IP Lawsuits With Hundreds of Defendants Demand Detailed Filings

In recent years, intellectual property rights holders increasingly have used so-called Schedule A lawsuits to halt the sale of counterfeit products.

Schedule A is the nickname given to certain complaints filed in district court by trademark, copyright, design patent, and even utility patent owners. The name comes from how these complaints identify (often hundreds of) defendants as “listed on Schedule A,” a form that may be filed separately from the complaint, typically under seal, and not publicly available.

While this legal approach allows IP rights holders to target multiple alleged counterfeit sellers in a single lawsuit, some have criticized the lack of transparency, as much of the litigation occurs behind “closed doors”—documents sealed from public view—and can affect legitimate sellers who are swept up in broad enforcement actions.

The US District Court for the Northern District of Illinois has been a hotbed of Schedule A cases. But an opinion from the Chicago-based court earlier this year may signal more scrutiny of these cases going forward.

It’s important to understand the debate over these lawsuits and explain how IP rights holders can combat counterfeiters amid growing criticism of the use of Schedule A.

Available Options

IP rights holders have several options to enforce their rights. They may start by sending a cease-and-desist letter, though this can be cumbersome or simply ineffective when trying to reach many defendants who have unclear or changing contact details.

Enforcement using the tools within an online marketplace such as Amazon.com is possible (for example, filing takedown notices of IP infringement). But many rights holders have experienced inconsistent enforcement through such methods.

Products initially may be removed only to later reappear. Likewise, some sellers will vanish under a particular identity only to resurface under a different alias, making sustained enforcement challenging.

Another option is to obtain a general exclusion order from the US International Trade Commission. A general exclusion order by the ITC allows IP rights holders to prevent counterfeits and knockoffs from entering the US, regardless of their source.

Once issued, a general exclusion order empowers US Customs and Border Protection to stop prohibited goods at the border, providing IP rights holders with a broad and proactive means of protecting their products in the US market. However, enforcement of these orders by customs and border personnel isn’t guaranteed or predictable.

Filing separate lawsuits against individual defendants in district court may be more effective in certain respects, but also may be prohibitively expensive—particularly when the infringers are each relatively small but numerous.

Schedule A lawsuits have thus grown out of a need for IP rights holders to be able to enforce their rights against a large number of defendants selling the same or highly similar counterfeit or infringing products in a single case.

Contrasting Viewpoints

Schedule A lawsuits have become attractive to certain IP rights holders as a practical way to enforce their rights when their products are being widely copied without their permission. A particularly attractive option is for the IP rights holder to file an ex parte motion for a temporary restraining order before the Schedule A defendants can transfer their assets or destroy evidence.

The Schedule A defendants typically don’t yet receive notice of the lawsuit or have an opportunity to appear. Rather, when a court grants a restraining order, the IP rights holder may send it to an online marketplace to request that the online marketplace take down infringing or counterfeit products and ask the online marketplace to freeze the sellers’ accounts. This may be the first time that the Schedule A defendants learn a lawsuit has been filed against them.

Critics argue that Schedule A cases sidestep procedural safeguards such as serving the complaint and establishing personal jurisdiction over defendants, as well as for the secretive nature of the proceedings.

Some Schedule A cases are criticized for being too broad and containing near-boilerplate accusations of infringement. There also have been assertions of improper joinder of the many defendants in some Schedule A cases.

Northern District of Illinois Judge John Kness acknowledged the problem that Schedule A cases seek to address when he wrote in August that “the costs of counterfeiting and IP theft are real, are significant, and are very difficult to combat legally with the tools presently at plaintiffs’ disposal.”

However, Kness stated that Schedule A cases are “a bridge too far” and “the Schedule A mechanism should no longer be perpetuated in its present form.” As of the date of this article, Kness has stayed all Schedule A cases on his docket.

Responding to Skepticism

Amid increased scrutiny of the practice, IP rights holders would be wise to conduct thorough due diligence when preparing and filing a Schedule A case to ensure that:

• The complaint is sufficiently specific and not simply boilerplate
• Each of the defendants listed on Schedule A are properly named
• Joinder is proper within the district in which the Schedule A case is filed, as best as the IP rights holder can ascertain
• Consider detailing for the court that other avenues were attempted, such as takedown notices through an online marketplace.

Despite Kness staying Schedule A cases on his docket in Illinois, Schedule A lawsuits play an important role in enabling IP rights holders to take effective action against counterfeiters. These lawsuits allow IP rights holders to enforce their rights against defendants that may otherwise pop up like Whac-A-Moles.

Therefore, IP rights holders should continue to use Schedule A cases as an enforcement tool. However, to overcome judicial skepticism, they must provide sufficient specificity and accuracy when preparing their complaints and naming defendants.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Dunstan H. Barnes is a partner at intellectual property law firm MBHB and chair of its design rights practice group.

James L. Lovsin is a partner at MBHB and co-chair of its PTAB post-grant proceedings practice group.

Taylor Weilnau is an associate at MBHB focused on life sciences patent prosecution and portfolio management.

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