SAD scheme

SAD (Schedule "A" Defendant) Scheme is an abusive frivolous lawsuit which exploits logistical technicialities of federal copyright law regarding counterfeit goods, and in particular the Federal Rules of Civil Procedure, such that the putative defendants have their funds frozen without ever having been notified of service of process. The victims are typically small on-line businesses, enough of whom settle for the racket to be profitable; the scam has been described as having "weaponized the legal system".

The acronym is something of a misnomer inasmuch as the (typically numerous) businesses in each case are not listed as Defendants, but rather as "Exhibit 1", "Exhibit 2", and so on. "Schedule A" refers to this list, which the putative rights-owner plaintiffs file not only seperately from the complaint, but sealed, and with a different docket number. The plaintiffs then request an ex parte temporary restraining order (TRO) against the defendants’ allegedly infringing behavior, which is procedurally granted and which on-line marketplaces typically automatically obey. Thus the merchant may only learn of the (spurious) litigation once their on-line marketplace account has been frozen. Enough settle, or simply lose by default, for the sophisticated scheme to be profitable. It admits of several variations.

Whilst at least one plaintiff has been charged with perpetuating fraud on the court, the racket is so novel, and relies so much on the automatic machinery of the courts, that institutional knowledge of it is not widespread. The victims are most often on-line merchants based in China, and most of the "litigation" has to date taken place in the Northern District of Illinois, with most of the remainder in the Southern District of Florida (a species of forum shopping).

The racket has attracted scholary legal analysis.