Omega SA et al v. 375 Canal, LLC et al

Filing 77

OPINION & ORDER re: 52 MOTION for Summary Judgment . filed by 375 Canal, LLC. The Court DENIES 375 Canal's motion for summary judgment dismissing Counts III and IV. The parties are directed to appear at a status conference on Th ursday, January 12, 2017, at 11:00 A.M. in Courtroom 14C to set a date for trial. The Clerk is directed to terminate all open motions. (As further set forth in this order.) (Status Conference set for 1/12/2017 at 11:00 AM in Courtroom 14C, 500 Pearl Street, New York, NY 10007 before Judge Paul A. Crotty.) (Signed by Judge Paul A. Crotty on 12/22/2016) (cf)

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OMEGA SA and SWATCH SA,
12 Civ. 6979 (PAC)

Plaintiffs,
-against-

OPINION & ORDER

375 CANAL, LLC,
JOHN DOES 1 -50 and
J<YZ COMPANIES 1 - 50
Defendants.

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HONORABLE PAUL A. CROTTY, United States District Judge:
Defendant 375 Canal, LLC ("375 Canal") moves for summary judgment dismissing
Counts III and IV of Plaintiffs' Complaint. Count III alleges contributory trademark
infringement against Defendant 375 Canal, the owner and landlord of the property from which
the infringing products were sold. Count IV asserts that 374 Canal violated New York Real
Property Law Section 231 (2) by knowingly permitting its leased property to be used for an
unlawful conduct. 1
Previously, the Court denied 375 Canal's Fed. R. Civ. P. 12(b)(6) motion to dismiss
Counts III and IV. Omega SA v. 375 Canal, LLC, No. 12-CV-6979 (PAC), 2013 WL 2156043
(S.D.N.Y. May 20, 2013) (the "May 2013 Order"). Plaintiffs' motion for summary judgment is
now moot because 375 Canal has withdrawn its Third (statute oflimitations), Fourth (as to
laches), Eighth (litigation privilege) and Ninth (failure to join indispensable parties) Affirmative

Omega SA and Swatch SA (together, "Plaintiffs") assert direct trademark counterfeiting, trademark infringement
and false designation of origin claims pursuant to 15 U.S. C.§§ 1114, 1125 against three "John Doe" defendants for
selling counterfeit watches that bear the registered trademarks OMEGA and SWATCH at a store located at 375
Canal Street: John Doe 21 (a/k/a "Rahman"), John Doe 22 (alk/a "Kazijoynal"), and John Doe 23 . (Counts I and II).
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Defenses. See Dkt. 70 at 15. The Court assumes familiarity with the facts and law set forth in
the May 2013 Order.
The May 2013 Order found that the factual allegations in Counts III and IV were
sufficient to support plausible claims of contributory trademark infringement; and of violation of
New York Real Property Law Section 231(2). Now, after discovery has concluded, 375 Canal
renews its motion with respect to Counts III and IV. 375 Canal argues that Plaintiffs have
provided no further facts demonstrating that 375 Canal (1) possessed the requisite knowledge of
trademark infringing activity, yet continued to supply its premises to known infringers, so as to
be contributorily liable; and (2) did not take sufficiently reasonable remedial steps to stop the
infringing conduct on the premises. See Omega SA, 2013 WL 2156043, at *1-2. 375 Canal
neither rebuts nor explains the existence of the facts alleged in the pleadings: that it was a
defendant in three lawsuits from 2006 to 2009 involving the sale of counterfeit goods; received
written notice from Plaintiffs on September 28,2011 that the New York Police Department
(NYPD) arrested individuals for selling counterfeit OMEGA and SWATCH watches and seized
said watches at the premises in December 2010 and February 2011; received correspondence
from 2004 to 2011listing multiple evidential purchases made at the premises of counterfeit
goods infringing on other trademarks; and that Plaintiffs' investigator purchased a counterfeit
OMEGA watch on May 19,2012. These unchallenged facts raise genuine questions as to
whether 375 Canal had the requisite knowledge of trademark infringement or took sufficient
remedial steps. Since these are factual questions, the Court must DENY 375 Canal's motion for
summary judgment.

