Commercial Landlords Beware: Tenant Trademark Infringement

Commercial landlords can now add another item to the already interminable list of risks they face in their capacities as landlords: liability borne from a tenant’s trademark infringement. The notion that a landlord could be vulnerable to legal action for the actions of its tenant runs counter to many people’s understanding of fairness. Nevertheless, commercial landlords are finding themselves increasingly subject to trademark enforcement claims as well-known brands seek to take stronger action to protect their intellectual property. If landlords want to ensure they are protected from their tenants’ trademark violations they would do well to understand the potential risks they face when leasing their properties to certain tenants.

In March, the jury in Omega v. 375 Canal, LLC awarded a total of $1.1 million to Omega, Swatch and several other brands as a result of 375 Canal’s contributory actions of trademark infringement. Case No. 1:12-CV-06979-PAC (S.D.N.Y. March 4, 2019). The watchmakers alleged that vendors leasing space owned by 375 Canal were selling counterfeit products that utilized their brands’ trademarks. The plaintiffs were able to prove the landlord had direct knowledge of the nefarious sales practices being employed by its tenants given (1) several arrests in 2010 and 2011 for these sales were made at the subject property, and (2) the plaintiffs notified 375 Canal of these arrests. Though 375 Canal stated that the offenders were removed from the property, by 2012 the brands’ investigators were still able to purchase counterfeit products at the property. The landlord also had a history of being involved in trademark enforcement actions, having consented to an injunction against infringement on Louis Vuitton trademarks in 2006, and other public nuisance claims that sought to prevent 375 Canal from allowing its property to be used by imitators. In the end, 375 Canal was found liable for contributory trademark counterfeiting, with each of the four trademarks that were the subject of the proceeding accounting for $275,000 of the total $1.1 million award to the plaintiffs.

The Omega case is the most recent in a line of cases involving commercial landlords facing liability for trademark infringement conducted by their tenants. Landlords should work with their legal counsel to review existing leases and ensure their indemnification provisions provide enough protection against trademark enforcement claims and an ability to terminate leases for intellectual property infringement. Future leases should be negotiated with potential trademark risks in mind, and careful attention should be given to the types of tenants landlords are dealing with.

In the event a landlord has knowledge of potential or actual trademark infringement by a tenant, it is imperative that action be taken to correct the tenant’s conduct or remove the tenant from the property. In light of the Omega decision, popular brands know that commercial landlords have a responsibility to be an early line of defense in protecting their trademarks against vendors who seek to imitate their brands. Commercial landlords cannot turn a blind eye to the actions of their tenants, but instead need to be diligent and address the trademark infringement of their tenants.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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