May 20, 2024

Credit country superstar Luke Combs for being a lot faster to get out ahead of a potential public-relations crisis than your average celebrity — to the point that he’s cleaning up messes before he’s had the chance to wipe the sleep out of his eyes.

Combs woke up early Wednesday morning learning of a TV news interview with a weeping woman in Florida, Nicol Harness, who’d been slapped with a $250,000 judgment by a federal court in Illinois, along with having thousands of dollars seized from her frozen Amazon seller’s account, because she had sold $380 of unauthorized Combs merch on the website. (The pricey infraction: 18 homemade drink tumblers bearing the singer’s name and likeness.) What further seized the public’s attention: Not only had Harness been hospitalized for a chronic heart condition when the suit was being decided, the convalescing mom never even knew she was being sued, having been served in an email that went to a junk folder on an AOL account she rarely checks, until she learned her webstore was out of commission and looked up the bad news.

After calling Harness to apologize, Combs had taken to social media within two and a half hours to say that he was “sick to my stomach” to learn he’d won such a huge judgment against such a humble individual, who professed to be a fan, after being assured his lawyers were only going after major international counterfeiters. He said he would double the $5,500 his lawyers had seized from Harness’ Amazon account, would sell his own tumbler in his web store to raise money for her medical bills (it was online by the end of the day), and would invite her to meet him at a show. The $250K fine was something she no longer needed to worry about.

Given that Combs already has a rep as one of the good guys of country music, he seemed to personally end the day in good stead. This stood in contrast to the public perception of a similar news story two Decembers ago, when Eric Clapton was widely pilloried for suing a widow in Germany who had sold a single bootleg CD her late husband had in his collection, even though only $3,900 in legal fees were at stake in that Goliath-taking-on-David case.

But if Combs does comes out of this looking OK, by virtue of his quick and seemingly earnest response, questions remain. How do sweeping lawsuits like this get filed and successfully pass through the federal court system, rendering huge judgments, probably against serious counterfeiters but also the little guy? Harness was just one of 46 defendants being slapped with a $250K judgment in this particular decision, and little is known about the others similarly fined — possibly even to lawyers in this case, who named the defendants in the filing only by their online business names.

Some legal experts say lawsuits like this one, where dozens or even hundreds of defendants are sued at a time for allegedly illicit merch, are increasingly commonplace. And they maintain the suits are particularly rampant in the Northern District of Illinois, which appears to have become a magnet, if not “cottage industry,” for these cases to result in mass settlements and judgments with little notice.

The lawyer named in court papers as filing several recent federal court lawsuits targeting hundreds of defendants on behalf of Combs is Keith A. Vogt, managing partner of Vogt IP. The firm’s website claims it sued over 10,000 counterfeiters in the year 2019 alone (which appears to be the last time the site was updated). If those numbers aren’t impressive enough, the firm claims a “100% success rate” with an “injunction issued in every case.” Past clients listed range from the Frida Kahlo Corporation to Pink Floyd Limited. Vogt IP is hardly alone in serving these lawsuits, but the firm’s site makes a point of having had “multiple cases before each of the 30 judges in N.D. Ill.,” pointing toward the perception that this district appears unusually friendly, as federal courts go, toward routinely handing out these mass judgments.

Vogt did not respond to Variety’s requests for comment. The assistant to Judge Elaine E. Bucklo, who rendered the $250,000 judgment against Harness and 45 other defendants in November, said the court would not be able to comment on the case. Combs’ camp has steered clear of publicly commenting so far, although they privately reiterate what the star said — that the singer had been assured that it was only serious criminals, mostly overseas, being targeted.

But legal experts have already noticed the trend in these cases, where dozens or hundreds of defendants at a time are hit with identical six-figure judgments, and have been talking or writing about it even prior to Combs’ apology making the news.

Last month, Eric Goldman, associate dean for research and co-director of the High Tech Law Institute at Santa Clara University, published an article in the Columbia Law Review Forum. The title: “A SAD Scheme of Abusive Intellectual Property Litigation.” “SAD” is an acronym, standing for what he calls “the Schedule A Defendants Scheme,” in which masses of defendants are grouped together by the lawyer for a celebrity or brand in a Schedule A document that may be initially sealed, keeping the parties from even being aware they’re being targeted — until the assets that are being held by websites like Amazon, eBay or Etsy have already been frozen by a sympathetic judge’s restraining order.