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LEGAL STANDARD
Summary judgment is appropriate where "the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.
R. Civ. P. 56(a). The Court "resolve[s] all ambiguities and draw[s] all reasonable inferences in
the light most favorable to the nonmoving party." Summa v. Hofstra Univ., 708 F.3d 115, 123
(2d Cir. 2013). Summary judgment is warranted where "the record taken as a whole could not
lead a rational trier of fact to find for the non-moving party." Smith v. Cnty. of Suffolk, 776
F.3d 114, 121 (2d Cir. 2015) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Com.,
475 U.S. 574, 587 (1986)). On a motion for summary judgment, "[i]t is the movant's burden to
show that no genuine factual dispute exists." Giannullo v. City ofNew York, 322 F.3d 139, 140
(2d Cir. 2003) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)).

DISCUSSION
375 Canal argues that there is no evidence that it continued to rent to anyone it knew was
engaging in trademark infringement, so Plaintiffs' contributory trademark infringement claim
fails. 375 Canal also argues that there is no evidence that it knowingly rented or permitted its
property to be used for an unlawful purpose, and thus Plaintiffs' New York Real Property Law
Section 231 (2) claim must fail.
I.

Contributory Infringement
A defendant that "intentionally induces another to infringe a trademark" or "continues to

supply its [service] to one whom it knows or has reason to know is engaging in trademark
infringement" may be contributorily liable for trademark infringement. Tiffany (NJ) Inc. v.
eBay, Inc., 600 F.3d 93, 106 (2d Cir. 2010) (quoting Inwood Labs, Inc. v. Ives Labs, Inc., 456
U.S. 844, 854 (1982)). Plaintiffs allege that 375 Canal has contributorily infringed by continuing

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to supply services to a known infringer. Dkt. 1 at~~ 67-75.
Contributory infringement depends on a factual analysis of four areas: whether 375 Canal
(1) had sufficient control over the instrumentality used to infringe; (2) possessed the requisite
knowledge of trademark infringement activity; (3) continued to supply its service despite said
knowledge; and (4) took sufficiently remedial steps to stop the infringing activity. See Tiffany,
600 F.3d at 100, 105- 08; Polo Ralph Lauren Corp. v. Chinatown Gift Shop, No. 93-CV-6783
(TPG), 1996 WL 67700, at *1 (S.D.N.Y. Feb. 16, 1996). 375 Canal does not challenge the
applicability of the doctrine to landlords, and the Court assumes that landlords may be
contributorily liable. See Omega SA, 2013 WL 2156043, at *2.
A. Extent of Control as a Limiting Principle
Contributory liability is extended to service providers, however, only when they possess
"sufficient control over the means of the infringing conduct." Tiffany, 600 F.3d at 105. 375
Canal has not addressed this factor, nor provided any rebutting evidence. A rational juror,
however, could find on the facts as they exist here, that there was sufficient control to impose
contributory liability. 2 See Omega SA, 2013 WL 2156043, at *3.
B. The Knowledge Requirement

For contributory liability to attach, a service provider must "continue[] to supply its
[service] to one whom it knows or has reason to know is engaging in trademark infringement."
Inwood, 456 U.S. at 854. The provider "must have more than a general knowledge or reason to

2 375 Canal signed two stipulations to settle the City ofNew York's public nuisance actions which demonstrate its
control. See Omega SA, 2013 WL 2156043, at *3 ("As owner, 375 Canal can control the configuration of the shop,
can screen the retailers that it allowed to occupy its premises, or otherwise physically examine the premises."). 375
agreed to enjoin the premises "from ... permitting the sale and/or possession of trademark counterfeit
merchandise;" allow the NYPD "to make unannounced warrantless inspections;" use lease terms specifying that a
violation of the injunction would "result in immediate closure;" "dismantle and remove all hidden storage
facilities/structures;" and post signs warning that sale and/or possession of counterfeit goods could result in arrest.
Dkt. 69, Ex. 22 at~~ 2, 4; Dkt. 69, Ex. 23 at~~ 6, 8, 12.

