Published by LawTechie - May 16, 2012 - LawTechie

Website SeizuresRon Coleman of Likelihood of Confusion highlights and Eric Goldman analyzes the growing trend of ridiculous default judgment awards in intellectual property infringement lawsuits as exemplified in the recent Hermes decision ($100M on a default judgment motion). Hermès v. Does, 12-civ-1623 (S.D.N.Y.; Apr. 30, 2012). So I will add a little something about the unnerving trend of website seizures granted on ex parte preliminary injunction motions.

Background: Back in March, Hermes filed a law suit against a slew of “John Doe” defendants, website operators, accused of selling counterfeit products in violation of Hermes’ trademarks. Hermes successfully moved ex parte for a temporary restraining order to freeze the websites. Now the Court has passed final judgment, to the tune of $100M, for willful trademark infringement against the various John Doe defendants who did not show up to defend themselves. The judgment included a permanent injunction transferring the domains from the Does’ registrars to the plaintiff.

As noted above, Eric Goldman and Ron Coleman did an excellent job of pointing out why it is bad when judges do not require plaintiffs to prove their damages after winning a default motion:

And here’s the last little point, though — another reason why it matters: Because this judgment represents a new order of magnitude in the inflationary process by which judges and juries in IP cases involving no proof of damages get to what I’ve called infinity dollar verdicts.

So I’ll stick to a topic, raised in these lawsuits, that lies a bit closer to my heart:

Domain Seizure in Intellectual Property Infringement

IMO, domain seizure in cases like Hermes is an even bigger deal than the insane $100M damages awards. This is due to the probability possibility that many of the defendants in default had never even received service from plaintiff until after their domains were frozen and their businesses shut down on the ex parte preliminary injunction (TRO) motion.

This is because many of the defendants (and this is based on my personal experience of vacating some of these temporary injunctions) are foreign companies who have not heard of the lawsuit filed in some place called the Southern District of New York and would, in any case, be surprised that the SDNY has any sort of jurisdiction over them.

Nevertheless, one would assume that legal procedure provides for some sort of safety mechanism to prevent potentially innocent internet businesses from losing weeks, if not months, of business as a result of an improper ex parte TRO. Yes, I do recall something about a bond that plaintiffs are required to post when they move for a temporary restraining order. Here’s what the Hermes Court required on its order:

“Plaintiffs shall post a corporate surety bond, cash or certified or attorney’s check in the amount of $1,000.00 as security, determined adequate for the payment of such damages as any person may be entitled to recover as a result of a wrongful seizure or restraint hereunder…

That’s right. For the hundreds of websites seized without any sort of due process, Hermes was required to post a $1,000 bond to make defendants whole in case of improper seizure.

Ron and Eric are right about how much these uncollectible $100M default judgment awards are hurting the intellectual property justice system, but I would submit that these SOPA-like business destroying ex parte website seizures are the greater menace.

LawTechie is a blog focusing on trends in tech and digital media. Areas covered include intellectual property, cyberlaw, venture capital, transactions and litigation as they relate to the emerging sectors. The blog is edited by the firm's partner Tim Bukher with contributions from the firm's experts in their respective areas of law.

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