Judge Richard Sullivan of the U.S. District Court for the Southern District of New York is continuing to press the Bank of China to comply with third-party discovery, related to the accounts of online sellers who are perpetrating an alleged counterfeiting scheme, brought by several luxury apparel brands in the pending case Gucci America, Inc. et al. v. Li et al., Case No. 1:10-cv-04974. This is a promising development for trademark holders, who have historically struggled to enforce their rights against counterfeiters who hide their ill-gotten assets in foreign banks, particularly in China. Nevertheless, this case highlights the continuing difficulties of holding foreign entities accountable under U.S. law.
Gucci and other trademark holders filed a lawsuit against online counterfeiters in June 2010. They subsequently obtained an ex parte preliminary injunction and asset freeze order, which they then served upon third parties, including the Bank of China, obligating the Bank to halt all activity in the (online seller) defendants' bank accounts. In 2010 and 2011, plaintiffs also served subpoenas on the Bank, requesting documents and information relating to the defendants' accounts and transaction histories.
The Bank of China resisted these subpoenas for five years, citing, inter alia, Chinese privacy laws, until the court finally stepped in last fall to order the Bank's compliance. Still, the Bank refused to comply with the subpoenas, leading the court to issue sanctions of $50,000 per day, starting December 1, for as long as the Bank remained noncompliant and in contempt.
In an effort to avoid this significant fine, the Bank filed a letter on January 20, 2016, stating that it had produced "all" of the requested account information to plaintiffs, and requesting that the daily sanctions be lifted. The court stayed the $50,000 daily fine pending a full determination of whether the Bank had, in fact, fully complied with its Order.
Recently, the Gucci plaintiffs have alleged that the Bank of China has still failed to substantially comply with the subpoenas. Gucci argued that the Bank's production consisted of 7,000 pages of unindexed and unorganized documents written entirely in Chinese, and suggested that the Bank's certification of its compliance was premature and done simply to save itself hundreds of thousands of dollars in daily fines.
Furthermore, the plaintiffs pointed out that, based on review of previously produced documents, it was evident that the Bank had violated the asset freeze by permitting the defendants to remove over $2 million from dozens of restrained accounts. It is possible that the court may reinstate the $50,000 daily fine if the Bank continues its uncooperative behavior in defiance of the Order.
As a result of the Bank of China's continued refusal to cooperate, Judge Sullivan has been forced to take a more active role in overseeing discovery. The court's direct involvement in ensuring that this foreign non-party complies with the plaintiffs' discovery requests is a promising sign for other brand owners seeking to enforce their intellectual property rights against overseas infringers. This case may encourage other U.S. courts to take a more aggressive stance in ordering that foreign non-parties, including banks, cooperate in the discovery stages of anti-counterfeiting enforcement matters. If this trend continues, counterfeiters may soon have no place to hide their unlawfully gained proceeds, and could be held more fully accountable for their actions.