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Omega Sa v. 375 Canal, LLC

United States District Court, Second Circuit

May 20, 2013

OMEGA SA and SWATCH SA, Plaintiffs,
v.
375 CANAL, LLC, JOHN DOES 1-50 and XYZ COMPANIES 1-50 Defendants.

OPINION & ORDER

PAUL A. CROTTY, District Judge.

Omega SA and Swatch SA ("Plaintiffs") assert direct trademark counterfeiting, trademark infringement and false designation of origin claims pursuant to 15 U.S.C. §§ 1114, 1125 against the three "John Doe" defendants for selling counterfeit Swatch and Omega watches at a store located at 375 Canal Street: John Doe 21 ("Rahman"), John Doe 22 ("Kazijoynal"), and John Doe 23. (Counts I and II). Plaintiffs assert a contributory infringement claim against 375 Canal LLC ("375 Canal"), the owner/lessor of the property at which the counterfeit goods were purportedly sold. (Count III). Plaintiffs also allege that 375 Canal violated Section 231(2) of the New York Real Property Law by knowingly leasing its premises to be used for unlawful conduct. (Count IV).

Defendant 375 Canal moves, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss Claims Three and Four, for failure to state a claim. The motion is DENIED.

BACKGROUND

Plaintiffs are Swiss manufacturers of watches that bear the trademarks OMEGA and SWATCH. (Compl. §§ 3, 4, 14, 20.) Defendant 375 Canal is the owner and landlord of a commercial building located 375 Canal Street at the corner of Canal Street and West Broadway in lower Manhattan. (Id. § 26.) Plaintiffs contend that Defendant has permitted its property to be used as a haven for the sale of counterfeit Omega and Swatch watches.

According to the well-pleaded allegations of the complaint, this is not the first time that 375 Canal has been charged with facilitating the distribution of counterfeit goods. For example, on January 18, 2006, in a lawsuit that alleged that its tenants or subtenants were selling counterfeit goods, 375 Canal consented to an entry of judgment enjoining it from infringing Louis Vuitton's trademarks and copyrights and directing Defendant to hang a sign at its property warning customers that the purchase of counterfeit Louis Vuitton items was prohibited. (Id. §§ 29-31.) Also in 2006, the City brought a public nuisance action against 375 Canal for hosting persons accused of selling counterfeit goods. 375 Canal consented to being enjoined from permitting its property to be "used or occupied" by counterfeiters. (Id. §§ 32-34.) The City brought a second action in 2009. (Id. §§ 35-36.) The parties' Stipulation of Settlement was similar to the first, with the supplement that 375 Canal was required to "dismantle and remove all hidden storage facilities/structures inside the Premises to allow open access to all areas within the storefront, " an increased fine of $10, 000, and the directive to post signs informing customers that they were prohibited from buying counterfeit goods. (Id. § 36; Paul Dec. Ex. 3 § 12.)

Concerning Plaintiffs' goods, on two occasions, once on December 7, 2010 and again on February 10, 2011, undercover officers from the New York Police Department seized Omega and Swatch-marked watches from John Doe 21 a/k/a "Rahman" and John Doe 22 a/k/a "Kazijoynal, " respectively. (Id. §§ 37, 40.) They were selling the watches from 375 Canal's ground floor. (Id.) An inspection of the watches revealed that Plaintiffs did not manufacture them. (Id. § 38.) The John Does were charged with Trademark Counterfeiting in the Third Degree. (Id. §§ 37, 40.)

On September 28, 2011, representatives of the Plaintiffs sent a letter to 375 Canal notifying it that NYPD arrested certain individuals for selling OMEGA and SWATCH branded watches at the 375 Canal Street storefront. (Id. § 44.) 375 Canal responded by email acknowledging that its "tenant sublet the space to an entity that was selling [the] counterfeit goods" and informing Plaintiffs that the "offending tenant" (subtenant) had been removed. (Id. § 47; Delfin Dec. Ex. B.) Notwithstanding this assurance, on May 19, 2012, Plaintiffs' investigators bought a counterfeit Omega-branded watch from John Doe 23, who was standing inside the store. (Id. § 49.) The seller had retrieved the watch from storage room located in the back of the store. (Id.)

ANALYSIS

I. Motion to Dismiss Standard

When considering a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), the Court "must accept as true all of the factual allegations contained in the complaint" and construe the complaint in the light most favorable to the plaintiff. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 572 (2007) (internal quotation marks omitted). The Court only "assess[es] the legal feasibility of the complaint"; it does not "assay the weight of the evidence which might be offered in support thereof." Lopez v. Jet Blue Airways , 662 F.3d 593, 596 (2d Cir. 2011) (internal quotation marks omitted). To state a facially plausible claim, a plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). "A pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'"

II. Contributory Infringement

A. Legal Standard

Defendants may be contributorially liable for the direct infringement of others: (1) if the defendant "intentionally induces another to infringe a trademark, " or (2) if the defendant "continues to supply its service to one whom it knows or has reason to know is engaging in 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 do not allege that 375 Canal has intentionally induced infringement. Instead, they allege that 375 Canal has contributorially infringed by continuing to supply services to a known infringer. Courts have held that the doctrine of contributory liability applies with equal force to landlords.[1] E.g., Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc. , 955 F.2d 1143, 1149 (7th Cir. 1992) (owner/operator of a flea market whose vendors were alleged to have sold infringing t-shirts); Ralph Lauren Corp. v. Chinatown Gift Shop , 855 F.Supp. 648, 650 (S.D.N.Y. 1994) ...


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