Quarter #3 2019: Landlord Liability for Tenant's Trademark Infringement

September 19, 2019
The IP Legal Minute

The U.S. Court of Appeals for the Eleventh Circuit recently ruled that landlords can potentially be held liable for trademark infringement by their tenants.  Luxottica Group, S.p.A. v. Airport Mini Mall, LLC, Case No. 18-10157, 2019 WL 3676340 (11th Cir. Aug. 7, 2019). This Court held that a landlord’s willful blindness to a tenant’s acts of infringement amounted to constructive knowledge sufficient to hold the landlord liable for contributory trademark infringement.

Direct trademark infringement under the Lanham Act occurs when a person without authorization uses a registered trademark on or in connection with the sale, offering for sale, distribution or advertising of goods (or services) that is likely to cause confusion, cause mistake, or to deceive.  See 15 U.S.C. § 1114.  Liability for trademark infringement can extend beyond those committing the direct infringement.   Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982).  If a party intentionally induces another to infringe a trademark, or continues to knowingly supply product (or service) to a direct infringer, that party can be liable of contributory infringement.  Id.

Plaintiff Luxottica manufactures and sells eyewear under the registered U.S. trademarks RAY-BAN and OAKLEY. Defendant Airport Mini Mall, LLC (AMM) operates a mall containing an indoor space with up to 130 booths for individual vendors.  During AMM’s operation, law enforcement raided the mall three times, executing search warrants, arresting tenants, and seizing alleged counterfeits of Luxottica’s eyewear. Luxottica twice sent letters to AMM and notified them that their tenants were not authorized to sell Luxottica’s eyewear and were selling counterfeit eyewear.  Despite the raids, letters, and meetings with law enforcement, AMM took no steps to evict the infringing tenants.

Whether contributory liability for trademark infringement extends to the landlord-tenant context was a question of first impression. Relying on the Supreme Court’s holding in Inwood laboratories, the Eleventh Circuit ruled that contributory liability can extend to the landlord-tenant context. In the decision, the Eleventh Circuit found that a landlord may be contributorily liable for its tenants’ direct trademark infringement since the landlord knew or had reason to know of the direct infringement while supplying services and support—such as space, utilities, maintenance, and parking—that facilitated the tenant’s sale of the counterfeit goods.

The Eleventh Circuit declined to decide whether a landlord must have actual knowledge of the direct infringement (by the tenants).  The Eleventh Circuit recognized that AMM had constructive knowledge of, or were willfully blind to, specific instances of infringement because of Luxottica’s demand letters.  These letters would have prompted a reasonable landlord to conduct a cursory investigation, thereby revealing the infringing conduct.  The Eleventh Circuit was also persuaded by the serious and widespread infringement on the premises, evidenced by the three law enforcement raids, of which defendants were aware.

But all hope is not lost for landlords.  The Eleventh Circuit’s decision in Luxottica follows a qualifying ruling by the Southern District of Florida.  Coach, Inc. v. Swap Shop, Inc., 916 F. Supp. 2d 1271 (S.D. Fla. 2012).   In this ruling, the district court ruled that ownership of the property where an infringing act occurs is not enough.  Rather, it is the operators of that property who are on the hook for the infringing conduct of tenants.

In light of the decision in Luxottica, landlords actively managing a property might need to be cognizant of and—to at least some degree—police the activities of their tenants and act quickly if they suspect counterfeiting or trademark infringement, especially where they have actual knowledge of it.  But landlords can no longer turn the proverbial blind eye to the potential trademark infringement by their tenants.