From The Field

April 16, 2020

Does California’s litigation privilege protect false reporting to Amazon of counterfeiting allegations that led to the removal of a competing seller from the Amazon.com platform?  Does the litigation privilege apply even if the reports were malicious, intentional, and made in bad faith?  In a recent decision in TP Link USA Corp. v. Careful Shopper LLC et al., 8:19-cv-0082 (C.D.C.A.), U.S. District Judge Josephine L. Staton answered “yes.”

TP Link is a California-based seller of computer networking equipment and other computer accessories and the exclusive licensee of the “TP-LINK” trademark.  Careful Shopper was a New York-based Amazon seller that purchased and resold authentic goods incorporating intellectual property of manufacturers and other holders of IP rights.  The parties’ dispute started in early 2018 when TP Link, through its agent Amazzia (a company engaged in the business of Amazon brand protection for its clients), reported to Amazon that Careful Shopper had listed counterfeit items bearing TP Link’s trademarks.  After receiving notice of the complaint from Amazon, Careful Shopper informed TP Link that the listed goods were genuine goods purchased from TP Link’s authorized sellers, including Amazon, and requested that TP Link withdraw its complaint.  TP Link did not withdraw its complaint; it also went further and made additional complaints to Amazon, resulting in Careful Shopper’s removal from Amazon.com.

Careful Shopper contended that TP Link, through Amazzia, engaged in intentional false reporting of counterfeiting to Amazon to suppress competition.  After its removal from Amazon.com, Careful Shopper initiated an action in the Eastern District of New York against TP Link asserting business tort and libel claims.  TP Link successfully moved to dismiss that case for lack of personal jurisdiction.  TP Link also filed its own trademark infringement case against Careful Shopper in the Central District of California.  In that case, Careful Shopper counterclaimed for interference with existing and prospective business relationships, trade libel, and antitrust violations.  TP Link moved to dismiss the business tort and trade libel counterclaims under California’s anti-SLAPP (“Strategic Lawsuit against Public Participation”) statute, Cal. Civ. Proc. Code § 425.16.  (TP Link also moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss Careful Shopper’s antitrust claim, which we do not address here.)

California’s anti-SLAPP statute “aims to identify, early in the litigation process, meritless first amendment cases aimed at chilling expression through costly, time-consuming litigation.”  The court engaged in a two-step inquiry in deciding TP Link’s motion:  first, whether TP Link made a prima facie showing that Careful Shopper’s counterclaims arose from an act by TP Link in furtherance of TP Link’s rights of free speech; and, if the answer to the first inquiry is “yes,” whether Careful Shopper could demonstrate a probability of prevailing on the counterclaims. 

On the first inquiry, the court noted that California’s anti-SLAPP statute is broad in scope:  it covers communications “preparatory to or in anticipation of the bringing of” a legal action or other official proceeding, so long as the communications relate to the substantive issues in the litigation and are directed to persons having some interest in the litigation.  The court first found that Careful Shopper’s tort claims were entirely predicated on TP Link’s prelitigation communications to Amazon regarding Careful Shopper’s alleged counterfeiting listings.  The court then found that those prelitigation communications concerned the same goods and sales activities giving rise to TP Link’s trademark infringement claim in the instant litigation and were made to a party with an interest in the litigation, i.e., Amazon.  Interestingly, the court recognized Amazon’s “interest” in this litigation as being an interest in the “propriety of activity that Amazon facilitates on its [] marketplace platform.”  Given these factual findings, the court concluded that Careful Shopper’s tort claims arose from TP Link’s prelitigation communications and those communications were covered by California’s anti-SLAPP statute.       

Careful Shopper attempted to sever the tie between TP Link’s prior communications and TP Link’s claims in the litigation by arguing that the prior communications concerned alleged counterfeit goods while the litigation involved trademark infringement claims.  The court rejected this argument on the basis that the anti-SLAPP analysis did not require an identity between the specific claims and the pre-suit communications, but merely the relatedness of the subject matters of the prelitigation communications and the lawsuit.

On the second inquiry, the court again found for TP Link relying on California’s litigation privilege.  The court noted that California’s litigation privilege statute, Cal. Civ. Proc. Code § 47(b), is applicable to communications taking place during, prior to, or after litigation, and provides absolute immunity from tort liability so long as the communication has some relation to judicial proceedings.  The court further noted that in an anti-SLAPP analysis, the litigation privilege and the anti-SLAPP statute served interrelated purposes, i.e., the litigation privilege might present a substantive defense a plaintiff must overcome to demonstrate a probability of success at the second step of the anti-SLAPP analysis. 

In this case, the court found that TP Link’s prior communications to Amazon regarding Careful Shopper’s alleged counterfeit goods were “sufficiently related to this litigation to fall within the coverage of California’s litigation privilege.”  As such, the communications were absolutely immune from tort liability.  The court concluded that Careful Shopper could not demonstrate the necessary probability of success on its tort claims, which were entirely predicated on those protected communications.     

Careful Shopper argued that the litigation privilege should not apply because TP Link’s communications to Amazon were intentionally false and made in bad faith.  But the court rejected this argument on the ground that California’s litigation privilege is “absolute” and protects even “fraudulent, deliberately false, or other types of tortious communications.”   

The court’s decision in this case presents challenges to Amazon sellers who are wronged by abusers of Amazon’s takedown procedure and want to seek redress in court.  But it is important to keep in mind that the anti-SLAPP statutes and litigation privilege statutes vary in scope in different states.  For example, as the court in this case noted, while California’s anti-SLAPP generally protects prelitigation conduct, New York’s anti-SLAPP may not.  An injured Amazon seller wanting to seek redress in court should consider venue options with this in mind. 

Author: Hui Liu