Firms that provided credit card processing services to the operator of a Web site on which counterfeit merchandise was sold may be secondarily liable for trademark infringement, a district court ruled. The court also ruled that the company that brought the Web site operator and the processing services firms together can be held secondarily liable as well. The court found that the trademark owner had alleged sufficient facts from which it could be found that each of the defendants knew or should have known that counterfeit merchandise was being sold on the Web site, an essential finding for establishing contributory infringement. The court noted, among other things, that the trademark owner alleged that the processing services firms charged higher fees for "high risk merchant accounts" that sold "replica" items, a term synonymous with counterfeit products, and the services processed charge backs from customers dissatisfied with the merchandise and thus were aware of the nature and relative low cost of the items. The court ruled that sufficient control over the infringing activity had been established with respect to the processing firms because the credit card processing services provided by them were "a necessary element for the transaction of counterfeit goods online, and were essential to sales" on the Web site. The firms “knowingly provided a "financial bridge between buyers and sellers" which enabled them to consummate transactions in infringing goods, the court found.
Gucci America, Inc. v. Frontline Processing Corp., 2010 U.S. Dist. LEXIS 62654 (E.D.N.Y. June 23, 2010) Download PDF