D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test: 1. Landlords (a) In General
A landlord whose premises are the site of infringing activity may be held contributorily liable for a plaintiff’s damages, provided the plaintiff can demonstrate that the landlord’s failure to prevent such activity was the cause of those damages. See Polo Ralph Lauren Corp. v. Chinatown Gift Shop, 855 F.Supp. 648 (S.D.N.Y. 1994), plaintiff’s motion for summary judgment denied, 1996 WL 67700 (S.D.N.Y. 1996) (unpublished opinion). See also Laugh Factory, Inc. v. Basciano, 608 F.Supp.2d 549, 564 (S.D.N.Y. 2009)(a landlord may be contributorily liable for the infringing acts of a tenant, citing Polo Ralph Lauren); Habeeba’s Dance of the Arts,Ltd. v. Knoblauch, 430 F.Supp.2d 709, 714-715 (S.D. Ohio 2006)(sustaining claim for contributory trademark infringement against YWCA athletic club that allowed infringing event to take place at its facilities). In Polo Ralph Lauren, the plaintiffs, Polo Ralph Lauren, Rolex Watch U.S.A., Inc. and Louis Vuitton, alleged that three retailers were using their landlords’ premises to sell goods that infringed their trademarks. They further alleged that the landlords who leased the premises were aware that their tenants were selling counterfeit goods on the premises and did nothing to prevent the activity. Id. at 649. (Note that plaintiffs sued both under federal law and under the New York Real Property Law Section 231(2).) The plaintiffs sued not only the retailer defendants, but also their landlords for contributory infringement. After they secured a default judgment against the retailer defendants, the landlord of one of those defendants brought a motion to dismiss, arguing inter alia that the Lanham Act did not provide a cause of action for damages against someone who indirectly aids the violation of the statute. The court disagreed and denied the motion, noting that although there is no explicit language in the Act, Inwood provided judicial precedent for interpreting the statute to include a cause of action for contributory infringement. The court further relied on Hard Rock Café, discussed in detail infra, to extend the theory of contributory infringement outside the manufacturer/distributor context.
In a later unpublished decision on both parties’ motions for summary judgment, the same court nevertheless refused to require the landlord to contribute to the amount of the default judgment against its tenant, finding no basis for attributing the landlord’s behavior to any of the damages assessed therein. See Polo Ralph Lauren, 1996 WL 67700 at *2. The court assumed, for purposes of both motions, that the landlord had a responsibility to “take reasonable steps to rid the premises of the illegal activity.” Id. at *1. In reaching its decision, the court examined the “damage period” of approximately six months, proposed by the plaintiffs as the time beginning from when the landlord was notified of its tenant’s counterfeiting activities and ending with the date of the entry of the default judgment. The court noted that the landlord had, within the first month, served notices to vacate on the tenant. The plaintiffs argued that the landlord should have followed up with an eviction action. The court found, however, that the landlord believed in good faith there was insufficient evidence to evict. More fundamentally, the court found that even if an eviction action had been taken, it would not have been completed by the end of the damage period. Id. at *2.
Where the defendant landlord and two direct infringing stores were separate corporations all owned by the same party, the court sustained the plaintiff’s motion for summary judgment and imposed contributory liability on the landlord, jointly and severally with the direct infringers. L & L Wings, Inc. v. Marco-Destin, Inc., 676 F.Supp.2d 179, 191-192 (S.D.N.Y. 2009). Under these circumstances, the court readily found knowledge on the part of the landlord corporation, which had received the same written notice of infringement as had the direct infringers. Id. at 192.
L & L Wings arose out of a dispute over a licensing agreement between the plaintiff, “Wings” a beachwear retailer, and its competitor, an individual with whom the plaintiff had shared an interest in three other companies several years prior to the litigation. At that time, the plaintiff’s principal owners decided to transfer their interest in those companies to the competitor. L & L Wings, supra at 183. As part of the transaction, the plaintiff entered into a licensing agreement which was signed by each of four corporate defendants owned by the competitor: two separate corporations that each operated competing stores, the corporation landlord for one of the stores, and a fourth company that provided management consulting services to the two stores. Id. at 183 -184. The licensing agreement allowed the defendants to use the plaintiff’s mark and trade dress for a number of years, after which such rights terminated. Id. at 184.
Notwithstanding the terms of the licensing agreement, which the court determined to be valid and binding, the defendants continued to use the plaintiff’s marks in the competing stores after the termination date. See Wings, supra at 185-187. The plaintiff not only reminded one of the store defendants of the termination date on two separate occasions, but also sent a cease and desist letter to all four defendants. Id. at 184. After being contacted by dissatisfied customers who bought merchandise in the defendants’ stores, thinking that the stores were owned by the plaintiff, the plaintiff sued all four defendants, alleging, inter alia, both direct and contributory liability for trademark infringement. See Id. It moved for summary judgment on the contributory liability claim, which the court granted, having found direct infringement arising out of the defendants’ breach of the licensing agreement. Id. at 189.
The Wings court reached its decision applying the Inwood test. Wings, supra at 191. That the defendant landlord provided a service and not a product was unavailing, the court decided, finding sufficient precedent, including Polo Ralph Lauren, supra, for applying the Inwood contributory liability test to defendants that supply a service. See Wings, supra at 192 and cases cited therein.
As to the knowledge element under Inwood, the fact that all four corporations shared the same owner compelled the court’s decision. It was undisputed, for example, that “the four defendants ha[d] shared nearly identical corporate officers, directors and main office employees.” Wings, supra at 191. The plaintiff’s former business partner signed the licensing agreement on behalf of each of the four defendant corporations. Id. Finally, as noted above, the defendant landlord received the same written notice of infringement as did the other three parties. On this basis alone, the court concluded that it had actual knowledge of the infringing activity sufficient to impose contributory liability, jointly and severally with the direct infringers. Id.
