Filing "Schedule A" Cases to Combat Counterfeiting on Online Marketplaces

While Amazon's increased efforts to stop counterfeiting are certainly welcome, the problem continues to persist. One increasingly popular strategy for brand owners is to start enforcement proceedings in federal court, rather then with Amazon directly, through the filing of a "Schedule A" complaint. 

As explained in this cited article, such complaints identify the defendants (typically online sellers and storefronts) in a Schedule A, an exhibit, that is filed under seal so as not to alert the defendants of the lawsuit pending against them. The rationale being that if the alleged counterfeiters knew of the complaint, they would destroy relevant documents and hide assets. After filing the complaint, the brand owner quickly obtains a temporary restraining order (TRO) enjoining the sale of the allegedly infringing products and provides the TRO to Amazon as a basis for closing the sellers' product listings and freezing their Amazon accounts (and thus effectively shutting down their businesses, at least temporarily).  It is only then that the defendants receive notice of the lawsuit.

The cited article describes how this can be an effective method for disrupting the defendants' businesses and combating counterfeiting on online marketplaces, and how one federal jurisdiction has become a preferred venue for enforcing design patents in this manner. The article also notes, however, that the use of Schedule A cases is open to abuse given that the defendants have no opportunity to defend against the TRO and initial take down actions by Amazon or other platforms. 

A few years ago, for example, my firm represented a client that was wrongly included in a Schedule A complaint that named more than sixty defendants alleged to be foreign counterfeiters selling on Amazon and eBay. Our client, however, was a legitimate business, based in Georgia with warehouses outside Atlanta, whose founder was born in China, but had immigrated to the United States with her parents in 2003. Ultimately, we successfully opposed the plaintiff's motion for a preliminary injunction and obtained a sweeping order by the court in which it held that the plaintiff was not likely to succeed on any of its claims against our client. But that win, and the resulting favorable settlement, followed months of disruption and expense caused by the TRO and Amazon suspensions that the plaintiff unilaterally obtained right before the peak season for our client's products. 

In sum, the filing of a Schedule A complaint is a strategy that brand owners should consider in appropriate cases and that authorized resellers should be mindful of in case they are wrongly swept up in such enforcement efforts.