The counterfeit lawsuits that scoop up hundreds of Chinese Amazon sellers at once
Goldman, in a paper published in March, calls this type of lawsuit a “Schedule A Defendants Scheme” (or “SAD Scheme”). When these cases are filed, the names of defendants are put into a document, Schedule A, that is often immediately made confidential at the request of the plaintiff. As a result, the cases can involve hundreds of sellers at the same time, yet the sellers don’t know who else is being sued, and they usually don’t know they are being sued themselves until the court orders Amazon to freeze their accounts.
After Goldman looked into the emoji cases, he kept thinking about them. IP trolling lawsuits have existed for decades, but the way the cases were filed struck him as taking advantage of the current court mechanisms to a unique degree. “I just spent hours and hours peeling the layers in the end, and I kept getting more and more upset, realizing that there was a problem here that was systemic,” Goldman says.
China targets
Not all Schedule A lawsuit defendants are from China, but attorneys who spoke to MIT Technology Review say it’s Chinese sellers who seem to be targeted the most often. Travis Stockman, a New York–based attorney who has represented e-commerce sellers in these cases, says about 70% of his Schedule A defense clients are from China, while fewer than 10% are based in the United States.
Justin Gaudio, an attorney at the Chicago-based law firm Greer, Burns & Crain (GBC) and the lead counsel for the plaintiff in the airbag lawsuit, told MIT Technology Review in an email that the reason so many Chinese sellers are sued in such cases is that counterfeiting is largely a Chinese problem.
“These cases focus on China-based defendants since the bulk of counterfeit products sent to the United States come from China and its dependent territories,’” he said, citing a report from the Buy Safe America Coalition. He declined to comment on the airbag case specifically, and GBC declined to comment on claims that the practice abuses the system.
What’s more certain is that it’s rarer to see Chinese defendants appear in court and fight the claims, Zhang says. There are ways to push back on the IP infringement claims and to argue that due process is missing, she says, but sellers are seldom willing to try. They often aren’t able to afford the legal fees or the lengthy time it takes for a case to resolve.
Instead of fighting back, the defendants may either settle with the plaintiff or abandon their Amazon account and the cash in it. Making a decision usually comes down to which one costs more. Zhang says the proposed settlement amount is often about 60% of the frozen account’s balance.
If sellers have just small amounts of money trapped in their Amazon account, they may well decide not to respond at all. The court eventually makes a default judgment, awarding whatever’s frozen in the account to the plaintiffs. Goldman estimates that 70% of all Schedule A cases end in such default judgments.
