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The Trademark Counterfeiter’s Depot – Self-Storage Facilities: Another Third-Party Supply Chain Intermediary – Part I

Self-Storage facilities around the world have more in common than just providing space at reasonable rates for persons in need of more storage space or in transition—they have been (and continue to be) an often preferred choice for the storage of trademark counterfeits.

SELF-STORAGE CRIMINAL MONTAGE SAMPLING

  • December 2014, U.S. law enforcement raided a self-storage facility in Queens, New York, seizing counterfeit goods valued at $2.2 million
  • October 2017, British law enforcement (Greater Manchester Region) raided six addresses (which included self-storage units) and seized enough fake designer clothes to fill a truck valued at $2.7 million
  • January 2018, U.S law enforcement raided a self-storage facility in Nassau County, New York, and came up with counterfeits valued at $25 million
  • March 2018, British law enforcement (West Midlands Region) seized counterfeit alcohol and tobacco from a self-storage facility valued at $4.2 million
  • May 2018, U.S. law enforcement raided a self-storage facility in Laredo, Texas and seized counterfeit goods valued at $16 million

WILLFUL BLINDNESS

According to retired NYPD detective William Ryan, president of Ryan Investigative Group, who was quoted in a 2016 New York Times article titled: Counterfeiting Trade Settles Into a New York Standby: Self-Storage Units, “They’re (self-storage operators) not paying attention to handbags and all this stuff moving in and out on a daily basis,” he said. “Suppose they weren’t moving handbags, they’re moving weapons. ‘See something, say something?’ Not in these places.”[1]

CONTRIBUTORY LIABILITY

U.S. IP Attorney Susan Neuberger Weller wrote in her 2013 article titled: Counterfeits, Trademark Infringement, and Contributory Liability: Your Vendors are Your Problem, “Counterfeit goods seem to be everywhere, and efforts to police their ubiquitous existence often seem futile. However, a recent decision involving counterfeit Coach products should inspire those who host vendors of counterfeit products to rethink their business strategy.”

She goes onto explain that a U.S. appeals court confirmed a district court’s award of $5 million in damages to Coach, Inc. “…for a flea market owner’s failure to stop his vendors from selling counterfeit Coach goods.

The issue before the court was whether the flea market owner could be held liable for the infringing acts of others. Although finding that the owner could not be held vicariously liable for the vendors’ counterfeiting activities (since there was no showing that he and the vendors were in a partnership relationship or had authority to bind one another or to exercise joint ownership or control of anything), the court upheld a finding of contributory liability.

“Since the owner of the flea market provided rental booths and storage units to vendors that he knew or had reason to know were engaging in trademark infringement, he was supplying a “product or service” under the liability standard. As the court stated, since the owner “continued to supply flea market resources to vendors with knowledge of and willful blindness toward ongoing infringing activities,” he facilitated the continuing infringing activity and must bear responsibility for his actions.”[2]

CONSUMER DECEPTION

In March of this year, the Ecuador attorney general charged owners of stores in which counterfeit products were seized with “Consumer Deception.” The offenders were subsequently sentenced to 15 months in prison.

What is instructive here is that the owners were not necessarily the counterfeiters, but they made their stores available for the sale of counterfeits. And, as reported in a Mondaq article titled: Ecuador: Custodial Sentences for the Owners of Stores Selling Counterfeit Goods by Ecuador IP Attorney Karen Gonzalez, she quotes the attorney general, “This has been an operation of significant importance and will set the standard moving forward in relation to intellectual property criminal proceedings, since not only was this the first time that a custodial sentence was handed down for this type of offence, but it also sets an extremely important legal precedent, in that selling counterfeit goods, was held to constitute consumer deception and that the owners of the marks were deemed to be the victims.”

She continued, “It is important to mention that the threshold for trademark infringement being considered a criminal matter is US$50,000, which makes such actions difficult in practice, whereas the offense of consumer deception has no such threshold.”[3]

Although the above two examples refer to an open-market and store operators, respectively, who are willfully blind, you would think a similar argument could be made against self-storage operators.

SO WHAT IS THE ELEPHANT IN THE ROOM?

ANSWER: Third Party Intermediaries

Here are a few quotes from an article published in the World Trademark Review titled, Liability of Intermediaries: The Effective Anti-Counterfeiting Tool, written by Greek IP Attorney Michalis Kosmopoulos on May 24, 2018:

“The most effective approach is to target the infrastructure and means used by counterfeiters to supply their products internationally. In this regard, counterfeiters often act through third parties…” [i.e., self-storage facilities, transportation, financial services, open markets, etc.]

