Court Dissolves Ex Parte Seizure Order Because Prelminary Injunction Adequate to Protect Brand Owner During Pendency of Counterfeiting Litigation
The Lanham Act authorizes a district court to grant an ex parte order for the seizure of items involved in the unlawful use of a counterfeit mark, including goods, counterfeit marks, the means of making such marks, and records. Under the statutory procedure, a court that issues an ex parte seizure order must schedule a hearing, generally within 15 days after the date the seizure order is issued. At that hearing, the party who obtained the order has "the burden to prove that the facts supporting findings of fact and conclusions of law necessary to support such order are still in effect.” In order to continue the seizure order, the court must make the following findings:
(i) an order other than an ex parte seizure order is not adequate;(ii) the applicant has not publicized the requested seizure;
(iii) the applicant is likely to succeed in showing that the person against whom seizure would be ordered used a counterfeit mark in connection with the sale, offering for sale, or distribution of goods or services;
(iv) an immediate and irreparable injury will occur if such seizure is not ordered;
(v) the matter to be seized will be located at the place identified in the application;
(vi) the harm to the applicant of denying the application outweighs the harm to the legitimate interests of the person against whom seizure would be ordered of granting the application; and
(vii) the person against whom seizure would be ordered, or persons acting in concert with such person, would destroy, move, hide, or otherwise make such matter inaccessible to the court, if the applicant were to proceed on notice to such person.
If the party who obtained the order does not meet its burden of proof, the seizure order will be dissolved or modified.
In Beltronics USA, Inc. v. Midwest Inventory Distribution LLC, the federal district court in Kansas decided November 13, 2007 to dissolve an ex parte seizure order it had previously issued to Beltronics because, after conducting the required hearing, the court was not satisfied that the defendants would destroy, move, hide, or otherwise make the seized goods inaccessible, or that an order other than an ex parte seizure order would not be adequate to ensure that Beltronics would have adequate remedies if the defendants are ultimately found to have infringed Beltronics’ trademark.
The court was swayed by the absence of evidence that the defendants were “the type of fly-by-night defendants who will seek to evade the couirt’s jurisdiction.” The defendants had never failed to appear in court when required to do so, there was no prior legal action against them, and there was no other indicia that they would be unlikely to comply with a court order. Noting that the defendants are incorporated businesses with inventories, assets, and a fixed physical presence that sell merchandise other than Beltronics equipment, the court concluded that they would have much to lose if held in contempt of a court order. Consequently, the court could not find that an order other than an ex parte seizure order would not be adequate to protect Beltronics. On the grounds that Beltronics has not made the showings required by the ex parte seizure statute, the court dissolved the seizure order and directed Beltronics to return the seized goods to the defendants. At the same time, however, it entered a preliminary injunction prohibiting the defendants from selling or offering for sale any Beltronics goods which do not bear an original Beltronics serial number label. In addition, in order to ensure the preservation of evidence, the court prohibited the defendants from destroying, modifying, moving, hiding, or otherwise making any such goods inaccessible during the course of the litigation.