Goldman tells Variety, “What’ll happen is, they’ll sue usually hundreds in a single complaint. And then a bunch of the defendants will settle, and there’ll be a voluntary dismissal” of those cases. As for those who don’t settle, “the plaintiffs will do batch processing of the default judgments.” In the case that Combs won in November, 46 defendants were ordered to pay the star $250,000 each in penalties, a judgment that would pan out to $11 million if lawyers were able to collect. That doesn’t include money that was already seized from the defendants’ webstores. What’s not known is how many more defendants did get the email, unlike Harness, and settled with Combs’ lawyers early on to get dismissed from the case.

With the many defendants who never respond at all before being hit with a major judgment — like the 46, including Harness, in this latest case — “we can’t disaggregate why they didn’t respond,” Goldman says. “One possibility is that there may have been problems with service; in the Luke Combs example, the woman said that she got served by email to an address that she was not checking. I’ve heard story after story from defendants who say, ‘I did get the email, but it looked like spam,’ or ‘It looked like some kind of extortion or shakedown, so I disregarded it because that’s what I do with spam.’ There’s significant problems with service by email, and not all courts permit it on a regular basis. Other reasons why people default: They may not be able to find or afford a lawyer, and they just might believe that they won’t be affected by a judgment. They may feel like they have nothing to lose — and they’re usually wrong about that, but they don’t have a lawyer to tell ’em otherwise.”

Continues Goldman, “Because the scheme is so understudied, we don’t really know how many times it has picked up actual infringers who should suffer some consequence, and people who might or might not have been infringers, which is probably the circumstance with (Harness), who don’t get their proper day in court. There are likely thousands of truly innocent victims who have been misidentified and subject to a process that doesn’t comport with our expectations, and as a result have suffered significant harm in their lives.”

Goldman says that, based on his studies, he believes “over 600,000 merchants have been sued in a SAD Scheme case,” with the number of lawsuits growing annually, especially over the last three years. He says his research that, oddly, more than 88 percent of the cases he’s talking about were filed in the same Midwest federal court that rendered the judgment in the Luke Combs lawsuit. “Why are SAD Scheme cases concentrated in the Northern District of Illinois?” the professor and attorney asks in his article. “Though the scheme’s historical linkage to the district isn’t clear, at this point, rights owners will keep filing cases in the district so long as they keep getting their desired outcomes.”

Talking with Variety, Goldman further contends: “The system has to be fixed. It’s not just a problem with the trademark owners; it’s that the system is broken.”

Sarah Burstein is a Boston-based professor of law at Suffolk Law School, whose research focuses on the intersection between art, design and intellectual property law. She, too, has written on mass IP enforcement and related topics — including an article last month titled “The Counterfeit Sham,” in which she explores how counterfeiting and trademark infringement are not the same thing, although they are sometimes deliberately conflated by attorneys, in her view.

Burstein says that the judges in Illinois that have proven so favorable toward these cases allow things they wouldn’t in other federal lawsuits because of the assumption put forth by attorneys that all of the defendants are overseas, using anonymous business names, and can’t easily be tracked down or investigated. (If you look at the lists of in Combs’ recent lawsuits, many do have foreign-sounding DBA names, while others have typical anonymous English-language webstore monikers; few are identified personally.)

“Among my fellow lawyers who aren’t experts in these ideas, what’s really caught people’s attention is this email service thing. That’s usually based on an allegation that all of the defendants are foreign  — which obviously was not true in (Harness’) case,” says Burstein.

“Basically what happens is these plaintiffs — largely driven by their lawyers, frankly — have come up with this litigation model where they sue people who have pots of money online being held by third-party internet platforms like Amazon, eBay, Facebook or Wish. They go to court and tell the judge, ‘These are nefarious foreign counterfeiters doing bad, bad things online, and you need to lock up their money without telling them, or else they will abscond with their ill-gotten gains.’ The court will freeze the defendants’ funds before they tell the defendants they’ve even been sued. If/when they get a default judgment, they can collect from those funds. So they might not get $250,000 from a defendant, but they’ll get the $5,000 or whatever that was in there. Multiply that by hundreds, maybe thousands, of defendants, and it adds up pretty quick. This is a volume business. And it is a business… and some of the judges in Chicago have started even calling this a cottage industry in their district. It’s a really big break from how we normally do federal litigation in this country.”

Burstein says that the Amazon seller who made the news with her Combs merch may, in fact, have been liable on some level, although not, in her view, for the kind of infringement that calls for hundreds of thousands of dollars to redress. “It sounds like in this case, if we believe what (Harness) said, she didn’t realize what she was doing was a problem. She’s certainly not some criminal mastermind running an international cartel of counterfeiters. She messed up, right? The bigger concern, for me, goes back to that duty to investigate… I think there certainly is a trademark infringement here, and arguably even a counterfeit. But this was not some shady person hiding offshore. And even actual trademark infringers or counterfeiters deserve due process. The fact that these nets are being cast so broadly is deeply troubling.”

