Using “Schedule A” Litigation to Combat Online Trademark Infringement
In today’s digital world, trademark infringement is a significant concern for businesses aiming to protect their brand identity. Accordingly, it is important for businesses to implement a multifaceted online enforcement strategy to protect their rights. Among the various legal avenues available to combat counterfeit goods and unauthorized use of trademarks, “Schedule A” lawsuits, which are most often filed in the U.S. District Court for the Northern District of Illinois, have emerged as a powerful tool. This blog post will explore what Schedule A trademark infringement litigation entails, how it works, and why it's essential for companies to understand this legal avenue.
What is Schedule A Litigation?
In recent years, the selling of counterfeit goods—an especially nefarious form of trademark infringement—has surged on e-commerce platforms. Counterfeiters exploit these platforms to sell fake products, often at a lower price, which can severely damage the reputation and revenue of legitimate businesses. Many of these counterfeiters set up small anonymous online shops to sell counterfeit products (often on platforms such as Amazon, eBay, and others), disappear before they can be held accountable, and then set up another shop under a different identity to continue to sell the counterfeit products.
Schedule A litigation refers to a specific type of trademark infringement case that leverages a streamlined process to quickly resolve issues related to counterfeit goods, particularly those sold online by the “hit and run” merchants described above. The term "Schedule A" originates from the fact that these lawsuits often contain hundreds of these “hit and run” online shops as defendants, which are listed on what’s known as the “Schedule A” to the complaint.
Why Schedule A Litigation?
Filing traditional lawsuits against each online infringer is time consuming and costly, especially when there may be hundreds or thousands of “hit and run” online infringers located all over the world. Schedule A litigation offers a faster, more efficient alternative to address these types of infringers by using a streamlined process where hundreds or thousands of online infringers can be included in a single lawsuit.
Why Are Most Schedule A Cases Filed in the Northern District of Illinois?
Most Schedule A cases are filed in the U.S. District Court for the Northern District of Illinois. There are several reasons why, but one of the primary reasons is that the Northern District of Illinois has a broader jurisdictional qualification than many other federal courts, which allows Schedule A cases to reach a broader group of infringers. Specifically, the “minimum contacts” required for the Northern District of Illinois to assert jurisdiction over the defendant is met if the defendant “reasonably could foresee that its product would be sold in the forum.” Given the size and prevalence of the Chicago area to trade, it can be argued that anyone who sells anything on the internet could foresee that a consumer in the Chicago area might purchase the product.
The Process for Pursuing Schedule A Litigation
Filing a Complaint: The process begins with the trademark owner filing a complaint in a federal court (such as the Northern District of Illinois). The complaint includes detailed information about the trademark, evidence of infringement, and a list of known and unknown defendants (often referred to as “John Does”). The Schedule A form is used to document these details and is often filed separately under seal.
Ex Parte Temporary Restraining Order (TRO): To prevent further damage while the case is being resolved, the trademark owner requests an ex parte TRO against the defendants’ infringement. The TRO, which aims to preserve the status quo, can impose an obligation on the applicable online marketplaces to temporarily halt the sale of counterfeit goods without notifying the defendants in advance.
Submit the TRO to the Online Marketplace and Obtain Settlements: Once the court grants the TRO (which it does based on the evidence provided by the plaintiff), the plaintiff can submit the TRO to the online marketplace(s) where the defendants are selling the infringing products. In response, online marketplaces will typically freeze the infringing merchant’s account, including any further sales and any money in the account. The TRO often causes an infringing party to settle its case with the trademark holder so that the infringing party can “unfreeze” its accounts with the online marketplaces.
Service of Process: The plaintiff must serve notice to the remaining defendants who have not settled. In Schedule A cases, since defendants are often operators of online stores who may be located internationally, service of process can be challenging.
Obtain Default Judgments: Many defendants, even when properly served, will fail to respond in court. In those cases, the plaintiff can obtain a default judgment, which often includes a permanent injunction against the defendants that prohibits them from continuing their infringing activities. Additionally, the court may award damages to the plaintiff, which can include actual damages, statutory damages, and attorneys' fees.
Evidence Collection: For any remaining defendants, both parties engage in the discovery process of exchanging evidence. Discovery in a Schedule A case often includes obtaining information from online marketplaces, payment processors, and shipping carriers to identify the sources and extent of the counterfeit activities.
Permanent Injunction and Damages: If the court finds in favor of the plaintiff against the remaining defendants, it may issue a permanent injunction against the defendants, prohibiting them from continuing their infringing activities. Additionally, the court may award damages to the plaintiff, which can include actual damages, statutory damages, and attorneys' fees.
Benefits of Schedule A Litigation
Speed and Efficiency: Schedule A cases are designed to allow businesses to address and mitigate the impact of trademark infringement more quickly and less expensively than traditional methods.
Protection During Litigation: The ability to obtain a TRO helps prevent further damage by halting sales of counterfeit goods while the case proceeds.
Broader Reach: Schedule A litigation can address infringing activities involving both known and unknown defendants, including international actors who might otherwise evade traditional litigation approaches.
Challenges and Considerations
While Schedule A litigation offers several advantages, it also comes with challenges:
Complexity of Service: Serving defendants who operate internationally can be complicated and may require additional legal steps.
Evidence Gathering: Collecting sufficient evidence to support claims and identify all parties involved can be resource intensive.
Legal Costs: Despite the streamlined process, Schedule A litigation can still be expensive, especially for smaller businesses.
Potential for Abuse: Due to the streamlined process and challenges with identifying and serving the infringers, which leads to much of the process being done ex parte, there is a potential for plaintiffs to abuse Schedule A litigation. This risk can be mitigated by working with qualified and ethical counsel.
Conclusion
Schedule A litigation provides a valuable tool for businesses facing the challenge of trademark infringement through the sale of counterfeit goods. By using Schedule A litigation, companies may be able to effectively protect their brands, enforce their intellectual property rights, and mitigate any damages caused by counterfeiters. However, due to the complexities and challenges involved in this type of litigation, companies should consult with experienced IP attorneys to ensure the best possible outcome for their case while safeguarding the integrity and success of their brands.
Our firm regularly advises clients on and litigates trademark issues, including strategies to protect and enforce their rights online. Feel free to contact us if we can be of help.