market vendors, in
violation of 15 U.S.C. §§ 1114(a) and 1125(a), on which Count I
is based.

Their objection to summary judgment rests on one

factual argument and one legal argument.

Factually, they argue

that Coach has not met its burden of producing evidence that
they possessed the requisite level of specific knowledge of
infringing activity to be held liable for contributory
infringement.

Legally, they argue that Coach overstates the

amount of affirmative action they were required to take to
police Coach‟s trademarks.

The court considers each argument in

turn.
1. Defendants‟ Knowledge of Infringement
Defendants‟ factual argument is based on the opinions in
Tiffany, and in particular, the holding that “[f]or contributory
trademark infringement liability to lie, a service provider must
have more than a general knowledge or reason to know that its
service is being used to sell counterfeit goods.”

17

600 F.3d at

107.

According to defendants, Coach has failed to produce

evidence that they had anything more than general knowledge of
infringing activities at the Flea Market.

The court does not

agree.
As a preliminary matter, the court notes that Tiffany, and
the two cases on which it relies in its discussion of general
knowledge, Inwood and Sony Corp. of America v. Universal City
Studios, Inc., 464 U.S. 417 (1984), involved situations where
the infringing activity and the alleged contributory infringer
were physically remote from one another.

In Tiffany, the direct

infringers were sellers using the defendant‟s online
marketplace.

600 F.3d at 96.

In Inwood, the direct infringers

were pharmacists who dispensed a generic drug manufactured by
the defendant.

456 U.S. at 846.

In Sony, the direct infringers

were people who used devices manufactured by the defendant to
record television programs in their homes.

464 U.S. at 419.

Here, by contrast, the direct infringers are vendors who bring
their merchandise to a venue operated and patrolled by
defendants on a daily basis.

The issue of proximity, in turn,

is related to the issue of control, which is a key component of
the analysis:
[T]he Ninth Circuit concluded that Inwood‟s test for
contributory trademark infringement applies to a
service provider if he or she exercises sufficient
control over the infringing conduct. Lockheed Martin
18

Corp. v. Network Solutions, Inc., 194 F.3d 980, 984
(9th Cir. 1999); see also id. (“Direct control and
monitoring of the instrumentality used by a third
party to infringe the plaintiff‟s mark permits the
expansion of Inwood Lab.‟s „supplies a product‟
requirement for contributory infringement.”).
Tiffany, 600 F.3d at 104-05.

Suffice it say that the operator

of a flea market that rents spaces to vendors exercises
substantially more control over potential direct infringers than
the defendants in Tiffany, Inwood, and Sony exercised over the
direct infringers in those case.
Given the circumstances of this case, Coach has met its
burden of producing undisputed evidence of defendants‟ knowledge
of the underlying infringement.

It is undisputed that: (1)

“Prior to the 2009 and 2010 raids on the . . . Flea Market by
federal and local law enforcement officials, the Counterfeit
Merchandise offered for sale at the Flea Market, including the
Counterfeit Coach Merchandise, was openly displayed for sale by
vendors at the . . . Flea Market,” Defs.‟ Admiss. # 36; (2) a
reasonable person could have easily identified the counterfeit
goods offered for sale at the Flea Market based on their
dramatically low prices;4 (3) after the initial raid, Richard
Horton saw several different items of counterfeit Coach
4

As Hard Rock Cafe makes clear, the “reason to know”
standard is based on what a reasonably prudent person would
understand, see 955 F.2d at 1149, not what would be understood
by a person as uninformed as Taylor makes himself out to be in
his affidavit, see Defs.‟ Obj., Ex. A (doc. no. 38-1) ¶¶ 2-5.
19

merchandise offered for sale at the Flea Market; (4) both Horton
and Taylor actually confiscated counterfeit merchandise from
vendors at the Flea Market; and (5) at least one Flea Market
employee actively instructed a vendor on how to sell counterfeit
merchandise while avoiding detection.
Beyond that, once law-enforcement agencies began raiding
the Flea Market, arresting vendors, and seizing counterfeit
merchandize, any lack of specific knowledge on defendants‟ part
could only have resulted from willful blindness; those raids
provided defendants with a veritable roadmap to infringing
vendors and merchandise.

Similarly, the fact that defendants

did not train the employees tasked with detecting counterfeit
merchandise, and their failure to inspect vendors‟ vehicles,
count as deliberate failures to investigate suspected infringing
activity, see Hard Rock Cafe, 955 F.2d at 1149, or a purposeful
contrivance to avoid learning of infringing activity, see
Tiffany, 576 F. Supp. 2d at 515.

Either a deliberate failure to

investigate or a purposeful contrivance to avoid learning of
infringing activity is sufficient to establish willful
blindness.

In sum, the court the concludes that Coach has

produced undisputed evidence that defendants rented spaces at
the Flea Market to vendors it knew, or should have known, were
engaging in infringing activity.

20

2. Defendants‟ Obligation to Prevent Infringement
Defendants‟ principal argument is the one addressed above,
i.e., that Coach has failed to produce undisputed evidence that
they knew about, or should have known about, the infringing
activity of vendors at the Flea Market.

