Landlord Liable for Subtenants’ Trademark Infringement

If you asked most commercial landlords what keeps them up at night, they probably wouldn’t say that they worry about their tenants committing trademark infringement.  Granted, trademark infringement is not likely to be an issue for most tenants.  But when it does happen, the landlord might be on the hook.  In fact, in 2017, we wrote about that happening.

Now it’s happened again.  Just last week, a federal appeals court ruled in favor of eyewear brand Luxottica Group and its Oakley, Inc. subsidiary against the owners of a discount mall.  Defendant Yes Assets owned the International Discount Mall and leased it to defendant Airport Mini Mall, LLC (“AMM”), which in turn subleased to 120 or so different vendors.  Yes Assets provided maintenance and operations services to AMM and the vendors.

While AMM ran the Mall, it was raided three times by law enforcement due to vendors selling counterfeit goods.  One of the raids lasted over 14 hours and required a tractor-trailer to haul away the seized goods.  The principals of Yes Assets and AMM were made aware of the raids at the time.  Luxottica twice sent letters to Yes Assets and AMM notifying them that their vendors were not allowed to sell Luxottica’s eyewear or counterfeit versions either.  The second letter identified specific vendors selling counterfeit eyewear.  After Luxottica filed the lawsuit, Yes Assets’ property manager and counsel met with law enforcement about the issue.  The defendants did not, however, do anything to stop the sale of counterfeit goods and even renewed the leases of several of the vendors who had been arrested during one of the raids.

Luxottica sued the defendants for “contributory trademark infringement.”  For that claim, the defendant must have “reason to know” of the infringement.  A jury found for Luxottica and awarded $100,000 for each infringed trademark, totaling $1.9 million in damages.  The appeals court affirmed the verdict.

There is some nuance to the ruling, but suffice it to say that landlords should be aware that if a tenant or subtenant is infringement a trademark, the landlord could wind up liable for it.

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