“Such third-party engagement renders the liability of intermediaries a cutting-edge matter in IP law worldwide.”

“Targeting intermediaries is vital for enhancing the effectiveness of an anti-counterfeiting program.”[4]

ARE SELF-STORAGE OPERATORS BEING HELD ACCOUNTABLE?

Up to this point of my research, I have not come across any cases in which an IP attorney (on behalf of a brand owner) filed suit against a self-storage operator for permitting counterfeiters to use their storage space for illegal purposes.

However, according to a 2013 article published in The Storage Facilitator.com industry blog titled: Storage Facility Settles Unprecedented Counterfeit Goods Lawsuit,” the New York City Office of Special Enforcement filed such a suit against a self-storage facility in Brooklyn.

Here are a few excerpts from the article, “For the first time ever, a civil suit was filed against a self-storage facility. The unfortunate situation offers some takeaways that fellow storage operators can use to protect themselves from similar woes.”

According to the article, an undercover investigator purchased 100 counterfeit DVDs and CDs from the storage unit renter at the storage unit itself. The investigators subsequently seized 44,000 counterfeit products from the facility.

“Not only did the (offender) store the counterfeit discs inside three storage lockers; he also sold them on-site.”

And how about this for a quote from then-Mayor Bloomberg’s Chief Policy Advisor, “The message to the self-storage industry is clear. You can’t look the other way when criminals turn your storage facility into a warehouse for illegal activity.”5

Well, isn’t that just what some self-storage operators continue to do?

IN MY NEXT POST…

I will discuss the third-party intermediary conundrum further, and explore the steps responsible self-storage operators are taking to mitigate their support of a criminal enterprise. I will also propose potential opportunities for IP private investigators to market their services to self-storage operators interested in establishing and maintaining a crime-free facility.

[1] Counterfeiting Trade Settles Into a New York Standby: Self-Storage Unit, New York Times https://www.nytimes.com/2016/11/21/nyregion/counterfeiting-trade-settles-into-a-new-york-standby-self-storage-units.html

[2] Counterfeits, Trademark Infringement, and Contributory Liability: Your Vendors are Your Problem https://www.copyrighttrademarkmatters.com/2013/06/18/counterfeits-trademark-infringement-and-contributory-liability-your-vendors-are-your-problem/

[3] Ecuador: Custodial Sentences For the Owners of stores Selling Counterfeit Goods http://www.mondaq.com/x/697356/Trademark/Custodial+Sentences+For+The+Owners+Of+Stores+Selling+Counterfeit+Goods

[4] Liability of Intermediaries: the Effective Anti-Counterfeiting Tool http://www.worldtrademarkreview.com/Intelligence/Anti-counterfeiting/2018/Industry-insight/Liability-of-intermediaries-the-effective-anti-counterfeiting-tool

{5} Storage Facility Settles Unprecedented Counterfeit Goods Lawsuit http://blog.selfstorage.com/storage-news/storage-facility-settles-unprecedented-counterfeit-goods-lawsuit-2574

 

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Ron Alvarez is a licensed private investigator and IP investigations specialist in New York City. He is a former NYPD lieutenant where he investigated robbery, narcotics, internal affairs, and fine art cases. Ron is a graduate of the FBI National Academy and earned a B.A. in Government and Public Administration from John Jay College of Criminal Justice in Manhattan. He has published a number of articles on various topics for PI Magazine. Ron is licensed in New York State.

3 comments on “The Trademark Counterfeiter’s Depot – Self-Storage Facilities: Another Third-Party Supply Chain Intermediary – Part I

  1. Hi Ron,
    Great article – I just got it in my Inbox. The storage box problem is one where legitimate operators probably also have storage boxes for smaller quantities, so the storage area operator may have difficulty determining what are legitimate (small-scale) goods, and what are counterfeit goods. A trademark on the items would be helpful to clear the uncertainty.
    Our new website TrademarKraft at http://www.trademarkraft.com provides low-cost trademarks, in case your viewers are interested.
    I’m definitely looking forward to the next post!

  2. Michael LeMieux

    Great article. As with other intermediaries, the truly egregious of the bunch should be treated as potentially cognizant of their role in the CF supply chain and held accountable where appropriate. Investigators want to determine that intermediary culpability as early as possible in the investigation and work that aspect just as diligently as they do the case against the primary infringing party.

  3. Pingback: The Trademark Counterfeiter’s Depot – Self-Storage Facilities: Another Third-Party Supply Chain Intermediary – Part II – IP-PI-BLOG

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