Defendants also appear

to raise – but not fully develop – a second argument related to
the degree to which they were legally obligated to monitor and
control the activities of their vendors.

In defendants‟ view,

the various steps they took to clamp down on infringing activity
after the 2009 raid were sufficient under the law.

In so

arguing, defendants rely on Tiffany for the proposition that the
law did not require them to further police Coach‟s trademarks.
In terms of the elements of Coach‟s cause of action, the
obligation of a person in defendants‟ position to prevent
infringement by another would appear to derive from the rule
that one who has knowledge of the infringing acts of another is
liable for that other person‟s infringement when he or she
“continues to supply [a] [service] to [the infringer].”
Tiffany, 600 F.3d at 106.
In Tiffany, there were two categories of underlying
infringers: (1) those that eBay knew to be selling counterfeit
goods; and (2) those that Tiffany said eBay should have known to
be selling counterfeit goods.

The former are the proper analog

21

to the infringers in this case, given the undisputed fact that
defendants had sufficient knowledge of the infringing acts of
the Flea Market‟s purse vendors.

With respect to those eBay

knew to be selling counterfeit goods, as soon as “eBay [had]
reason to know that particular listings were for counterfeit
goods, eBay did not continue to carry [their] listings.”
F.3d at 106.

600

Moreover:

The [trial] court found that eBay‟s practice was
promptly to remove the challenged listing from its
website, warn sellers and buyers, cancel fees it
earned from that listing, and direct buyers not to
consummate the sale of the disputed item. The court
therefore declined to hold eBay contributorially
liable for the infringing conduct of those sellers.
Id. (citations to the district court order omitted).

The

plaintiff in Tiffany did not challenge that ruling, and the
court of appeals agreed with the trial court.

Id.

Here, defendants‟ handling of the vendors it knew or should
have known to be infringing Coach‟s trademarks falls far short
of the standard the Tiffany Court held to be sufficient to avoid
liability for contributory infringement.

It is undisputed that

after the first raid on the Flea Market, defendants took only
two steps to prevent the sale of counterfeit Coach merchandise:
posting a sign stating that no Coach merchandise could be sold
at the Flea Market and conducting walk-throughs to see whether
any counterfeit Coach merchandise was being sold.

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It is also

undisputed that: (1) defendants did not inspect vendors‟
merchandise before allowing them to set up; (2) defendant did
not inspect vendors‟ vehicles, notwithstanding Richard Horton‟s
direct observation that vendors often used their vehicles to
store counterfeit merchandise out of sight; (3) the employees
conducting walk-throughs of the Flea Market were not trained in
how to detect counterfeit merchandise or sales thereof; and (4)
on dozens of occasions, Flea Market employees confiscated
counterfeit goods while allowing the sellers of those goods to
keep their spots at the Flea Market.
Unlike eBay, which disallowed infringers from using its
service, defendants in this case have never asked a vendor to
leave the Flea Market for selling counterfeit Coach items.

This

is so, notwithstanding Taylor‟s testimony that after the first
raid, the Flea Market instituted a policy of evicting vendors
for selling counterfeit goods.

Moreover, it is undisputed that

two of the Flea Market‟s employees have caught vendors in the
act of selling counterfeit name-brand merchandise on at least
twenty-five occasions.

It is further undisputed that on at

least one occasion, a Flea Market employee counseled a vendor on
how to hide counterfeit merchandise in his or her booth.

The

fact that a Flea Market employee actually taught a vendor how to
conceal infringing merchandise drifts perilously close to, and

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may well cross, the line between allowing known infringers to
use the Flea Market‟s services and actually inducing
infringement.
The bottom line is this.

Like the defendant in Tiffany,

defendants in this case knew that vendors were using the service
they provided to conduct infringing activities.

The defendant

in Tiffany barred those known infringers from using its service.
Gata and Taylor did not.
Because the undisputed factual record demonstrates that
defendants continued to supply the services of the Flea Market
to vendors it knew to be engaging in trademark infringement
and/or vendors it had reason to know were engaging in trademark
infringement, Coach is entitled to judgment as a matter of law
on Count I.
Conclusion
For the reasons given, the court grants defendants‟ motion
for reconsideration (doc. no. 57), but only to the extent
allowing defendants to withdraw and amend their answers to
Coach‟s requests for admissions.

Having taken that step,

however, the court still rules that Coach is entitled to
judgment as a matter of law on Count I.

Elimination of several

of the admissions upon which Coach and the court previously
relied may have an impact on the span of time for which damages
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are available, but even without those admissions, Coach has
produced undisputed evidence that defendants are liable for
contributory trademark infringement.

Accordingly, the grant of

summary judgment to Coach on Count I still stands.
SO ORDERED.

__________________________
Landya McCafferty
United States Magistrate Judge
June 9, 2011
cc:

Kelly Martin Malone, Esq.
Thomas Morgan, Jr., Esq.
Adam M. Ramos, Esq.
Jeffrey K. Techentin, Esq.

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