Forum Moderators: buckworks
I am writing this as a warning to fellow practitioners of e-commerce. A couple of years ago, just barely two months after our business started, we received a message from a US lawyer. We were informed that a lawsuit had been filed against us by a US based multinational in a US court. This had occurred suddenly out of the blue without any warning. The US multinational alleged that we resold products from a Hong Kong company that had infringed that trademark logo. We were given no options to discuss this or negotiate a settlement. Although the design of the logos did bear some resemblance, it was far from certain whether the design was a deliberate infringement. The owner of the Hong Kong company told us that the logo was based on a ancient Chinese design. We were not that scared because the US multinational would have to fight their case in Hong Kong in order to get us. However, it was most unlikely they would do so because their case was very weak.
The lawyer for the US multinational then sent letters to our web hosters in the UK and the US demanding them to close our accounts which they did. As a result, we had to switch move our web hosting to Hong Kong. Our web hosting subsequently received a letter from the lawyer as well, but their position was that unless there is a court injunction against us in Hong Kong, they will not take action against our account. At the time, my wife was heavily pregnant and we decided that this was not our fight. Therefore we delisted all the products of the Hong Kong Company. Since then we have not had any more harassment.
This type of harassment by US multinationals on Hong Kong e-commerce companies is all too common. Here are some examples I know:
- A friend of ours sells toys on eBay. Their listings were closed down by eBay following a complaint by AOL-Time Warner that their toys infringed their copyright. My friend promptly contacted Time Warned and apologized, but were asked to reveal the sources of their products.
- Another friend of ours were asked by a manufacturer of FRS radios to advertise their products on his web site. The product is known as freetalker and is a radio based on a wristwatch design. Within a couple of weeks of posting, my friend received a letter from a US lawyer alleging that the product infringed their copyright and demanded that he removed the product from this web site. This he did promptly, partly because the product was unsaleable in the first place because it did not have FCC approval.
- the third case is much more serious and involved a Hong Kong company that sells video games accessories on the Internet. It was sued jointly by Microsoft, Sony and Nintendo for selling mod chips. Their case was that mod chips promoted games software piracy. As a result of this suit, their web site was closed down for over a month and they eventually sold it to another company. Surprisingly, they decided to fight this suit, partly because Sony failed to win a similar suit in Australia.
The problem facing us and other retailers is that it is virtually impossible to know which products we are selling may or may not infringe copyright. At least, after this experience, we have made contingency plans should we get into these problems again. Should we ever grow big enough, we will change into a limited company so that if we run into big legal problems, we can just pack the company in.
Derek
On a happier note a chinese friend of produces oil paintings from original works of art, he lives and works china. You may not know this but China has no copyright law relating to the reproduction of copyrighted work.
So imagine my delight being able to draft a letter for him telling the US based lawyers to go sing. or words similar to that. Odd thing is he hasnt heard from them in moths.
very pleasing.
Can you explain more just what the letter said?
We carried products made by a Hong Kong company known as Eagletec.
The US multinatiional had alleged that Eagletec had infringed their trademark logo. Therefore they sued Eagletec and ourselves in the same suit.
They would have sued ANY Internet retailer that carried products by Eagletec.
I just can't see how anybody can avoid getting into problems like this unless Eagletec told them of pre-existing problems.
The second issue was even then, it was just not a clear cut case of infringement. Eagletec's logo was registered and the resemblence to the US company's was minimal. The fact that company did not dare take its case to Hong Kong or push this through in the US courts speaks for itself.
The fact of the matter was that this was probably a completely frivolous allegation in the first place. However, the methods used were deplorable.
1. They sued us without warning, and there are also no offer of negotiation.
2. They targeted our web hosters with these unsubstantiated allegations. Also they also told our web hosters not to reveal their communication, perhaps in fear that we may file a suit against them in Hong Kong.
I don’t use any logos on my site, except for mine, to insure no problems. You could just check the supplier’s legal page. This will tell you if their logo is trademarked, etc.
>The fact of the matter was that this was probably a completely frivolous allegation
Companies typically do not do this. Typically. There could be an underlying issue that you do not know about. I worked with an attorney at Motorola for about 2 years, and he told me some stuff about what a big company may or may not do legally. And it gets way too complex to explain in detail for this type of communication.
>1. They sued us without warning, and there are also no offer of negotiation
They do not have to warn you, but in my experience, in a courtroom, if they did not do that, the judge takes it into serious consideration. This is because judges hate dealing with trivial issues like this that could have been settled out of court. Judges are people too and don’t necessarily like dealing with every aspect of their jobs as many of us don’t. I found out a long time ago, you DO NOT have to do anything wrong to get sued. You just have to come up against someone who does not like you, in your case don’t like your supplier, and has a big war chest. I have actually threatened to take companies and their customers to court in the past. Every time, without exception, once the customer is brought into the mix, the offender folds. The Motorola attorney taught me that trick 15 years ago. It is nothing new.
In a case like this, you probably would not even need an attorney, just time to go to court and you probably would not have had any attorney’s fees. Also, if you supplier cared about it’s customers, they not only would NOT have put you into that situation in the first place, but they could have filed a motion to have you included in their law suite, which most of the time in a case like this is granted.
>Also they also told our web hosters not to reveal their communication, perhaps in fear that we may file a suit against them in Hong Kong.
I doubt it. Big companies do not like to have any legal proceedings in the public record, period. It is standard operating procedure.
