Egregious/Overreaching Ex Parte Orders for Rightsowners Keep Coming — Deckers and Richemont

[Post by Venkat Balasubramani, with comments from Eric]

Deckers v. Liyanghua, 11-cv-07970 (N.D. Ill.; Dec. 15, 2011) (report and recommendation)

Deckers proceeds against a slew of domain names in Illinois. The case was originally sealed, but in granting a preliminary injunction, the court unseals it. The court’s November 15, 2011 (now-unsealed) order provides for the following relief:

- an injunction against defendants

– An order requiring the registries and/or registrars to “prevent the . . . domain names from connecting to corresponding” websites and prevent the registration or transfer of new domain names

– an order directed at search engines, web hosts, registrars and registries to cease facilitating access to any websites through which defendants conduct business

– expedited discovery (Deckers emails a subpoena to banks and service providers who now have to turn over documents)

– authorizing notice via email . . . but “[a] ruling on permissible service of process methods is held in abeyance until Deckers has obtained discovery responses from third parties” [this is significant — there has not yet been service of process]

– an asset transfer restriction

The preliminary injunction similarly includes a broad injunction against defendants. It also orders the registries to change the registrar of record for the domain names to a registrar of Decker’s choosing. There’s a broad injunction against those “in privity” with defendants, including search engines, web hosts, registrars and registries. The court orders broad discovery, and an asset freeze.

The one interesting thing is that the court makes Deckers post a $150,000 bond. Deckers contested this but the court didn’t budge on this issue.

Richemont Int’l v. Montesol OU, 11-cv-09322 (S.D.N.Y.; Jan. 3, 2012)

In this case, the court enters a TRO on Dec. 21, 2011. The TRO broadly enjoins defendants from infringing on the marks and contains an asset freeze. It also purports to enjoin websites, online search engines, online shopping price comparison services and other businesses and publications from advertising, promoting, or marketing the websites or products in question. A similar prohibition is directed to website hosts, ISPs “or any other business supporting, hosting, or providing e-commerce services to defendants’ websites.” The order also directs registries or registrars to “delete all existing DNS entries” for the domain names and to enter the registrar’s default DNS address for the domain names, and orders a slew of service providers to “temporarily disable service to” the domain names.

On January 3, 2011, the court enters a preliminary injunction. The order notes that defendants were served with the papers on December 23 and, as of January 3, 2012, they did not submit any papers in objection. The injunction is similar in scope to the TRO. It contains a broad account freeze directed at third parties. It enjoins service providers from providing support to the websites. It tells the registries/registrars to delete all existing DNS entries and enter the registrar’s default DNS address.

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Venkat’s Comments

This activity in the courts is crucially relevant to the SOPA/PIPA discussions taking place right now. Congress should take a look at what is going on in courts–if for no other reason than to figure out what relief judges think is authorized under current law (or what relief plaintiffs seem to obtain) and what potential abuses (if any) may occur, and also to explain how exactly SOPA/PIPA changes existing law. Obviously, just because a court authorizes a certain type of relief does not mean that there is always a proper basis for it. There are a lot of cites to “the court’s inherent equitable power” in these orders. That’s judicial code for: “there is no express basis for it, but I think certain relief is appropriate and I’m going to grant it.”

It may not be easy to engender much sympathy for these defendants, but that’s not the point. The system has certain procedural safeguards in place, and those should not go out the window just because you’re dealing with a foreign online infringer. The relief that is being granted in these cases is extraordinary and is frequently being done with no notice or minimal notice. There is no way much of this will fly against a domestic litigant. In some cases, the initial papers are filed under seal, so defendants cannot determine what the allegations are against them until the preliminary relief–in the form of a shutdown–is awarded. Plaintiffs seem to be required to do nothing more than to present a declaration from their investigative team alleging that (1) defendants infringe, (2) defendants are located abroad, and (3) perhaps the defendants will evade or frustrate the court’s relief.

Based on this, the court typically shuts off the defendant’s website and also orders relief directed at third parties who may or may not be subject to the court’s jurisdiction. These third parties are not before the court and have no chance to contest the scope of the relief being sought. I’m curious as to how they react when they are presented with the order. Do registrars routinely transfer domain names to a friendly registrar of the plaintiff’s choosing? Is DNS deletion or revision routinely implemented in response to these orders?

It’s interesting to compare the approach Deckers took in this case to the approach it took against alleged infringers who was selling counterfeit UGG boots out of a house (located in Illinois). See Deckers v. Migliore, 11-cv-06836 (N.D. Ill.; Nov. 15, 2011). Deckers didn’t obtain any ex parte relief; they moved for a default after effecting service. Is this because a court was less likely to order the total shutdown of the point of sale of the infringing goods (in this case, a house), or because Deckers views infringement occurring on the internet as somehow different?

