NY City's Nuisance Abatement Law Invoked Against Counterfeiters and their Landlords
Under New York City's nuisance abatement law, the city can obtain injunctions against counterfeiting operations, obtain fines from landlords whose buildings house such operations, and force them to post bonds and to submit new tenants for city approval. On October 23, New York City Mayor Michael Bloomberg announced an "aggressive campaign" to use the nuisance abatement law against the owners of buildings in which video piracy operations are taking place. At the same time, Bloomberg proposed that the State of New York revise its criminal code to make the recording of movies in theaters a Class A misdemeanor, punishable by up to one year in prison, with subsequent convictions Class E felonies, punishable by up to four years in prison. Currently, illegally recording a motion picture is only a violation. (The MPAA estimates that nearly half of all camcorder-generated pirated DVDs are made in New York City theaters, while 43 percent of all pirated DVDs seized in the U.S. and 20 percent of those seized worldwide are made in the city).
As reported in the NY Times, over the last couple of years, New York City has used the nuisance abatement law to seize close to $50 million in counterfeit goods and shut down 15 buildings in the area of Broadway and 34th Street that had been used almost entirely by counterfeiters.
Ultimately, the effectiveness of nuisance actions depends on how receptive judges are to the city's requests for enforcement. In a decision that was released yesterday, the New York Supreme Court's Appellate Division reversed a November 2005 lower court ruling that let defendants Khalid Ahmed and Mouman Outlet, Inc. off the hook for their alleged use of a building to house a counterfeiting operation. The trial judge had vacated a preliminary injunction against Ahmed and Mouman Outlet under the nuisance abatement law after they convinced the court that they had removed all counterfeit goods from their premises. The appellate court held that the injunction should not have been vacated because the city has an "ongoing right to ensure that [they] do not subsequently recommence their illegal activities in the same location."
Earlier this year, in Marvisi v. Greenwich Insurance Company, reported at 2006 U.S. Dist. LEXIS 32840, the federal district court in Manhattan ruled that a landlord was not entitled to coverage under the "personal and advertising injury clause" of his commercial general liability insurance policy for claims that New York City brought against it under the nuisance abatement law. The city's action asserted that Marvisi created a "criminal nuisance . . . by knowingly conducting and/or maintaining the subject premises as an illegal establishment where persons gather for purposes of purchasing, selling, and/or possessing merchandise bearing counterfeit trademarks." In the same decision, Judge Griesa held that the Marvisi's insurance did not cover civil claims brought against him by Rolex, Louis Vuitton and Fendi which alleged that he induced and aided the infringement of their registered trademarks by providing his tenants with a "safe haven and marketplace" in which counterfeit goods could be sold and that he is vicariously liable for his tenants' sale of counterfeit goods because he controls the property and derives financial benefit from the tenants' infringing activities.