Lululemon Sues Online Sellers
Lululemon, the internationally recognized athletic apparel company, has filed a trademark infringement lawsuit against online sellers. The Defendants in this case may have been made aware of the suit by way of a Temporary Restraining Order (TRO). If you were impacted by the lawsuit, you may already know what the TRO means for your business. Essentially, even though Lululemon’s claims of counterfeiting are allegations, the restraining order freezes the seller accounts of the named Defendants. TROs affect every business differently, due to variations in size and success, but they are disruptive across the board.
All of the Defendants in this trademark infringement lawsuit should strongly consider responding to the court. Any sellers who fail to provide a response are taking a definite loss. If you abandon the issue you are giving the money in your frozen account to Lululemon. The court may also subject sellers who do not respond to a Default Judgment. This judgment can potentially cost even more than the frozen account money.
What Are the Implications of a “Schedule A” Lawsuit?
Our firm has seen many infringement cases just like this one filed by Lululemon. This particular type of counterfeiting suit is known as a Schedule A lawsuit. Over the last several years, intellectual property attorneys have seen a dramatic rise in federal Schedule A suits. Specifically, these cases are filed in the United States District Court for the Northern District of Illinois. What is the reason for the increase in these types of infringement cases? Huge global brands worth millions or billions of dollars do in fact experience regular infringement by online sellers. Rather than file against one or just a few sellers, brands make a blanket claim against many. This method of filing saves brands like Lululemon enormous amounts of money and time.
By suing a group of sellers at once, the Plaintiff expects a number of them will walk away. Again, when sellers abandon their frozen account, any money left in that account will be awarded to the Plaintiff (Lululemon). The more sellers named in the suit, the higher the amount of seller walk-aways. And ultimately, the larger the amount of abandoned funds collected by Lululemon. All of which is enacted, by the way, without a thorough investigation into the actual activities of the Defendants. Many of the online sellers who choose to abandon these cases are not actually guilty of infringement. Thus, we strongly urge sellers affected by such lawsuits and restraining orders to respond to the court. If possible, take legal action to clear yourself of any alleged wrongdoing.
How Sellers Should Respond to Allegations of Infringement
You may be wondering why sellers would just abandon their account and the money they worked so hard to earn. Principally, as the complaint details, the majority of the Defendants “reside and/or operate in the People’s Republic of China or other foreign jurisdictions.” That means, presumably, the affected sellers may not know what a response to the court should include. Not to mention, if a seller lives and operates in another country like China, they may not understand the US legal system well enough to take action. Even more granularly, e-commerce operators outside the US may not feel they can confidently navigate the legal process, due to language barriers, costs, and other logistical factors.
As a matter of fact, Schedule A lawsuits have proven to be a very effective filing strategy for major brands like Lululemon. These million- and billion-dollar companies sue sellers worth much less and who are not located in the US so that they can gain as much as possible from the lawsuit. In addition to expecting many sellers to leave the issue alone, Lululemon may have an interest in making settlements with the Defendants. It has been reported that sellers who try to reach settlements with brands in infringement cases receive roughly 60% of the money in their frozen account. And what of the remainder of the funds? Not surprisingly, that goes to Lululemon (if a seller accepts the settlement amount). Moreover, settlements do not permit accused infringers of clearing themselves of the accusations made against them (though they are not necessarily admitting to infringement).
E-Commerce Sellers in China Sued by Lululemon
As we have noted in our articles on Schedule A lawsuits in the past, the complaint associated with the lawsuit is heavily templated. Which is to say, the allegations are almost identical to every other trademark infringement case filed in the same federal district court. The only real discernable differences are the name of the Plaintiff, the Defendants, the precise trademark in question, and the products protected by that mark.
Now, what are the claims of infringement? Among the allegations, sellers have been accused of damaging the value of Lululemon because of their actions. Per the lawsuit, sellers work in concert to collectively infringe on the brand’s intellectual property. Defendants are said to use fraudulent identities and stolen website designs to make their unauthorized online storefronts appear authorized. Furthermore, the lawsuit claims sellers rely on off-shore bank accounts to avoid paying brands when infringement has been proven. All in all, this Schedule A lawsuit aims to demonstrate that e-commerce sellers intentionally deceive customers to make profit off of Lululemon’s established reputation.
Retaining Legal Counsel Can Save You Money
Our team at Stockman & Poropat, PLLC knows exactly how frustrating and disruptive this kind of lawsuit can be for online sellers. We have successfully developed legal solutions for many sellers in just this predicament. Before walking away or reaching a settlement, allow us to understand your e-commerce operation during our free consultation. From there, we can help you figure out the best, most financially sound way forward. Contact us today!
Download the legal complaint below:
Up next we will be discussing the Birkenstock Trademark Infringement Lawsuit.