All of these ex parte shutdown cases (and there are probably many more out there) warrant a *close* look. It’s disappointing to see so many of these orders sail through without any significant objection from the judges who sign them. Of course, they offer a preview of how rightsowners will proceed under SOPA. Many have highlighted the potential for abuse under SOPA. There’s little doubt that rightsowners will push the envelope. They are already doing so under current law.

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Eric’s Comments

Ex parte orders regarding foreign alleged infringers are out-of-control. Without sufficient regulation and without any adversarial pushback, rightsowners have learned that they can ask for ridiculous relief on an ex parte basis and get a judge to sign off on most or all of it. It’s clear that rightsowners are asking for way more than the law allows, but judges seem to acquiesce. The results are two-fold:

1) the rightsowners are taking control over third party domain names on an ex parte basis and with questionable notice given to the domain name registrants

2) worse (IMO), judges are issuing orders that purport to bind third party non-litigants, such as domain name registrars, search engines and shopbots. The Federal Rules of Civil Procedure purport to limit such orders against non-litigants, but litigants and judges apparently interpret phrases like “acting in concert” incredibly broadly. The result is that these third party service providers–who aren’t in court protecting their interests when the orders are being signed–are presented with a court order that imposes costs on them no matter what they do. They can take the action required in the court order…at some cost. Or they can contest the order…at some cost. Or they can ignore the order and risk being found in contempt. Naturally, these third parties will take whatever path is cheapest–which is usually to honor the order regardless of its legal legitimacy. (This is especially true in the case of domain name registrars, who typically make only a buck or two of profit a year off any particular domain name). So when the judge doesn’t tightly control the ex parte requests being imposed on third parties, the judges are usually ensuring that the third party won’t contest even an illegitimate order.

Rightsowners don’t look so good in this process, but who can blame them for overreaching? If judges are freely handing out lollipops, why not ask for a lollipop! Plus, lawyers view themselves as zealous advocates, so anything that they can get a judge to sign must, by definition, be OK.

This means the real breakdown is occurring with judges. They are supposed to be the safeguards to prevent abuses, but judges are so dependent on adversarial proceedings that they are surprisingly flexible when only one side bends their ears. It looks we need some urgent judicial education about the issues raised by rogue website enforcements.

As Venkat points out, some members of Congress and their rightsowner patrons are also looking pretty silly right now. They keep insisting, with the straightest face imaginable, that rightsowners lack the current ability to bring effective enforcement actions against foreign rogue websites, and this is just FLAT-OUT WRONG. So either these folks are ignorant about what’s happening in the courts or lying about it (or possibly both). Now, the entire legislative process is routinely detached from actual facts, so this is nothing unusual, but it’s hardly a credit to those who are looking increasingly foolish as rightsowners in court keep getting what lobbying rightsowners and members of Congress keep insisting isn’t possible to get. Get your story straight, please.

For the critics of SOPA and PIPA who have decided this legislation is the place to draw the line in the sand: I’m with you, brothers and sisters, but defeating the legislation doesn’t end the problem. Until we fix what’s taking place in the courts with rightsowners running hog-wild in ex parte proceedings, any legislative successes will be hollow. After we wipe out SOPA and PIPA completely, we need to proactively seek out at least two additional policy solutions:

1) We need to develop educational programs for judges about dealing with ex parte orders, especially when it comes to third party non-litigants.

2) We may need to fix or clarify the portions of the Federal Rules of Civil Procedures so that ordinary service providers aren’t bound by ex parte orders against them. The rules should be clear enough that service providers don’t have to spend their money to correct judicial errors. Maybe an automatic fee-shift if a plaintiff gets a judge to sign off on an overbroad order that a third party non-litigant successfully contests?

If you have any other suggestions about proactive steps we should take to fix the abuses we’re seeing in court, please send them along.

Prior blog coverage of these topics:

* More on Ex Parte Cutoffs of Foreign “Rogue” Domain Names

* Does the House Judiciary Committee Debating SOPA Know What’s Going On In the Courts?–Philip Morris v. Jiang

* If You Dislike SOPA, You’ll Dislike This Case Too–True Religion v. Xiaokang Lei

* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website–Elsevier v. Chitika

* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods–Chanel, Inc. v. Does

UPDATE FROM ERIC: A reader reminded us of the UDRP Sec. 3, which says: “We [registrars] will cancel, transfer or otherwise make changes to domain name registrations under the following circumstances…b. our receipt of an order from a court or arbitral tribunal, in each case of competent jurisdiction, requiring such action.” So when a judge issues an ex parte order against a registrar, the registrar’s hands may be tied. All the more reason for the judge to get it right and not rely on ex post pushback from the non-litigant third party. This also creates the possibility of abuse of ex parte orders, just like I discussed in this blog post. If we were to redraft the UDRP, we probably would not make it mandatory for registrars to honor ex parte orders.

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