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Former Owner of Flea Market Could Still Be Found Liable in Counterfeiting Case

Thursday, February 6, 2014
By Anandashankar Mazumdar

Feb. 4 --A former owner of a flea market in Southern New Hampshire might still exercise sufficient control over vendors such that a jury could find him liable for contributory infringement and other claims arising from the sales of allegedly counterfeit luxury goods, the U.S. District Court for the District of New Hampshire ruled Jan. 31 (Coach, Inc. v. Sapatis, 2014 BL 26669, D.N.H., No. 1:12-cv-00506-PB, 1/31/14).

Largely denying the former owner's motion for summary judgment, the court noted that the relevant statutes did not require a defendant to be an owner of a place of business, but merely to have exercised sufficient control over direct infringements in order to be secondarily liable.

Although neither the Supreme Court nor the relevant federal appeals court had explicitly found the existence of contributory liability with regard to several of the claims related to the counterfeiting, the court decided to recognize that such claims were valid.

Owner Sells to Daughter, Stays Involved
In 1991, Peter J. Sapatis acquired ownership of a residence and an adjacent field in Londonderry, N.H. He used the field to establish a flea market, the Londonderry Flea Market. Starting in 2003, the flea market was operated by Londonderry Marketplace LLC.

In 2008, Sapatis retired and sold the flea market to his daughter Alaina E. Paul and her company, TABA Enterprises LLC for $100,000. In the transaction, however, Sapatis retained ownership of the property, leasing its use to TABA Enterprises for continuing operation of the flea market. Londonderry Marketplace LLC was dissolved in 2009. Additionally, Paul pays $12,000 a year to Sapatis toward the $100,000 purchase price, but Sapatis also gives her a gift of $12,000 a year. Sapatis continued to appear at the flea market on a volunteer basis.

Coach Inc. of New York, founded in 1941, is a maker of luxury leather goods. In June 2011, Coach engaged the services of private investigators, who went to the Londonderry Flea Market and found counterfeit Coach products. The investigators asked to speak to the manager, and they were met by Sapatis. Upon being informed of the presence of counterfeits, Sapatis informed the flea market's manager, Linda Morrow, and called the local police.

Accompanied by an officer, the detectives purchased several counterfeit items and presented cease-and-desist letters. In August, Coach sent a letter to the flea market, alleging further illegal activity, and Sapatis asked one of the investigators to do another inspection, which turned up no counterfeits at that time.

In April 2012, the investigator again found counterfeit Coach items at the flea market and Coach sent another letter after which Sapatis contacted Coach, requesting assistance in solving the problem.

Coach then sued Sapatis, Londonderry Marketplace, Paul and TABA Enterprises, alleging contributory trademark counterfeiting, infringement, and dilution, contributory trade dress infringement, contributory false designation of origin and false advertising and contributory copyright infringement, as well as claims under New Hampshire state law. Sapatis and Londonderry Marketplace moved for summary judgment.

Motion Mostly Denied
Judge Paul J. Barbadoro concluded that even though Sapatis was no longer the legal owner of the flea market, that he had sufficient control over the operations that a jury might reasonably find him secondarily liable for the actions of the vendors.

The court also recognized the possible claims of contributory copyright infringement, trade dress infringement, false designation of origin and false advertising and trademark dilution, even though such claims had not been recognized explicitly either by the U.S. Supreme Court or by the U.S. Court of Appeals for the First Circuit.

Furthermore, the court said that it would “assume without deciding” that such secondary liability claims were also possible with respect to the state law claims.

However, the court did grant summary judgment in favor of Sapatis on Coach's claim of unfair competition, on the basis that there was no representation made by Sapatis to consumers regarding the availability of Coach-branded goods at the flea market.

Turning to the claims against Londonderry Marketplace LLP, the court found no evidence in the record that the now defunct entity had anything to do with the flea market's operations after 2008.

The court thus granted summary judgment in full for Londonderry Marketplace and in part for Sapatis.

Coach was represented by Pamela E. Berman of Bowditch & Dewey LLP, Boston. Sapatis was represented by Gary M. Burt and Thomas J. Pappas of Primmer Piper Eggleston & Cramer P.C., Manchester, N.H., and Lisa Snow Wade of Orr & Reno P.A., Concord, N.H.


Text is available at http://www.bloomberglaw.com/public/document/Coach_Inc_et_al_v_Sapatis_et_al_Docket_No_112cv00506_DNH_Dec_21_2.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com

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