PayPal Account Frozen and Online Store Shut Down for Infringement – Now What?

In their latest efforts to combat coppyright or trademark infringement, foreign content creators have been filing a rash of complaints in the Southern District of Florida to obtain a temporary restraining order (TRO) seizing and freezing online seller’s PayPal, Square, and other payment platform accounts and online stores through such platforms as Etsy, eBay, Bonanza, Amazon, Wish, and more. If you’ve had your online store shut down and seized and are the subject of a Federal lawsuit, don’t just ignore it. Here’s some suggestions on how to handle having your online store shut down by claims of copyright or trademark infringement.

Here’s how these claims work: The Plaintiff files a complaint in Federal Court, along with a request for a Temporary Restraining Order (TRO) and a request that the Court seal the pleadings in the case — that is, keep them secret so that you are not tipped off that Plaintiff is about to get an order shutting down your online store and freezing your access to your PayPal or other linked bank accounts. You find out about it because your online store sends you a message that tells you you’ve been shut down. The Court also orders that the selling platform give the Plaintiff immediate access to your true identity, which may include your name, your e-mail address, and your physical address. You may also get a link to a Dropbox account that gives you access to review the complaint and the Temporary Restraining Order. Your livelihood is shut down — you probably had sales proceeds in your PayPal account that had absolutely nothing to do with the accused products — sometimes thousands of dollars. What do you do now? If this sounds familiar, read on.

Don’t Ignore it

Ignoring it does not make it go away. In fact, if you just ignore the suit filed against you, you may end up with a default judgment entered against you, which will likely include not only a permanent injunction prohibiting you from continuing to sell the accused goods, but also an award of damages, which can be collected by garnishment. If you do not defend yourself in the suit, or at least address it strategically, those damages awarded could be as much as $1,000,000 in statutory damages per counterfeit trademark, up to $150,000 per work for copyright infringement — judgments that can follow you around for upwards of 20 years and may not be dischargeable in bankruptcy. Even if you feel such an award of damages would not be collectible against you, the holder of such a judgment could also use that judgment to put a hold on future merchant and other bank accounts (perhaps even your non-business accounts that you use to support your family). A judgment could follow you around for a long time, so be sure that you don’t just put your head in the sand. You have to educate yourself and make an informed decision about what to do.

Assess Your Exposure

There are a lot of factors that go into whether a default judgment can be entered against you. Are you based in the U.S. or are you a foreign national or entity? Have you been served by a process server, or has the Plaintiff effectuated formal service of process in another way? Can the Plaintiff show it has personal jurisdiction over you? How much have you made in gross sales by selling the accused products? How much of that was profit? What are the goods or services that you are selling? Is there truly infringement? That is, do your good or services really bear a copy of a trademark, or of a work that is protected by copyright, or is this a case of mistaken identity? Is there a possibility what you are accused of could be found to be fair use? Is the trademark or copyright you are accused of infringing registered, and when was that registration obtained? Did your PayPal account contain the proceeds of sales of non-infringing goods? Can you afford to just let the plaintiff keep that money, or do you need to fight for it? You need to understand the answers to all of these questions and more in order to quickly assess both your rights and your options in responding to the complaint (or not). The important thing is to truly understand the legal ramifications of the accusations against you, and the different possible outcomes depending on the course of action you choose.

Choose Your Course of Action

Once you have the factual information you need — and an understanding of the law surrounding these claims — to really understand your risk, only then can you make an educated decision as to your course of action. It is almost certain you will pay something, either now or sometime in the future — the only question, really, is how much, and to whom? Once you’ve made your assessment, you really have three options:

(1) Make an informed decision to do nothing and accept the consequences.
(2) Negotiate a solution on your own.
(3) Hire an attorney to help you.

Each of these may be a viable course of action, depending on the facts of your case, and your own risk tolerance. For example, if you do nothing, are you okay with taking on the risk that while nothing may happen now, it may come back to bite you ten years from now? Or are you the type of person that prefers certainty and would rather invest a little more now to ensure that the claims against you go away without a judgment being entered.

If you try to negotiate on your own, is that agreement in your best interests? Remember that being in negotiation, by itself, will not stop the entry of default or default judgment against you. Default means you have accepted all of the accusations in the complaint as true, and makes it much easier for the Plaintiff to get a judgment entered against you. And if you do want to fight in Court, you may have no choice but to hire a lawyer, because corporate entities cannot represent themselves through officers (otherwise known as acting “pro se”) in Court. And whether or not you are required to hire a lawyer, using a lawyer may well be in your best interests, for a host of reasons.

How can an Intellectual Property lawyer help?

If you are going to hire a lawyer, ensure it is one that already has a strong knowledge of the legal issues in these kinds of cases. Copyright and trademark law are complicated areas, and while a strong business litigator would be able to learn the legal issues involved, someone with extensive experience with copyright and trademark law specifically will be able to ask you the right questions to cut to the chase quickly and efficiently. That means the lawyer won’t be learning on your dime. One of the difficult things about these kinds of cases is that the amounts of a potential actual damages award involved, while significant to the accused, is significantly less than what it would cost either side to fully litigate the case in Court. And that means that knowledgable counsel can work to keep attorney’s fees down to get as much of those frozen or seized funds back in your account as soon as possible. Of course, no lawyer can guarantee any particular result — and you should be wary of any lawyer that tries to do so. But an experienced attorney can help resolve these kinds of cases, with either negotiation or litigaiton.

If you’ve had your accounts seized or frozen and want to speak to an experienced Florida attorney about what your options are, please use this form to contact our office today [link]. With this form, you can confidentially provide us with some basic information about your case so that we can schedule an intake call and determine whether it makes sense for us to work together to resolve your suit. But whether you reach out to our firm, another lawyer, or decide to handle the situation on your own, make sure you don’t put your head in the sand.