43 online sellers of fake UA merchandise ordered to pay

Posted: August 30, 2018 at 4:30 a.m.

The Arkansas Razorbacks logo is shown at midfield of Donald W. Reynolds Razorback Stadium on Monday, Aug. 27, 2018, in Fayetteville.

A federal district judge on Wednesday awarded $200,000 in damages each from 43 online merchants in a lawsuit filed by the University of Arkansas System board of trustees alleging the sale of counterfeit Razorback merchandise.

But what portion of the $8.6 million in damages will actually recovered depends on whatever assets are held in PayPal and other e-commerce accounts tied to the sellers, who are described in court documents as based outside the United States.

The lawsuit, as filed in June, named 53 merchants identified not by personal names but by their online presence, many selling items through large online marketplace websites like Wish.com. The lawsuit described the defendants as residing in China or "other foreign jurisdictions," according to documents filed in the U.S. District Court in the Northern District of Illinois.

U.S. District Judge Gary Feinerman signed the order Wednesday listing 43 defaulting defendants who neither answered the lawsuit nor "appeared in any way." The judgment states the defendants are liable for counterfeiting and "willful federal trademark infringement," as well as violating the Illinois Uniform Deceptive Trade Practices Act.

To recover damages, the judge ordered that "all monies currently restrained in Defaulting Defendants' financial accounts, including monies held by Amazon, WISH, PayPal and Alipay, are hereby released to ARKANSAS," stating that the companies must release any money in the accounts within 10 business days of receiving the judge's order.

More than a month earlier, a temporary order issued in the case stated that the merchants had to stop using their online marketplace accounts. The merchant names were first filed under seal.

The final judgment states that each of the 43 listed sellers be "permanently enjoined and restrained from" using the online marketplace account "that is being used to sell or is the means by which Defaulting Defendants could continue to sell Counterfeit/Infringing Products."

The sellers listed have names such as chinaflags, Sanguine DIY Jewelry Store, Custome Shop, Yiwu Cute Jewelry Co., Ltd. and ZNWJQWHG.

UA System spokesman Nate Hinkel in a statement said the judgment "was a major victory for the University's licensing program and sends a strong message to other online piracy sites that put the University's brand and reputation at risk."

Hinkel said research will be done on assets to satisfy the judgment, and that while other lawsuits against counterfeiters might be filed, "the primary purpose is to shut down piracy sites, create a substantial and unprecedented deterrent to further unlawful activities, and prevent any damage to the University, the Athletic Department, its brand and reputation."

The judgment states that the sellers were "properly" notified of the lawsuit, via "electronic publication or email, along with any notice that Defaulting Defendants received from domain name registrars and payment processors."

Some of the defendants were voluntarily dismissed from the case, according to court documents filed on behalf of UA trustees by attorney Keith A. Vogt.

Online court records show Vogt, who is registered as an attorney in Illinois, has filed 24 similar cases this year in U.S. District Court in the Northern District of Illinois against alleged foreign counterfeiters or trademark infringers, representing Iron Maiden Holdings Ltd., a company associated with the English rock band, and Stanley Black & Decker Inc., the tool manufacturer, among several other entities.

David Ludwig, a trademark attorney not involved with the case, said the legal strategy to seek account assets held by entities like PayPal is common when big business entities go after those selling unauthorized goods.

"This is indicative of colleges and universities becoming more like corporations in their brand enforcement," Ludwig said.

He said he was unfamiliar with other universities utilizing this approach to go after overseas counterfeiters.

"Unfortunately, in today's world, a lot of the infringement is coming from other countries, China and other areas of the world," said Ludwig, a Virginia-based attorney and partner in the firm Dunlap, Bennett & Ludwig.

He said the judgment amounts are "big numbers" that likely reflect the one-sided nature of the case, with no arguments made by sellers to counter the claims made on behalf of the university.

"When there's a default judgment, the plaintiff can put on their best evidence of damages and there's no one to rebut that," Ludwig said.

Court documents show that the UA trustees asked the judge to award $2 million in damages from each defendant. Hinkel said there was no disappointment that the damage award was lowered by the judge to $200,000 from each seller.

Ludwig said there's no way to know what amount might actually be in the accounts to be turned over the UA System.

"It just depends on what happens to be hanging in those particular accounts," Ludwig said, explaining that the sellers, for example, could have emptied out funds on a weekly basis, so there "may be negligible amounts" in the accounts.

Metro on 08/30/2018

*CORRECTION: University of Arkansas System spokesman Nate Hinkel said a primary purpose of lawsuits filed against counterfeiters of Razorback merchandise is to shut down “piracy sites.” A previous version of this story incorrectly quoted Hinkel.