I purchased, what turned out to be, counterfeit phone chargers / cases from a major Chinese online wholesaler. Before selling I compared the items to one purchased at a domestic office supply store and it appeared to be the same. I sold roughly 15-20 of these items online and then was informed they were replicas and the item was pulled offline. I stopped selling the cases and sent the remaining cases back to the distributor. A couple weeks later I was sent a package via certified mail from Johnson & Pham LLLP that I comply with their requests, on behalf of the company, or face potentially damaging litigation. One of their requests was submitting no less than $20,000 for damages. I feel this is extreme considering the circumstances. Should I be worried / consult with a lawyer?
Another alleged copyright and trademark infringer of Mophie products who's gotten a letter from Paul Pham demanding $20,000.
Let me guess: he sent you a detailed article about their court victories and their list of cases actually filed, to prove to you their firm wasn't bluffing. They're not, they do sue people. If you did buy counterfeit products from a Chinese wholesaler, and I'm guessing you did because China doesn't respect IP laws and the US companies can't sue them there so they sue small retailers like you who think they've got a good bargain and can retail these fakes on eBay and make $20 or $30 each on them, you've got no defense and you need to settle this because if J&P does sue you (and they'll sue you in CA where they are and where Mophie is and where they're investigator bought one of your counterfeit chargers), you'd lose, and the statutory damages alone could be 10s of 1000s, plus their legal fees because there were several trademarks and each one has a statutory damage. You've got no upside here and a significant downside.
You should consult with a lawyer about negotiating the $20,000 demand down, which is a lot. The $20,000 is their opening demand, and therefore negotiable. Don't do this yourself, because without a lawyer, you're likely to make damaging admissions and present no threat of potentially disputing this, so they'll drive a much harder bargain, and the only leverage you've got is through a lawyer of your own.
As Attorney Koslyn notes, you need to take the matter seriously.
You and your own attorney need to consider that IF you're sued in California based on your sale of an allegedly infringing product TO AN AGENT of the Plaintiff [a "trap sale"] you may have a very good argument that the case must be dismissed on procedural grounds because (1) the court has no personal jurisdiction over you when the plaintiff manufactures the defendant's contacts with California and (2) the plaintiff does have standing to sue because when IT buys the allegedly infringing product it has suffered no "injury in fact" sufficient to satisfy prudential standing. There's plenty of case law for both propositions [and some cases that go the other way as well]. Smart lawyers representing rights holders who do use "trap sales" to enforce their rights draft their complaints so these arguments cannot be made -- but if they can be made then a motion to dismiss is one tool in your attorney's belt to try to resolve the matter more favorably.
I agree with my colleagues that this is serious and requires attention. I suggest a prompt consultation with a lawyer with the idea of negotiating a resolution. The $20k is an opening gambit and will likely be subject to significant reduction, but you'll need a lawyer to represent you to get the maximum reduction b/c you will not likely be taken seriously without one. Good luck.
Yes you should be worried, and you most certainly should retain counsel. Copyright and trademark infringement are strict liability offenses---it does not matter that you thought they were legitimate items. Further, whether the Chinese online wholesaler was "major" or not, there is an known epidemic of importation of counterfeit items from China and, therefore, you should have been on notice that this could be a problem.
Given that you admit that you purchased these counterfeit items from China, you have very little choice other than to attempt to settle the case (and you absolutely must retain counsel to do so). But don't expect miracles as to the settlement amount---you will need to make a substantial payment here. Note that if you are sued for either copyright or trademark infringement, you face the risk of substantial damages plus the obligation to pay attorneys fees. The attorneys fees alone can be tens of thousands of dollars. You could be liable for up to $150,000 for each "work" for willful copyright infringement. These chargers might also be protected by patents. In short, you face a substantial financial risk if you litigate this---if you litigate you almost surely will end up paying damages in excess of $20,000----plus attorneys fees.
You may feel that the damages claim is "extreme" but that is not correct. This is a quite reasonable settlement offer in the circumstances. I help defend these cases regularly, and I am confident that I could successfully negotiate a reduction in this amount--but you still will have to make a substantial payment. And you absolutely will have to retain and pay legal counsel---failure to have a lawyer represent you in this matter could be the worst financial mistake you have ever made.
Yes you need to consult an IP defense attorney. You cannot settle this as favorably without an attorney, as they want to teach you a lesson, not your attorney, who will already know you should not do that. And, a good attorney can make them want to grab the easy money and settle. You will save more than the attorney fees you pay. Peddling counterfeits was a bad unprofitable idea that is going to cost you a bunch of money. Hope you learned a lesson that will encourage you to be more honest in the future. It was to good to be true and you knew it.
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