Why Illinois, as the center for the “cottage industry”? “This is something I’ve been trying to figure out for a long time now, and I’m still not sure I know the answer,” Burstein says. “I think the main answer is: Chicago is where the lawyers are, and it’s just cheaper to file at home. The appellate court that’s relevant there said that you can basically sue an Amazon seller anywhere, because they offer the infringing product in the district. They got the judges on board, and I just wonder if, after you grant 10, 50, 500 of these motions, it’s harder to sit back and think, ‘Oh, wait, is this right?’ And to be fair, some judges in that district have already started saying some things that basically boil down to: Are we being played? I also suspect that the early cases may have been stronger than the median case we see today — true counterfeiting, really bad actors — and now we just have a lot of people expanding their causes of action.”

The judge in the case did not overtly step outside the law in fining each defendant $250,000, as outrageous as that amount may be seen. Federal law does set parameters of anywhere from $1,000 to $200,000 as the range of amounts a plaintiff can ask for, for each copyright violation. So how did this penalty come in even higher than that $200K maximum? The law also says that plaintiffs can get up to $2 million per action, if the judge believes attorneys proved that the infraction was willful. The Illinois federal judge apparently believed that Vogt had proven that all 46 defendants in this latest case knew they were engaging in counterfeiting.

This wasn’t the first time so many big-dollar fines had been slapped on defendants on Combs’ behalf. In a legal filing submitted to the judge, the attorney pointed out that the same court had awarded damages of $250,000 per defendant in cases dated Aug. 20, 2021 and Aug. 9, 2023. But the awards in Combs’ lawsuits have not always been quite that high. In a lawsuit filed by Vogt for Combs that closed on Dec. 6, 2022, Illinois Judge Joan B. Gottschall fined each of the defaulting defendants the far lesser amount of $100,000 each.

Celebrities, of course, have wildly differing viewpoints about how aggressively to pursue infringement against their trademarks in the courts. One well-known TV actress Variety spoke with this week said that she laughs off “cute” webstore items that are obviously handcrafted by individuals, and even sometimes buys them and hands out to friends. Others, of course, have a zero-tolerance policy. Even the legal experts who spoke for this story recommend taking periodic action to protect IP, which judges can vacate if the trademarks are no longer being used by the holder. Burstein says that for anyone who wants to be self-protective but not litigious, Amazon and other stores have takedown procedures that don’t involve the courts, but still legally establish that the trademark is being enforced.

Combs, for his part, said in his social media statement that having a lawyer go after infringements was never about money for him. “We do have a company that goes after folks — only, supposedly, large corporations operating internationally that make millions and millions of dollars — making counterfeit T-shirts, things of that nature, running illegal businesses,” Combs said on Instagram and TikTok. “And apparently this woman, Nicol, has somehow gotten wrapped into that, and that makes me absolutely sick to my stomach.” He added, “This is not something that I would ever do. This is not the kind of person I am. I’m not greedy in any way, shape or form. Money is the last thing on my mind — I promise you guys that.” 

Deterrence is what lawyers handling these cases promise famous clients, of course, along with damages. The Vogt website says that “prior lawsuits have significantly reduced online counterfeiting” and “counterfeiters learn to avoid brands represented by Vogt IP,” along with citing a company track record of being able to “provide our clients with hundreds of millions of dollars in damages.”

Of the Combs case, Burstein appreciates that the singer had second thoughts after learning about Harness’ humble status, but says, “If it’s true that he didn’t know what his lawyers were doing, I hope that he’s asking some questions now about these cases and whether he wants to keep doing this going forward. Because the fact that this person got swept up in the net… she’s probably not alone. There may be other people who didn’t see their email or other people who were improperly joined but couldn’t fight back.

“They really have these defendants over a barrel in ways that are offensive to our normal ideas about due process. I hope that the plaintiffs think about this, because catching people who are either innocent or non-intentional wrongdoers in these nets is not uncommon. If your small business gets crippled by one of these injunctions, your storefront gets frozen, your ranking goes down, you can’t pay your employees and you can’t pay your bills. We can’t know if it’s just a small number,” she adds, “because so much of this is secret and off the record,” with the judges sealing records to keep targeted parties from being tipped off. “I can’t tell you what percentage of these people are innocent. But whether it’s 90 percent or 2 percent, it’s a 100-percent big deal for them.”

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