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know that its service is being used to sell counterfeit goods. Some contemporary knowledge of
[the particular infringing items] is necessary." Tiffany, 600 F.3d at 107; see Nomination, 2010
WL 4968072, at *5-6 (requiring awareness of"specific instances of infringement"). 375 Canal
renews its argument that it cannot be liable because Tiffany requires knowledge of specific,
identified infringers. See Dkt. 54 at ,-r 2; Dkt. 53 at 9. But the Court has already rejected this
interpretation of Tiffany and does so again now. See Omega SA, 2013 WL 2156043, at *4
("Notice as to the sale of a particular type of good, by an (unnamed) individual, at a specific
location is comparable to the 'listings' required in Tiffany."). Trademark owner's warning
letters or law enforcement raids of the premises may give a service provider sufficient
knowledge of specific infringements. See Slep-Tone, 2016 WL 3360522, at *4; Nomination,
2010 WL 4968072, at *6; Coach, Inc. v. Goodfellow, 717 F.3d 498, 504 (6th Cir. 2013).
The May 2013 Order found that the pleadings' factual allegations were sufficient to
create an inference of375 Canal's knowledge. 3 See Omega SA, 2013 WL 2156043, at *4. 375
Canal does not provide any evidentiary rebuttal, but nonetheless asks the Court to reverse its
determination. Indeed, the record contains even further support: the September 28, 2011 letter;
the private litigation complaint and subsequent permanent injunction; and correspondence sent to
375 Canal from 2004 to 2011 by another law firm informing 375 Canal of multiple sales and
evidential purchases of counterfeit merchandise infringing on other trademarks. Dkt. 69, Exs.
16, 17, 18; Dkt. 63, Ex. 1. A reasonable juror could certainly infer knowledge based on these
facts.

3 375 Canal was previously a defendant in three lawsuits involving the sale of counterfeit goods - one private and
two public nuisance actions - and received written notice from Plaintiffs on September 28, 2011 that the NYPD had
arrested individuals for selling counterfeit OMEGA and SWATCH watches at the premises in December 2010 and
February 2011. Omega SA, 2013 WL 2156043, at *4. The record included the two public nuisance stipulations of
settlement. Dkt. 19, Exs. 2, 3.

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C. Continued Supply of Service
Plaintiffs allege that 375 Canal continued to supply its premises to known infringers after
receiving the September 28, 2011 notice, which is supported by the fact that Plaintiffs'
investigator purchased a counterfeit OMEGA watch from a store clerk at the premises on May
19, 2012. Dkt. 62 at ,-r 15. Despite this purchase, 375 Canal asserts that its October 3, 2011
email informing Plaintiffs that the infringing tenant had been removed, together with its removal
of one infringing tenant in December 2010, is sufficient for the Court to determine as a matter of
law that no question of fact exists regarding continued supply. See Dkt. 53 at 11-13. 375 Canal
further argues that because Plaintiffs have "failed to identify a single repeat seller," no factual
dispute exists. Dkt. 70 at 10. But this "repeat seller" argument is irrelevant. See Omega SA,
2013 WL 2156043, at *4. 375 Canal's argument fails as a rational juror could find that 375
Canal continued to lease its premises, knowing that the recipient was using the premises to
engage in trademark infringement. Similarly, the fact that there were "failed buys" does not
mean that 375 Canal had stopped renting to known infringers. Dkt. 53 at 11. At best, it simply
presents another genuine question of material fact for jury resolution. See Slep-Tone, 2016 WL
3360522, at *4 (finding Defendant, a bar owner that contracted karaoke company to host events
after receiving Plaintiffs warning letters informing Defendant of company's infringement,
contributorily liable).
D. Reasonable Remedial Steps
The Second Circuit has considered whether a defendant with sufficient knowledge may
have an affirmative duty to remedy infringing activity. Tiffany, 600 F.3d at 107; see also Polo,
1996 WL 67700, at *1 (assuming that landlord had obligation "to take reasonable steps to rid the
premises of the illegal activity"). Other circuits have held that a defendant with the requisite

