SAD scheme
SAD (Schedule "A" Defendant) Scheme is a controversial tool in Intellectual property enforcement which exploits logistical technicalities 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 defendants are typically small on-line businesses, enough of whom settle for the scheme to be profitable; the scheme has been described as having "weaponized the legal system".[1]
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 separately from the complaint, but have 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.[2][3]
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 defendants 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,[4][5] with most of the remainder in the Southern District of Florida (a species of forum shopping).[6]
The scheme has attracted scholary legal analysis.[7][8][9]
See also
References
- ^ "Small Sellers Are Getting Swept up as Brands 'Weaponize' the Legal System". 16 July 2023.
- ^ "You searched for Schedule A".
- ^ "The counterfeit lawsuits that scoop up hundreds of Chinese Amazon sellers at once".
- ^ "Brands Flock to Chicago Court in War on Internet Counterfeiters".
- ^ "'Schedule A' Cases: A Powerful Tool for Enforcing Design Patents".
- ^ "Are Some Plaintiffs Firms Becoming 'Trademark Trolls'?".
- ^ "A Sad Scheme of Abusive Intellectual Property Litigation".
- ^ Goldman, Eric (January 2023). "Ning Zhang interview with Eric Goldman regarding Schedule a Defendants". Historical and Topical Legal Documents.
- ^ https://www.ericgoldman.org/Speeches/SADScheme.pdf?time=20230712224024
