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Landlord Liability for Tenant’s Counterfeit Sales

November 26, 2019

By: Tara Tedrow, Jon Gibbs & Ahmad El-Gendi 

Should landlords care what business their tenants are operating? The obvious general answer of “yes” now has a more detailed and important caveat. If your client is retailing goods, you as a landlord may be liable if those goods are counterfeit. Thanks to some new developing case law which intersects intellectual property and real estate, landlords cannot willingly turn a blind eye to a tenant selling counterfeit products.

Before too much lease review hysteria sets in, courts are not asking landlords to do a ten-point inspection of a tenant’s product sales to ensure there are no counterfeits being sold from a leased premises. However, in a recent case out of New York, Omega v. 375 Canal Street, a jury awarded the high-end watch retailer, Omega, with $1.1 million in damages against a landlord that was found to have contributed to trademark infringement with its willful blindness to its tenants’ sales of counterfeit Omega watches. In a similar case out of Georgia that was upheld by the appellate court, Luxottica Group, S.P.A. v. Airport Mini Mall, a mini-mall owner was hit with a $1.9 million damages verdict for a type of indirect trademark infringement stemming from its subtenant’s sale of fake designer glasses.

There is, however, a silver lining-- in both of those cases, the property at issue had been raided by police multiple times and the brand owners sent letters putting the landlords on notice of the illegal activity. The takeaway for landlords? Once you are put on notice of illegal activity on your leased property, you have a duty to take action. And for online landlords that think a court can’t reach your virtual domain, think again. The same rules apply to virtual landlords providing forums for sales on which infringing activity occurs when they knowingly ignore it. As addressed in the Tiffany (NJ) Inc. v. eBay Inc. case out of New York City, and affirmed by the appellate court, eBay was not liable for the infringing acts of an on-line seller because it had established procedures for removing sellers of counterfeit merchandise and promptly took action when notified of such illicit activity.

For all landlords, the good news is that (as usual) you are not powerless. Here are a few general issues that should be covered in leases: (1) make sure your lease has language about illegal activity, and indemnification, insurance, and access rights relating to a reasonable suspicion of illegal activities; (2) have procedures in place to deal with tenants selling counterfeits on your property; and (3) take prompt action when you are notified of any such illicit activity. So for all landlords, you better remain vigilant, because while the products sold may be fake, the million dollar verdicts are very real. 

If you have any questions, please contact Tara Tedrow, Jon Gibbs, Ahmad El-Gendi or the Lowndes attorney of your choice.

Ahmad

Ahmad is a connector and a problem solver. He listens carefully to understand his clients’ needs and thinks creatively to provide legal services that address the issues at hand, including issues that clients may not have anticipated. Ahmad focuses on intellectual property and commercial litigation, and also has experience with real estate matters. His diverse education in neurobiology and legal jurisprudence allows him to understand complex concepts quickly and streamline large amounts of information into concise, precise summations. Ahmad treats every client’s matter with the same care he would take in addressing his own personal matters, including avoiding needless expenses. With the large Lowndes team behind him, Ahmad has enjoyed plentiful success, including reaching highly favorable resolutions for clients such as obtaining a payment of approximately $400,000, which was 95% of the initial demand, without having to proceed to prepare for and engage in a costly final arbitration hearing.

Ahmad’s litigation experience in federal and state courts includes the following: IP Litigation (patents, trademarks, and copyrights), franchise and license disputes, privacy issues, international and out of state judgment domestications, fraudulent concealment and misrepresentation, personal injury, property disputes, breach of fiduciary duty, and corporate disputes. In addition, Ahmad has experience working with significant corporate clients on multifaceted transactions with capital exceeding one hundred million dollars at stake. His transactional experience also includes: contract analysis, drafting and negotiation (vendor agreements, settlement agreements, leases, easements, and license agreements), the sale of a business, and patent drafting (with a licensed agent).

Ahmad focuses on providing a calm voice of reason in the midst of escalated disputes, but does not shy away from vigorously pursuing his client’s rights through the end of any dispute. He leaves no stone unturned. Ahmad is highly attentive and responsive to his clients’ needs and looks forward to representing you.

Tara

Tara is a shareholder in the firm’s Real Estate Transactions, Development, Land Use, Zoning & Environmental practices. Tara’s practice focuses on land use and development, as she assists clients statewide on entitling projects for commercial, residential, industrial, office, and mixed uses. Tara works with local governments and other regulatory authorities in order to address the needs of her clients related to environmental permitting and compliance, zoning, comprehensive plans, concurrency, site plan approval, variance and waiver requests, due diligence, and property rights. Additionally, Tara is the Chair of the Cannabis and Controlled Substances Group, where Tara assists clients in complex regulated industries such as alcoholic beverage and medical marijuana licensing. On the alcoholic beverage side, Tara offers additional value to clients throughout Florida in the hospitality, restaurant and entertainment industries through her experience with alcoholic beverage licensure and Florida’s alcoholic beverage laws. On the cannabis side, Tara works with physicians, lenders, real estate developers, landlords, ancillary service providers, licensed Medical Marijuana Treatment Centers and license applicants, helping them to navigate the ever changing regulatory landscape of medical marijuana. Tara is a regular presenter and speaker at industry seminars and conferences. As of the fall of 2018, Tara was the first professor in the state of Florida to teach a law school course on medical marijuana law and policy at the University of Florida Levin College of Law. Tara also assists clients in the national hemp industry in obtaining licensing and approvals for processing, retailing, cultivation and other forms of secondary byproduct monetization. She is the only person in the state to be appointed by the Florida Department of Agriculture and Consumer Services to both the inaugural Industrial Hemp Advisory Board created under Senate Bill 1020 and to the state’s Hemp Advisory Committee, which she Chairs.

Prior to joining the firm, Tara worked as a legal extern for the University of Florida General Counsel and Office of the Vice President as well as for the Orlando Juvenile Public Defenders Office. For over a decade, Tara has also worked professionally as a private speech and debate coach and taught at multiple national debate institutes, including the National Debate Forum at Emerson University, the National Symposium for Debate at Grinnell College and Victory Briefs Institute at UCLA.

Tara Tedrow is a contributing writer at the Orlando Sentinel and has spoken about various real estate topics on Fox News.

Jon

Jon Gibbs is the Chair of Lowndes’ Intellectual Property Services Group and represents clients in a broad spectrum of intellectual property matters including intellectual property protection, licensing, litigation, auditing, and due diligence. Jon counsels clients on brand management strategies, selection and clearance of trademarks and service marks, policing and enforcement issues and securing rights in proprietary discoveries and works through patent, copyright, and trade secret protection.

Jon conducts due diligence investigations in connection with intellectual property transactions, negotiates and drafts intellectual property transfer and license agreements, and documents co-existence agreements.

Jon has litigated and defended matters involving claims of trademark infringement, trademark dilution, unfair competition, trade dress infringement, false advertising, copyright infringement, cybersquatting, patent infringement, and trade secret misappropriation. He has handled numerous matters before the Trademark Trial and Appeal Board in addition to litigating domain name disputes under the UDRP.

Jon is also a general aviation pilot and a United States Coast Guard licensed Captain.

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