Atari’s Lawsuit Against a Print-on-Demand Service Fizzles Out–Atari v. Printify

This is an IP enforcement action against a print-on-demand service called Printify. Printify facilitates interactions between merchants who create new items to sell (using storefronts like Etsy, Shopify, or eBay) and third-party printers/manufacturers. Printify doesn’t process consumer purchases for its merchants (except in its “Pop-Up Shops” offering) and doesn’t display its brand on any manufactured items.

After obtaining an ex parte TRO (what?), Atari sought a preliminary injunction, which the court denies because “Atari has not shown that it is likely to succeed on the merits.”

Direct Trademark Infringement. Atari argued that Printify sold infringing items. Printify claimed to be “a passive facilitator of orders by merchants.” In support of Printify’s position, the court summarizes:

Printify does not design the products, does not manufacture or print the products, and does not ship the products. The products are quality-checked by the third-party printer and Printify claims that it engages in routine monitoring only to ensure that the printer is generally up to Printify’s standards. Aside from the “small percentage” of merchants who use Printify Pop-Up Shops, the products are not sold on Printify-operated websites.

Noting that Atari lost a jury trial against RedBubble, the court says that Printify is in a more favorable position than RedBubble:

Customers purchase goods directly on Redbubble’s website and the order arrives with Redbubble tags in Redbubble packaging. This differs significantly from Printify. The vast majority of Printify customers purchase directly from the merchant, the orders do not arrive in Printify packaging, and Printify does not otherwise “identif[y] the goods as its own.” Customers go through the entire purchase process—from browsing to ordering to receiving delivery—without any knowledge that the order is being facilitated by Printify. Notably, even though the evidence of Redbubble having “used” Atari’s trademark was stronger in Atari Interactive, Inc. v. Redbubble, Inc. than it is here, the jury in that case found against Atari when the action went to trial.

The court distinguishes the HD v. Sunfrog decision:

there is no evidence in this record that Printify engages in any advertising or trains or encourages anyone to use infringing designs. In addition, the evidence does reflect that Printify does not own or operate any printers, does not handle the products after printing, and does not ship or affix its logo to any products.

Accordingly, the court says that Printify isn’t “using” Atari’s marks and is more like a “passive facilitator.”

Contributory Trademark Infringement. The court says that Printify took appropriate steps when it learned of infringing items via Atari’s lawsuit:

First, Printify searched its own database for the 70 URLs identified by Atari in ECF No. 28-1 as linking to merchant websites with potentially infringing products. Printify manually reviewed a sample of nearly 60,000 of those merchants’ product sales and removed from its database the 37 products that it identified as potentially infringing. In addition, Printify proactively searched its database for keywords such as “Atari,” manually reviewed the results, and removed any additional potentially infringing uses from the database….Once a product has been removed from the database, the merchant is unable to place orders with Printify for those products.

Notice that Atari didn’t send takedown notices before suing (and securing an ex parte TRO). This provides another data point supporting my claim that the notice-and-takedown scheme is increasingly failing.

Also, this ruling doesn’t absolve either the merchants or the printers from liability. However, the court’s ruling makes it harder to extend any liability those entities face to Printify. Thus, this is another favorable ruling for print-on-demand services that are narrowly designed as matching facilitators.

About that TRO... The court summarizes the proceedings:

Atari initially moved for an ex parte TRO, which the Court granted on October 24, 2023. In that TRO, the Court granted Atari’s request to freeze Printify’s assets based on Atari’s ex parte representation that Printify “likely will hide or move their ill-gotten funds to offshore bank accounts” and is “likely to take whatever action they can to hide, move, conceal, or potentially squander assets to avoid enforcement as soon as they find out about this suit.” After being notified by financial institutions that its accounts were frozen, Printify agreed to a joint stipulation modifying the TRO to remove the asset freeze provisions. There is no evidence in this record that Printify ever intended to hide or move its assets to offshore bank accounts.

HOLD UP. 🛑 Read that last sentence again. The court says plainly that there was **never** any support for Atari’s assertion that Printify intended to dissipate or expatriate funds. Then how did Atari get a TRO? The answer is dispiriting. It appears Atari made bogus claims to the court when requesting the TRO, the court bought Atari’s claims without any requiring sufficient supporting evidence or otherwise critically scrutinizing the request, and now Atari’s ruse has been exposed.

Worse, after the court heard from Printify, the court now realizes that Atari’s claims were always meritless and never should have supported a TRO. Despite this, the judge describes this situation without expressing any anger at Atari for its overclaims or embarrassment at having been played by Atari. The judge’s quiescence about the clearly erroneous TRO is part of the reason SAD Scheme cases are so hard to curb–judges rarely want to publicly admit they made a bad ruling, even if that becomes apparent from subsequent proceedings. The opinion doesn’t address any steps by Printify to remediate any harm caused by the bogus ex parte TRO, though I hope they hold Atari accountable for its overclaims.

More generally, this case demonstrates yet again how rightsowners misuse ex parte TROs and how judges struggle to properly police those requests without guidance from defendants. Ex parte TROs are a known hotspot for avoidable judicial errors, which is a great reason not to issue them. Worse, in the context of the SAD Scheme, improper TROs trigger devastating consequences that won’t necessarily be fixed in further case proceedings. I feel like there was a time in the not-too-distant past when ex parte TROs were viewed as truly extraordinary outcomes, but over time (at least in the IP context) they are increasingly viewed as ordinary and routine. That needs to change, with Congressional intervention if necessary.

Case Citation: Atari Interactive, Inc. v. Printify, Inc., 2024 WL 283641 (S.D.N.Y. Jan. 25, 2024)

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