GunBroker.com Seeks Declaratory Relief Against Heckler & Koch and the Trademark Enforcement Efforts of Continental Enterprises, Inc.

Heckler & Koch's MP7

GunBroker’s website offers an online auction service for third parties to sell merchandise such as firearms, knives, swords, and hunting equipment and accessories to interested parties. Sellers create the auction listing and submit it to GunBroker, which then adds the auction to its site, administers the auction, notifies the auction winner, and provides details on how the winner can contact the seller. GunBroker’s Website User Agreement specifically prohibits the posting of items for sale that violate any third party’s intellectual property rights, and GunBroker provides a mechanism for trademark holders to report any violations.

According to the complaint, on August, 27, 2008, GunBroker’s predecessor-in-interest received a letter from the “Office of the General Counsel” for Continental Enterprises, Inc. (“CE”). The letter indicated that CE had been engaged by H&K to protect H&K’s intellectual property and that several hundred auction listings on GunBroker’s website violated H&K’s trademark and copyright rights. The letter enclosed a 16 page printout from GunBroker’s website that showed a list of auction listings (over 340) posted by third party sellers on the website who were attempting to sell merchandise and in some way using one or more of the H&K trademarks.

The basis of CE’s engagement to enforce H&K’s intellectual property rights was a letter from James E. Baker, Jr., an attorney with the Baltimore, Maryland law firm of Baxter, Baker, Sidle, Conn & Jones, P.A. (the “Baxter Firm”), which purportedly confirmed that H&K had engaged the services of CE to identify and investigate any unauthorized uses of H&K’s intellectual property. Apparently, however, the letter did not explain the relationship between the Baxter Firm and H&K nor did it indicate whether or not the Baxter Firm is an agent of H&K or otherwise entitled it to act on behalf of H&K.

According to the complaint, the owner of CE is Mr. Karl Manders, a career private investigator (but not a lawyer) who, through his company, concentrates exclusively on the enforcement of intellectual property rights. GunBroker believes that CE obtains a percentage of any settlement proceeds that CE receives from its efforts. CE has supposedly acted on behalf of such companies as Heineken USA, Inc., Just Born, Inc., and Big Dog Holdings, Inc.

GunBroker also notes in its complaint that Indiana’s Rules of Professional Conduct (Rule 5.4(a)) prohibits a lawyer from entering into a partnership with a non-lawyer and from sharing legal fees with a non-lawyer and cites Indiana State Bar Legal Ethics Opinion (Indiana State Bar Association, Legal Ethics Committee, Opinion #7, 1991) discussing that Rule 5.4(a) was designed to prevent “the possibility of control by a lay person who is interested in profit, rather than the client’s interests, and control by a person who is unregulated by the profession.”

GunBroker alleges that it has become the target of CE’s “for profit” intellectual property enforcement efforts. Click here for one website’s detailed discussion about CE’s trademark enforcement efforts – including a separate page entitled “What To Do If Contacted By Continental Enterprises.”

GunBroker’s complaint notes that the list of allegedly infringing auctions provided by CE did not distinguish between allegedly infringing use of H&K’s trademarks and the fair use of H&K’s trademarks by sellers listing authentic H&K products or otherwise making a fair use of H&K’s trademarks. Moreover, despite GunBroker’s request, neither CE nor H&K have used the mechanism on GunBroker’s website, to report a specific violation or to clarify which if any, specific postings on GunBroker’s website that CE or H&K believe infringe on H&K’s trademarks.

CE has threatened that GunBroker’s further advertisement or sale of “infringing merchandise” would be considered “willful infringement,” and would subject GunBroker “to enhanced penalties, including, but not limited to, treble or statutory damages and attorneys fees.” CE has also threatened to “advise H&K to take whatever steps it deems necessary to fully protect its intellectual property rights.”

Based on CE’s actions and threats regarding GunBroker’s alleged trademark infringement of H&K’s trademarks through the third party auction listings on GunBroker’s website, GunBroker maintains that a substantial controversy exists between the parties to warrant GunBroker’s request for declaratory relief.

GunBroker seeks a declaratory judgment that it has not infringed H&K’s trademarks, that it has not committed any contributory trademark infringement through the auction listings by sellers comparing their product to an H&K product, selling products that are compatible with an H&K product, selling products that are a “knock-off or look alike” to an H&K product, or reselling a used H&K product, and that such uses of H&K’s trademarks by sellers in their auction listings is fair use.

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