IP Law Daily, TRADEMARK—C.D. Cal.: Online marketplace found liable for sale of counterfeit JUUL products, (Jun 13, 2023)

By Kevin M. Finson, J.D.

A website operator and distributor of goods sold by third parties was found liable for trademark infringement, counterfeiting, false designation of origin, and false advertising.

Electronic cigarette maker JUUL was entitled toa permanent injunction and $2,000,000 in Lanham Act damages from an online marketplace that allowed the sale of counterfeit JUUL products on its website, the U.S. District Court in Los Angeles has held following a bench trial. A long history of findings of liability for other counterfeit goods showed willfulness on the part of the website operator. Because the website operator acted with reckless disregard for JUUL’s rights, the case was exceptional, allowing JUUL to recover reasonable attorney fees under the Lanham Act’s fee shifting provision (JUUL Labs, Inc. v. Chou, June 8, 2023, Fischer, D.).

JUUL Labs, Inc. was the owner of several registered trademarks including the name JUUL and several related logos. JUUL used these marks for various electronic cigarette (vaping) products, including inhalation devices, pods containing nicotine, charging cables, and related accessories. Andy Chou was the owner and operating of various entities, including CJ Fulfillment Corp., operating as an online marketplace connecting third-party vendors to customers and offering fulfillment and warehouse services in connection with that marketplace (collectively, CJ). JUUL, through its brand protection team and a third-party investigation, believed that JUUL-branded products sold on CJ’s website were counterfeit, in part because CJ was listing products that JUUL had long-since ceased to manufacture and because products ordered via CJ as part of the investigation were missing identifying features found on genuine JUUL products such as serial numbers.

JUUL brought suit against CJ for trademark infringement, trademark counterfeiting, false designation of origin, and false advertising. After a bench trial, the court issued its findings of fact and conclusions of law.

Trademark infringement. By the time of trial, the question of infringement remained open as to JUUL Portable Chargers, JUUL Charging Cables, and JUUL mobile phone cases. Previous categories of products had been disposed of on summary judgment. There was no dispute as to the validity or ownership of the marks or that CJ had used the marks in commerce. The court found that there was a likelihood of confusion with the JUUL mobile phone cases, but in the case of the chargers and charging cables the use was not likely to cause confusion: the mark appeared to show the cables were compatible with JUUL products, not as a source indicator, and the chargers were prominently marked with the manufacturer’s logo. The court found CJ liable for infringement with regard to the mobile phone cases but not with regard to the chargers or charging cables. For the same reasons, and without further discussion, the court reached the same conclusion in the false designation or origin and unfair competition claims.

Willfulness. JUUL argued that CJ infringed willfully due to a long history of prior infringement suits by various brands. CJ argued that it made anti-infringement efforts, such as an internal database and use of the search engine Baidu to search for brands, but the court held that these were perfunctory, poorly maintained, and half-hearted policies.

The court held that CJ acted with reckless disregard for the infringement and awarded statutory damages in the amount of $2,000,000, along with injunctive relief. The court also determined that the case was exceptional, allowing JUUL to recover its reasonable attorney fees under the Lanham Act’s fee shifting provision.

The Case is No. 2:21-cv-03056-DSF-PD.

Attorneys: Stephen C. Steinberg (Bartko Zankel Bunzel and Miller APC) for JUUL Labs, Inc. Byron E. Ma (Buche and Associates P.C.) for Andy Chou a/k/a Lizhi Zhou, Yiwu Cute Jewelry Co., Ltd. and CJ Fulfillment Corp.

Companies: JUUL Labs, Inc.; Yiwu Cute Jewelry Co., Ltd.; CJ Fulfillment Corp.; CJ Trade Corp.; Yiwu Promotional Trade Co., Ltd.; Yiwu Xite Jewelry Co., Ltd.

Cases: Trademark CaliforniaNews