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Inwood knowledge must then "take reasonable action to promptly halt the practice." 1-800
Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229, 1255 (lOth Cir. 2013); accord Coach, Inc., 717
F.3d at 505. The Court assumes that this requirement applies in some capacity here.
375 Canal claims that it is entitled to summary judgment because it took affirmative steps
to stop infringing activities that "exceed those of the landlord in Polo"; it "took the next step of
initiating legal action against [a tenant]."4 Dkt. 53 at 11-13. But the remedial measures inquiry,
however, must be "context-specific." Dkt. 75 at 2. The Court rejects 375 Canal's "static, bright
line rule [that] a building owner can never be held contributorily liable ... so long as the owner,
upon learning of the infringing activity, takes steps to terminate the lease or sublease in
question." !d. at 2-3. Moreover, despite these measures, which 375 Canal claims warrant
summary judgment, there is some question as to their efficacy. When Plaintiffs' investigator
visited the premises on May 19, 2012, "[t]here were no signs of any sort visible anywhere within
or adjacent to the storefront" and a store clerk "went into and then emerged from a hidden
storeroom or other hidden structure in the rear of the store carrying two counterfeit 'Omega'
Seamaster watches," one of which the investigator purchased. Dkt. 62 at 5. The record clearly
reflects competing narratives and unresolved issues of material fact regarding the remedial steps
taken by 375 Canal. The Court cannot rule as a matter oflaw that these steps were sufficiently
reasonable.
Accordingly, 375 Canal's motion for summary judgment dismissing Plaintiffs'
contributory trademark infringement liability claim (Count III) is inappropriate and denied.

The court in Polo granted summary judgment in favor of a landlord who, the same month during which she was
notified of infringing activity, served two notices to vacate upon the infringing tenant and refused to agree to a lease
renewal in two years' time. Polo, 1996 WL 67700, at *2- 3. But contrary to the facts presented here, Polo cites no
previous litigations nor other infringement-related conduct aside from that involving the single infringing tenant. Id.
at *1-2. Nor does Polo cite any evidence of continued infringement on the premises following the landlord's
actions and the tenant's subsequent vacation. Id.
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II.

New York Real Property Law Section 231(2)
"The owner of real property, knowingly leasing or giving possession of the same to be

used or occupied, wholly or partly, for any unlawful ... business, or knowingly permitting the
same to be so used, is liable [jointly and] severally ... for any damage resulting from such
unlawful use, occupancy ... or business." N.Y. Real Prop. L. § 231 (2). The law applies to
premises used to sell and store counterfeit goods. 1165 Broadway Corp. v. Dayana ofN.Y.
Sportswear, Inc., 633 N.Y.S.2d 724, 726 (N.Y. Civ. Ct. 1995).
Plaintiffs have presented sufficient factual evidence from which a rational juror could
find that 375 Canal violated N.Y. Real Prop. L. § 231(2), despite 375 Canal's argument that
Plaintiffs rely on the same "speculation" as in their Complaint. Dkt. 53 at 15; see also Omega
SA, 2013 WL 2156043, at *5. 375 Canal does not provide any evidence to the contrary. The
Court thus denies 375 Canal's motion for summary judgment regarding this claim (Count IV).

CONCLUSION
The Court DENIES 375 Canal's motion for summary judgment dismissing Counts III and
IV.
The parties are directed to appear at a status conference on Thursday, January 12, 2017,
at 11:00 A.M. in Courtroom 14C to set a date for trial. The Clerk is directed to terminate all
open motions.

Dated: New York, New York
December Pv,l016

SO ORDERED

PAULA. CROTTY
United States District Judge

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