Celco Settles Coach Trademark Suit; Judge Finds Brokers Potentially Liable for Infringement
The saga of Coach’s trademark infringement lawsuit against Celco Customs Services has come to an end, with the California-based former customs brokerage withdrawing its appeal on Aug. 11 after settling the case for $8 million in late July. Despite Celco continuing the fight for over a year, the settlement equals the amount awarded by a Central California U.S. District Court jury in April 2013. Celco had argued that brokers can't be liable for trademark infringement because they aren't in a position to know the contents of a shipment. But District Judge Margaret Morrow ruled that Celco could be held responsible because it ignored several red flags related to the power of attorney associated with the importer of the infringing goods.
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The jury had originally ordered Celco to pay Coach $8 million in damages after finding the broker contributed to trademark infringement by entering a shipment of over 30,000 counterfeit handbags and wallets into the Port of Los Angeles in 2009 (see 13041520). CBP revoked Celco’s broker license shortly after the jury reached the verdict (see 13080712). The case was part of a broader trend of trademark cases brought by footwear and apparel companies like Coach and Nike against customs brokers (see 13042619). Many of those have settled, partly because the customs brokers had no choice given the expense of litigating, according to industry lawyers.
Celco asked Judge Morrow to overturn the jury's verdict as contrary to law. As a customs broker, Celco had no way to know it was infringing the trademarks, it argued. There was no evidence anyone told Celco what was in the shipping container, and as customs brokers Celco had no authority to inspect the container itself before filing the entry, it said.
The District Court ruled on June 5 that the number of red flags that were presented to Celco meant the broker should have known the container held counterfeit or infringing products. The power of attorney Celco’s owner, Celine Wang, received for the shipment from the freight forwarder showed a discrepancy between the purported importer and its tax identification number, yet Celco made no attempt to contact the importer before filing the entry, said the District Court. Other actions taken by Wang were also evidence of her guilt, said Judge Morrow. She had a subordinate with no knowledge of the transaction sign the entry form after CBP put a hold on the shipment and asked Celco for more documentation. And rather than meet with the CBP officers that visited Celco in connection with the seized shipment, Wang listened from an adjoining office, said the court.
Wang had years of experience, and had even previously encountered a fake power of attorney when Celco entered a shipment of counterfeit cigarettes in 2002, said the court. “Taken as a whole, there is substantial evidence from which a reasonable jury could have found that Wang’s act of filing an entry form that had clear indicia of invalidity, without seeking or receiving any information that explained inconsistencies in the power of attorney, demonstrated that she knew -- or at least should have known -- that her services were being used to facilitate trademark infringement."
Although Judge Morrow acquiesced to Celco’s request for a new trial, the former customs broker notified the court on July 22 that it was settling the case for $8 million. The District Court entered judgment against Celco on the next day. Celco subsequently withdrew its appeal to the 9th Circuit U.S. Court of Appeals.
(Coach, Inc. v. Celco Customs Service; C. D. Cal. 11-10787, Judge Margaret Morrow)
Email ITTNews@warren-news.com for a copy of the June court order denying Celco’s motion for judgment as a matter of law.