I appreciate your input. I want to emphasize that Logos from any company were NEVER used on our site. We only resold their products, period.
As far as the logos were concerned, both were trademarked. Both were of a very simple design of two colours only; one was a square with 5 stripes, the other a rectangle with 3 stripes. I showed these to various lawyer friends and almosta ll thought that this was a joke. As for any other underlying issues involved, I do not know but again this is not our fight.
After consulting legal opinion, and also after that Eagletec agreed to cover us for any costs, we were never concerned about it. Eagletec was not concerned about it either.
Of course, that company was not worried about of paying out should they lose a suit in Hong Kong (we would only have used small claims tribunal anyway). However, this would have looked bad in the public eye, especially since that Hong Kong is now Chinese sovereign territory.
Unless you have a big company with a team of lawyers at your disposal, I don't see how you could have prevented this. For one the supplier do not have to tell you the truth, especially when they strongly feel that they have not infringed. Secondly, the sales representative may not know about this at all.
Web hosters are being put pressure on to act as judge and jury in this case. This they should not do unless there is a court judgement. Of course, web hosts in America are much more susceptible to this. I understand that our web hosters in America were actually threatened with legal action but our host in Hong Kong was not. The tone of the letter was cordial.
This is for another completely different matter. It claims that the PCNCIA devices we carry have infringed their copyright. According to their claims, basically all PC cards on the market, whether modems, LAN, or IEEE 1394 would infringe their copyright for "Smart Connector"
Actually this is a much easier matter to sort out, the brand we have been carrying is a licensee of that technology and therefore there was no infringement.
As we receive our products from a supplier, who receives the products from a supplier in Taiwan who receives the products from the manufacturer, just tell me how can we avoid something like this!
Do any of you make your supplier sign a declaration reviewed by lawyers to that to their knowledge, none of their products infringe any copyright before you carry them?
I really can't see how this sort of thing can be avoided unless you have a very large company which has huge negotiating power and has a team of lawyers
We are just lucky that we are not in the US.
Do NOT skimp on costs for your attorneys, money walks, talks, and negotiates much better than most can imagine. A $1,000 per hour lawyer is worth every penny in these instances.
Big firms of US attorneys do hit hard, make sure you are represented by an equal adversary that they will respect....it's amazing how that one hour of billed time resolves so many of these issues out of court:)
But seriously, we are not worried about it. Any judgments made by a US court will not apply in Hong Kong. It is extremely rare that these companies take their cases to Hong Kong. Eagletec was stupid in that they have a US company, and therefore they had to deal with the litigation.
In this new case, I am sure the products do have license and therefore did not infringe ay copyright.
Are you sure some competitor isn’t spoofing you? That would not be a copyright issue. It would be a patent issue.
However, according to the list of their patent licensees, the manufacturer of our products are on that list, and so I cannot see any problems.
Have you got any thought on this?
1. They would bother to pick on you
2. They call it a copyright violation when it is clearly a patent violation
Have you contacted the company sending the letters to make sure it is legitimate and if there is anything you can do to correct the situation?
I find that, in the US anyway, if you try to solve the problem the judges take that into consideration if it goes that far.
I cannot see them seriously considering coming to sue us in Hong Kong in a unfamiliar and probably hostile legal system. However, since we only sell about 10 of these items a month, there is no point in putting up a fuzz about this.
Manufacturers of electronic equipment in Hong Kong get letters alledging copyright and patent infringements all the time. Most of the time, they ignore these letters and it is extremely rare that they get sued in Hong Kong.
It looks that any shop that sells PC cards on the Internet can get sued.
That's because the companies just go after the people selling them in countries where there are treaties signed that make it easy for them to sue. You may be just on a larger list of all of that company's customers.
Based on how many a month you sell, your better off not doing it as you said and telling the company that you have ceased and desisted so that they know you will play ball with them. In the long term, this may be to your advantage.
China doesnt recognise the concept!
They have asked us to report past sales of such units to the US of which the total no. is less than 40.
The bottom line is that we are willing to delist the products in question but will not discuss any compensation.
I would not tell them how many units you sold. I would just tell them that you have stopped and that the number was much less than 50. "Much less" could be defined as 40 ;-))
Manufacturers of electronic equipment in Hong Kong get letters alledging copyright and patent infringements all the time. Most of the time, they ignore these letters and it is extremely rare that they get sued in Hong Kong.
Please don't continue on with this oh poor me act. If you don't want US attorneys annoying you, then get a reputable attorney and check out your suppliers. I as well as you know very well that many over there copy (ie steal) from other companies abroad. Lawyers in the US and other countries may decide it's not worth going to Hong Kong to sue either because of unfavorable laws or insufficient monetary return, HOWEVER they sure can make your life miserable when you try to sell this stuff outside your own country. If you lie with dogs, you'll be treated like one.
As we understand, the alleged infringing product is the connecting cable (dongle) rather than the PC card. I don't think that the manufacturers were intent on infringing the patent, they were just not aware that such a simple device could be patented. The only PC card we sell that uses a dongle is the IEEE1394 card which we have only sold 10 units. It is uncertain whether we have ever shipped this item to the US.
As mentioned earlier, we buy this product from a Hong Kong supplier, who buy from a distributor in Taiwan, who buy from a manufacturer.
It just looks that they are now going after every manufacturer, distributor, supplier and retailer who may sell in the US. If you sell any PC card that may come with a connecting cable, I would advise that you check with your supplier immediately.
The only consolation is that we must be getting somewhere to be bothered twice in two years.
