Trademark Cases Drop as Pandemic Fuels Uncertainties

June 17, 2020, 10:01 AM

The rate of trademark lawsuits filed in federal courts fell in the first five months of 2020, as brand-owners grapple with the effects of the coronavirus pandemic.

Trademark suits are down 22% year-over-year, Bloomberg Law data shows. Fewer anti-counterfeiting cases against online vendors largely drove the downturn.

Trademark owners have been less aggressive in pursuing counterfeiting cases as they face court disruptions and business uncertainties, including their own financial struggles, after the pandemic shut down much of the U.S. economy, attorneys say.

The drop-off in lawsuits may not be a lasting trend. Attorneys say there has been an increase of infringement during the pandemic, and new cases against alleged infringers could come in waves.

“A lot of trademark claims are not make or break for a business - ‘we’ve got to pursue this now or we’re going to be belly up,’” said Haynes and Boone partner Jason Bloom. Some of those kinds of claims “could be put on hold until things open back up a little bit.”

Taxing Courts

Federal courts saw just over 1,120 trademark cases filed over the first five months the year, the lowest number for the comparable period in more than a decade. There were 1,458 new cases filed during that same time in 2019.

Keith Vogt, whose Chicago IP firm, Vogt IP, files dozens of cases against online counterfeiters each year, said the firm “backed off from the court for a while” during the pandemic.

Courts’ restraining orders in trademark lawsuits can require financial institutions and online platforms like Amazon.com Inc. and eBay Inc. to lock down infringers’ accounts. Vogt noted many of those platforms have been dealing with their own sets of issues brought on by the health crisis.

Amazon, for example, was dealing with a surge of online shopping orders during the pandemic.

“We don’t want to be taxing the court, we don’t want to be taxing third parties, until they’ve gotten their processes in place,” he said.

Some companies, such as 3M Co., have filed high-profile lawsuits related to the pandemic.

But various fashion and apparel brands with reputations as aggressive trademark defenders, including Adidas AG and Luxottica Group S.p.A., have filed fewer infringement lawsuits this year, federal court data show. Both companies declined to comment.

Sream Inc., a glass smoking pipe maker who was among the most active filers against alleged counterfeiters last year, has also filed fewer cases.

The pandemic—and a shift to online shopping—has upended the retail industry, which might also have contributed to the decline in trademark lawsuits.

Some trademark owners might not be as concerned with rooting out infringers while dealing with economic and health ramifications from the health crisis. Others are likely waiting to see whether an infringer is still in business in a few months before committing resources to litigation, attorneys say.

Trademark owners may also be reluctant to file because it’s been harder to get fast orders to stop infringers, as federal courts reshuffled their calendars and restricted in-person hearings.

Art Ask Agency irritated a federal judge in March when the licensing agency asked for an emergency hearing in a trademark case over unicorn drawings.

“The world is facing a real emergency. Plaintiff is not,” Judge Steven Seeger in the Northern District of Illinois wrote.

The judge said the filing called to mind the words of Elihu Root, secretary of state under Theodore Roosevelt: “About half of the practice of a decent lawyer is telling would-be clients that they are damned fools and should stop.”

Upcoming Rebound?

Counterfeiting and trademark infringement have continued during the pandemic, despite the drop in lawsuits, attorneys say.

3M, maker of the N95 mask, has filed over a dozen lawsuits against companies accused of price-gouging and trademark misuse during the pandemic. The health crisis has also raised concerns from the International Trademark Association and other organizations about counterfeit equipment, including tests kits, and sanitizers.

“Bad actors are taking advantage of everybody’s appetite for buying things online right now because stores are not open in many places,” said Monica Riva Talley, head of the trademark and brand protection practice at Sterne Kessler Goldstein & Fox PLLC. “We definitely have seen an increase in counterfeits, and knock-offs, and infringements.”

As the country continues to reopen, trademark lawsuits could spike.

In some ways, the pandemic has increased the focus on protecting trademarks and brands, said Cynthia Walden, who leads the trademark and copyright practice group at Fish & Richardson PC. Walden said her practice, which involves counseling and enforcement leading up to litigation, “has been as busy as ever.”

“My belief is that the lawsuits are there, they’re just backing up, and that they will be raring to go as soon as the forums are back up and running at normal capacity,” Talley said.

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Roger Yu at ryu@bloomberglaw.com, Keith Perine at kperine@bloomberglaw.com

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