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NSW Nike Cease and Desist Letter - How to Respond?

Discussion in 'Intellectual Property Law Forum' started by SHARP, 16 July 2014.

  1. SHARP

    SHARP Active Member

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    I'm an online retailer of football merchandise. I operate the business as a hobby and it is very small scale. I get merchandise from a variety of avenues, depending on whether I can get small orders of items at a reasonable price that I can make a few dollars on.

    Yesterday I received an email from Nike claiming that I had been selling fake goods and demanding over $1000 in costs and that I close my website. I responded immediately and informed them that I was unaware that any goods I held were counterfeit (infringing their trademark) and asked to see some evidence. They replied saying that they had a purchased item in their possession (from my store), but still didn't give any other details.

    I don't believe that all Nike goods I've ever sold were counterfeit and, although I have a fair idea which supplier it may be (as the supplier sells a lot of Nike goods), I would like to know for sure who it is that may have passed off counterfeit goods to me (and which goods may have been counterfeit). I emailed them back and informed them of this, requesting some details regarding the item they have. These details have still not been provided and instead I was emailed a cease and desist letter by their legal representatives. I have taken all Nike merchandise off my webstore and emailed both Nike and their lawyers stating that I am willing to help them get to the bottom of the matter. I did, however, reiterate that I would at least need to know the product in question in order to nail down where it came from.

    Since my last email, Nike has replied giving details of the product in question. I narrowed down the order they were referring to and it turns out that the parcel has not yet arrived. Basically, they have lied to me about having evidence in their possession, while demanding I pay them over $1000. Is this a violation of Section 178BA of the Crimes Act 1900 (demanding money by means of deception)?
     
  2. SHARP

    SHARP Active Member

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    My apologies, I meant to refer to Section 178BB.
     
  3. John R

    John R Well-Known Member

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    Hi SHARP,
    Selling counterfeit products that infringe on the trade mark/s of a third-party is a serious legal risk for online retailers that don't source their branded products from the local Australian authorised distributor.
    Even if you believe that the product that you are selling was manufactured in a Nike factory, it may still be infringing a Nike trade mark/s (and therefore counterfeit).
    This means that, as a retailer, you should take steps to clearly understand the supply chain and authenticity of all branded products (and the associated legal risk) unless you are purchasing direct from the local Australian authorised distributor.

    Recent notable cases in relation to this issue include:
    Paul's Retail Pty Ltd v Lonsdale Australia Limited [2012] FCAFC 130 (11 September 2012)
    Paul's Retail Pty Ltd v Sporte Leisure Pty Ltd [2012] FCAFC 51 (11 April 2012)

    I also found this Clayton Utz Insights article from November 2012 titled "Nowhere to run for grey goods importers? Full Federal Court restricts parallel importation defence" that may also be of interest.
    1. How certain are you that the order that Nike (or one of Nike's anti-counterfeiting service providers) ordered is the one that you suspect is yet to be delivered?
    2. Did the cease and desist letter also require you to "deliver up" all alleged counterfeit Nike products in your possession?
    3. Did the cease and desist letter also require you to "account for profits" (that is, detail the profit that you made on the alleged counterfeit Nike products)?
     
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  4. SHARP

    SHARP Active Member

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    Hi John, thanks for the reply. The answers to the questions are:

    1. Yes, I'm certain that the order in question was undelivered when they started making their claim.
    2. Yes, but I don't actually hold a lot of stock and certainly won't be dealing with any Nike gear after this, so no new orders will be placed.
    3. Yes, they asked for details of accounts, etc.
     
  5. John R

    John R Well-Known Member

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    Hi SHARP,
    Ultimately, Nike are the trade mark owner of Nike trade marks so even if you are certain, they may have placed previous order/s using an external/covert third-party or identified the supplier of your product (and subsequently, have became aware that the product you've obtained is counterfeit and/or infringing on Nike trade mark/s).

    Without knowing the structure of your business (sole trader, private company, etc.), and despite your belief that you operate the business as a hobby, you should strongly consider engaging a lawyer with intellectual property (IP) expertise at your earliest opportunity to assist and represent you.

    This is because:
    1. You have not received a simple cease and desist letter. You appear to have received a letter that instructs you to permanently stop selling any Nike products (Nike also owns other brands including Converse and Hurley).
    2. You are being required to deliver all Nike products in your possession to Nike or their law firm. I assume that postage is at your cost.
    3. You are being required to provide an account of profits so that Nike can understand the financial position of your business and potentially issue you with further payment demands. This may mean that you need to pay more than the initially demand of $1,000 towards Nike's costs.
    4. You are likely being required to disclose all contact information for your supplier. Ideally, you would have an supply agreement with your supplier so that they are liable to pay your legal fees in the event that they supply you with counterfeit product.
    Hope this helps. Please keep us updated with your progress.
     
  6. SHARP

    SHARP Active Member

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    Thanks for your time John, but you've failed to answer the question. I am aware of what was contained in the cease and desist letter, but that wasn't my question. The fact that I'm a small retailer (with a website that is less than a few months old) I haven't actually had my sales. Therefore my question was about whether Nike's behaviour (based on me having evidence to support my claims) is a violation of the crimes act. I have already been talking to a solicitor friend of mine, but came on here to see if I could get a few opinions.
     
  7. SHARP

    SHARP Active Member

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    And for the record, I don't believe that they have multiple items, or that any items I've sold are counterfeit.
     
  8. Tim W

    Tim W Lawyer

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    No, it isn't.
     
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  9. SHARP

    SHARP Active Member

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    Then which act do you think covers demanding money by means of deception?
     
  10. Tim W

    Tim W Lawyer

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    1. That is not what's happening here.
    2. On the assumption you are in NSW,
      you do know that that section is no longer in that Act?
     

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