Intellectual Property Law

Approving Corporation's Trademark Infringement Can Cause Personal Liability

By Michael Atkins

The default judgment in Century 21 Real Estate, LLC v. Raritan Bay Realty, Ltd., illustrates that an officer can be personal liable for its employer’s trademark infringement.

All that’s needed is authorization and approval.

In Century 21, the defendant corporation entered into a franchise agreement with the plaintiff and continued to use the licensed trademarks after plaintiff terminated the agreement. Plaintiff sued the corporation and its officers; defendants did not answer; and plaintiff moved for entry of a default judgment against all of the defendants, including the officers.

Eastern District of New York Magistrate Judge James Orenstein found:

“An individual officer can be held personally liable for a corporation’s trademark infringement and unfair competition under the Lanham Act if the officer is a ‘moving, active conscious force behind [the corporation’s] infringement.’ Demonstrating that the officer ‘authorized and approved the acts of unfair competition which are the basis of the corporation’s liability is sufficient to subject the officer to personal liability.’ Moreover, a defendant’s belief that the products at issue were genuine and non-infringing is ‘irrelevant’ to the disposition of a Lanham Act claim for trademark infringement.”

In his report and recommendation, the magistrate reluctantly found that plaintiff had met this burden.

 “Century 21’s well-pleaded allegations and supporting evidence ultimately suffice to establish the personal liability of each of the individual defendants in this case for trademark infringement under the Lanham Act — although Century 21 has made arriving at that conclusion needlessly difficult. Indeed, Century 21’s default motion and accompanying submissions do not address individual liability in the context of the Lanham Act at all. Despite that significant shortcoming, a thorough review of the record compels the conclusion that each of the individual defendants was a ‘moving, active conscious force behind’ [the corporation’s] infringement.

“…. The record amply supports those allegations with respect to the individual defendants. Pursuant to the Franchise Agreement both individuals agreed personally to manage and supervise the business. The two individual defendants are [the corporation’s] only shareholders and the only corporate officers with supervisory responsibilities. That Century 21 specifically directed each of its letters regarding termination of the franchise and the defendants’ attendant obligations to [the individual defendants] is further evidence that both individuals had a direct hand in the acts of infringement at issue here.”

On Sept. 3, the Eastern District adopted the magistrate’s report and recommendation.

The moral of the story, of course, is that individual officers can’t sign off on a corporation’s trademark infringement without fear of being held to account personally for their hand in the infringement.

The case cite is Century 21 Real Estate, LLC v. Raritan Bay Realty, Ltd., 2008 WL 4190955 (E.D.N.Y.), No. 07-1455 (Orenstein, M.J.).

Full post as published by Seattle Trademark Lawyer on September 21, 2008 (boomark / email).