Online marketplaces create enormous opportunities for businesses to attract more customers and sell in previously unreachable markets. But the ecommerce landscape also makes it easier for counterfeit goods and unauthorized branding of products to appear alongside–or in place of –legitimate goods and advertising efforts.
For brand owners seeking to protect their intellectual property, pursuing each instance of infringement is expensive, time-consuming, and ongoing, often without lasting success.
In response, many companies have turned to a potentially powerful litigation tool known as a “Schedule A” lawsuit, designed to pursue dozens or even hundreds of online sellers at once.
What Is a “Schedule A” Lawsuit?
Schedule A lawsuits allow brand owners to pursue claims of trademark infringement, counterfeiting, copyright infringement, or unfair competition against a large number of online sellers simultaneously in a single case. Instead of listing every defendant in the caption of a Complaint, the defendant sellers are identified in an attachment to the Complaint (i.e., the “Schedule A”). Because of the pervasive anonymity afforded to sellers in the online marketplace, the schedule typically identifies defendants using seller IDs, storefront names, domain names, or links to marketplace listings. In many cases, the schedule is initially filed under seal.
The Litigation Strategy
The effectiveness of a Schedule A lawsuit often stems from the ability to pursue a claim against essentially unknown defendants and the speed of early litigation processes common in these cases.
Despite plaintiff’s inability to serve the Complaint on the largely unidentifiable group of defendants, after filing the Complaint listing the alleged infringing seller names and storefronts, plaintiffs typically ask the court for several forms of early relief against the sellers. These requests are often made before the defendants are aware of the lawsuit. Courts frequently act quickly on these motions, allowing notice to defendants via any known contact information–most often the email address associated with the seller account or through the online platform’s notice procedures.
Early court orders may include temporary restraining orders restricting sales on a defendant’s account, the freezing of a seller’s funds and ecommerce accounts, locking or transferring domain names connected to alleged infringement, and/or restricting payment processors or online marketplace accounts associated with the seller’s accounts.
Once these court orders are in place, it is assumed that the online sellers will receive notice from the plaintiff, or at a minimum, from the online platform where the restrictive activity occurred. Now, with the seller’s business revenue immediately halted, the plaintiff gains significant leverage, as many defendants are clamoring to resolve the claims quickly. In exchange for dismissal from the lawsuit and the release of frozen funds, sellers are more eager to agree to discontinue (and refrain from) the alleged infringement. This can further facilitate a signed Settlement Agreement with the seller, and oftentimes, results in a settlement payment from the seller.
If a defendant does not appear in the case or attempt to resolve the claims, the court may ultimately issue a default judgment against that defendant, which can later be relied on by the plaintiff in similar future actions or disputes.
Legal Challenges and Criticism
Although Schedule A lawsuits have proven effective for brand owners, they have also raised concerns about fairness and procedural safeguards.
One issue involves mass joinder, or grouping dozens or hundreds of sellers together in a single case. Critics argue that sellers may be engaged in unrelated activities yet are treated as if they participated in the same scheme.
Other concerns focus on notice and due process. Because early court orders are often issued before defendants become aware of the case, sellers may first learn about the lawsuit when their accounts or funds are frozen.
Additional concerns include the potential abuse by plaintiffs who can bring a federal lawsuit against a large group of sellers with only limited notice to the defendants and minimal evidence linking each and every seller to the violations alleged in the Complaint. Schedule A defendants are placed under immediate financial pressure from frozen assets, which initially puts them in a precarious position, further exacerbated by the challenges of defending the plaintiff’s claims in a mass-joined case.
These issues have prompted ongoing debate about how courts should balance this potentially efficient tool for mass enforcement with the equal potential for creating procedural unfairness.
What Online Sellers Should Know
For online sellers, Schedule A lawsuits highlight the importance of respecting intellectual property rights.
Businesses selling products through online marketplaces should take steps to reduce risk by adhering to the tried and true best seller practices, which include:
- Avoiding the use of trademarks that belong to others;
- Using only product images that are original or properly licensed;
- Verifying suppliers and documenting supplier agreements; and
- Considering indemnification provisions in supplier contracts
If a seller becomes aware that they are named in a Schedule A lawsuit, seeking legal counsel quickly is important. Early action can help sellers understand their options and respond appropriately.
Considerations for Trademark Owners
For brand owners, Schedule A lawsuits can be an efficient way to address widespread infringement involving multiple online sellers who violate rights under similar facts and circumstances.
Before pursuing this strategy, trademark owners should conduct thorough due diligence for each alleged infringer. Preserving evidence such as screenshots of online listings and documenting prior takedown efforts can strengthen a case and support settlement discussions.
Strong intellectual property protection also plays an important role. Registered trademarks and well-documented enforcement efforts help support claims and demonstrate the legitimacy of the brand owner’s rights.
A Powerful but Evolving Enforcement Tool
Schedule A lawsuits are an important strategy for brand owners confronting large-scale online infringement. By allowing plaintiffs to pursue many sellers in a single action when appropriate, these cases can provide a faster path to enforcement in a marketplace where infringing sellers often appear and disappear quickly and anonymously.
At the same time, courts and commentators continue to examine how these cases should be handled to ensure fairness and proper procedural protections.
As online marketplaces continue to evolve, both sellers and brand owners benefit from understanding how intellectual property enforcement works. Learn more about how Erise IP helps companies protect and enforce their IP rights.
