Brand Enforcement / 12.06.2019

Landlord Liability for Tenant Counterfeiting

By: Kyle Hutnick

landlord liabilityWith the holidays upon us, everyone is looking for the hottest deal. But some deals are obviously too good to be true, like a $20,000 watch for $80, for instance.

A growing number of cases have held that commercial landlords are liable for tenants who sell counterfeit goods. In one recent case, Omega v. 375 Canal Street, a famous watchmaker filed a lawsuit in the U.S. District Court for the Southern District of New York attempting to hold the landlord legally responsible for their tenant’s counterfeiting activities. According to the plaintiff, the landlord knew about the illegal activity because the property had been raided by police multiple times in the past. Omega also notified the landlord of the counterfeit activity happening on the premises.

Omega wasn’t willing to settle. The company wanted justice and to send a broader message to stop the cycle of counterfeiting and brand exploitation. So, the case went to trial.

Omega won big — the jury awarded the brand $1.1 million.

The Omega case is just one of an increasing number of lawsuits based on the same legal theory: if a landlord willfully ignores a tenant’s infringing activity, then they should also be liable. Counterfeiting is a massive industry, with sales at approximately $509 billion globally in 2016 alone.

Given the size and scope of the problem, it’s no surprise that across the country, brands have been pursuing commercial landlords to recover for counterfeiting. In another case, Luxottica Group, S.p.A. v. Airport Mini Mall, a federal court in Georgia found a landlord liable for $1.9 million in damages for selling fake designer sunglasses. The case was appealed, and the judgment was affirmed.

But how closely do landlords have to monitor their tenants to avoid liability?

Landlords need not be omniscient, but they can’t be willfully blind either. The properties at issue in Omega and Luxottica had both been subject to police raids in the past. The landlord’s duty arises when it knows, or should know, that counterfeiting may be happening on premises.

Here’s the takeaway for landlords: When the duty arises, take action! And make sure you have legal protection. For example, adequate insurance coverage can help shield a landlord from a potential claim. Still, the best response is to also contact an attorney as soon as you become aware of potential counterfeiting or possible claims against you.

KJK’s Brand Enforcement Group is a team of professionals who understand companies’ needs and the ins-and-outs of the industry that is brand exploitation. If you are interested in learning more about this evolving area of law, contact Kyle A. Hutnick at kah@kjk.com or 216.736.7243.

 

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