King Spider LLC v. Panda Technology Co., Ltd.

Background

King Spider LLC and several other apparel-brand plaintiffs alleged that Panda (Hong Kong) Technology Co., Ltd., doing business as Pandabuy, helped consumers purchase counterfeit versions of plaintiffs’ products through third-party Chinese e-commerce websites. The plaintiffs asserted trademark-infringement claims, and Denim Tears also asserted a copyright-infringement claim.

The court initially issued temporary restraining orders and later entered a preliminary injunction. The injunction barred Pandabuy from directly or indirectly infringing plaintiffs’ marks and works, listing or promoting them, or knowingly instructing others to do so. It also continued an asset freeze that had frozen $16,841,342.38 in an account belonging to Pandabuy. Pandabuy did not initially appear, but later moved to dissolve or modify the preliminary injunction.

Pandabuy described itself as an online shopping platform and facilitator. Users could search for or submit links to products listed on third-party Chinese websites. A separate shopping-agent company purchased products for users, and a warehouse inspected, photographed, repackaged, and shipped them. Pandabuy did not own the goods, maintain inventory, manufacture them, or place its name on the packages. It received fees connected to the transactions. The plaintiffs argued that Pandabuy controlled the shopping-agent company and warehouse and therefore actively participated in the alleged infringement.

Trademark Claims

For purposes of direct trademark infringement under the Lanham Act, the court focused on whether Pandabuy made commercial use of plaintiffs’ marks in a way likely to confuse consumers about the source or sponsorship of the goods. The court explained that intermediaries may avoid liability when they act as passive facilitators, but liability may apply when an intermediary exercises enough control over the creation, manufacture, or sale of goods to function like a seller or manufacturer.

The evidence supported both sides to some extent. Pandabuy connected users with products, directed users to the shopping-agent company, gave the warehouse access to its systems, and appeared to manage those companies. But Pandabuy did not present itself as the seller, identify the goods as its own, manufacture the goods, maintain inventory, bear the risk of loss, or place its name on the packages. Its fee-based compensation also was more consistent with a facilitator than a seller.

Comparing Pandabuy to other online services, the court concluded that Pandabuy acted more like a facilitator than a genuine seller. The court therefore found that the evidence at this stage did not show that Pandabuy’s use of plaintiffs’ marks was likely to cause confusion about the origin or sponsorship of the goods. Although the court stated that plaintiffs might ultimately succeed, it found that they were not likely to succeed on their direct trademark claims based on the evidence then available.

Copyright Claim

The court separately considered Denim Tears’ copyright claim. A copyright owner has exclusive rights involving reproduction, distribution, performance, and display of a copyrighted work. The court examined whether Pandabuy’s website displayed copyrighted images or instead merely linked to or generated search results containing third-party images.

The court found that Pandabuy’s image results were generated by user searches. Users submitted text or images, and Pandabuy displayed the same or similar images in thumbnail form. The court compared this process to a search engine’s display of thumbnail images and concluded that the listings resulted from algorithmic and user-driven behavior. It therefore found that Denim Tears was not likely to succeed on its copyright-infringement claim.

Sealing Motions

Pandabuy also sought to seal or redact information submitted with its motion, including financial information, order values, revenues, profits, fees, search-term bans, account information, and related business records. Because the materials were submitted to the court in connection with the motion, they were judicial documents subject to a strong presumption of public access.

The court held that Pandabuy had not shown a sufficiently specific injury to justify sealing information discussed or relevant to the court’s decision. The sealing motion was denied as to Sealing Categories 1, but only regarding the amount previously frozen, 2, 11, 12, and 16; Pandabuy could redact account numbers and other identifying information. The motion was granted as to the remaining categories, which involved types of sensitive business information that courts commonly protect.

Disposition

Judge Jessica G. L. Clarke granted Pandabuy’s motion to dissolve the preliminary injunction and dissolved the injunction entered on July 10, 2024. Pandabuy’s motion was otherwise denied as moot, so the court did not decide the alternative request to modify the asset freeze. The sealing motion was granted in part and denied in part. The court also granted plaintiffs’ request to replace Exhibit A to the amended complaint with a corrected copyright-registration certificate and related deposit materials.