Landlords beware: Your trademark infringing tenant is your problem too

If a landlord learns that trademark infringement is occurring on its premises by one of its tenants and fails to stop further violations, the landlord may be held responsible by the trademark holder for damages relating to the infringement of a trademark.

This situation most commonly occurs for landlords that own flea markets or at venues in which goods are sold by a variety of small independent operators.  Typically, in order to assert a claim for damages, the trademark holder is required to place the landlord on notice of the violation.  Once the landlord is placed on notice and knows or has reason to know that counterfeit goods are being sold on its premises, the landlord is then required to take subsequent remedial measures to prevent violations.  Failure to take steps necessary to prevent violations or even inadequate action by a landlord can result in a court finding that a landlord was willfully blind, and is therefore, responsible for damages. Courts define willful blindness as a situation in which a landlord suspects, knows, or has reason to know of wrongdoing, but fails to further investigate the wrongdoing.

In a recent example, an owner of a flea market was notified by a trademark holder and by the district attorney that specific counterfeit goods were being sold at their flea market. The landlord acknowledged receiving the notices and admitted that it was aware of the violations, but despite these notices, when multiple raids of the flea market were conducted by law enforcement over the course of a year, counterfeit goods were continually found and seized.  While the landlord sent out flyers, posted signs, and called a meeting of the tenants requesting that the tenants stop violating trademarks, the Court found that those actions were insufficient measures and permitted the landlord to be responsible for contributory damages.

Accordingly, if a landlord learns that a tenant is infringing on a trademark, the landlord should avail itself of all remedies available under the lease and common law to prevent the tenant from selling counterfeit goods.  Leases typically prohibit a tenant from engaging in illegal activities.  For further instruction on what to do once a landlord becomes aware of a tenant’s violation, we recommend that landlords consult their counsel and review our previous blog article entitled What Happens When a Tenant’s Business Becomes Illegal During the Lease Term.

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