American law firms make an annual income of 6 billion! Tens of thousands of sellers suffer, so be alert to the freezing of store funds caused by the temporary ban on TRO received by cross-border e-commerce platforms due to infringement.

Foreword Since 2017, some American lawyers have filed malicious lawsuits against some China merchants on American e-commerce platforms such as Amazon, AliExpress, Ali International, eBay, wish, Independent Station, etc., issued a TRO(Temporary Restraining Order) to freeze the funds in e-commerce platform accounts, and used relevant American laws and regulations to circumvent the service rules of The Hague Convention on Service, so as to achieve the effect of obtaining a default judgment without the merchants’ full knowledge.

(E-mail notification of fund freeze received by the seller)

background survey

The main mode of this kind of litigation is that, entrusted by major brands, the following law firms/lawyers collect evidence on relevant intellectual property cases (including checking product descriptions and using buyer’s number to buy goods, etc.), and then conduct large-scale litigation in American courts. Especially, GBC Law Firm, followed by other law firms, filed lawsuits against sellers in China round after round. Because sellers in China are not aware of intellectual property rights and have a large volume, they often become the “fat meat” of these law firms. “The means of collecting money by these law firms is very simple. In most cases, initiating a lawsuit is a carnival between the brand and the law firm. These law firms usually sue hundreds or more sellers at one time, and if someone contacts and negotiates, they will reach a settlement with the other party; If someone asks an American lawyer to initiate a lawsuit, they will go to court. If there is no response, when the 21-day prosecution period is up, apply to the court for a default judgment and award compensation ranging from $100,000 to each seller, so that the funds frozen in the defendant’s account will be awarded to the prosecution. Because the cost of prosecution in the United States is very low, most law firms use software to operate in batches. For example, if 1,000 sellers are sued at one time, each settlement is often not less than $2,000. As long as one lawsuit is filed, these law firms may earn millions of dollars. Therefore, these law firms can often make a fortune. According to the third-party information, the revenue of GBC Law Firm in 2020 alone is nearly 1 billion US dollars, equivalent to more than 6 billion RMB, which is close to the first-tier sellers in China such as Anker( 93.53 billion RMB).

The list of some law firms/lawyers includes:

GBC（Greer Burns & Crain Ltd）

HSP（Hughes Socol Piers Resnick & Dym, Ltd.）

Keith A. Vogt

David Gulbransen

DBL（Dunlap Bennett & Ludwig, PLLC）

AMS（AM Sullivan Law, LLC）

ESP（Epstein Drangel LLP）

SMG（Stephen M. Gaffigan, P.A.）

Legal analysis

First of all, regarding the service procedure of American litigation, in general, American civil litigation needs to abide by The Hague Convention on Service, but the relevant laws of the United States stipulate that intellectual property cases can be served in other ways under certain circumstances and regarded as equal service. The types of documents served include subpoenas, judgments, rulings and so on. At the same time, the court for the Northern District of Illinois (IL) is often chosen because there are a large number of cases in the court that allow delivery by other means, such as e-mail. Judging from the American judicial system, the court has the right to serve it in other ways.

Secondly, if the defendant thinks that it is unreasonable to serve by other means, he needs to hire an American lawyer to make relevant comments to the court, including insufficient reasons for serving by other means and the court that accepts it has no jurisdiction. Otherwise, 21 days after the summons is issued, the court will regard the defendant as refusing to participate in the proceedings, and the subsequent processes are as follows: the plaintiff applies for a TRO(Temporary Restraining Order) extension motion >; The plaintiff’s lawyer submitted a preliminary injunction order of PIO(Preliminary Injunction Order), also known as a permanent injunction motion >: The plaintiff filed a motion for default, and the court made a default judgment. Here, for each defendant seller, the judgment amount is more than 100 thousand dollars and above. According to the default judgment, the plaintiff’s lawyer can apply for Amazon and other e-commerce platforms to deduct the money from the defendant’s merchant account.

Litigation scheme

To sum up, we suggest that the defendant’s businesses actively respond to the lawsuit and safeguard their own relevant rights and interests, otherwise, it will be impossible to restrain some American lawyers from suing China businesses indiscriminately, so that these American lawyers will always use this loophole to infringe on the interests of China businesses. In addition, according to the experience of cooperating with American lawyers, we roughly estimate that it will cost thousands to tens of thousands of dollars to hire a responsible American lawyer to represent the respondent or hire a lawyer to reach a settlement with the other party.

Of course, not all cases are true infringement. There are generally businesses that have been wrongly sued here. It is completely feasible to analyze the cases and their own situations, choose to respond to the lawsuit and ask the plaintiff for the loss during the freezing period of the store, and finally get compensation through counterclaims for false “infringement”.

Other schemes

In addition to responding positively, there are actually other ways to deal with such incidents, which are listed here.

First, after receiving the email from the above-mentioned law firm/lawyer, inform the other party that all legal documents should be delivered to me in the ways listed in the Hague Service Convention, and remember to attach the real and effective address and contact information. If the other party indicates that according to Article 4(f)(3) of the Federal Civil Procedure Law of the United States, they have the right to serve legal documents in a way not prohibited by international treaties. Then merchants can directly invoke Article 10 of The Hague Convention on Service: If the destination country does not object, this Convention does not prevent: 1. Directly serve judicial documents to people abroad by mail; In view of this, China made it clear that there were objections. If it is handled properly, it may be able to persuade the above-mentioned law firm, because if it is carried out in accordance with the procedures of The Hague Convention on Service, the other party will spend a lot of time and energy. If it cannot, it will also win more response time for domestic businesses. The disadvantage of this method is that when you meet an experienced law firm/lawyer, the other party may ignore the reply. Although according to The Hague Convention on Service, in this case, domestic businesses can apply for annulment of the judgment within one year after the judgment comes into effect, it is the same as the reason for this case-the above-mentioned law firms/lawyers firmly believe that few businesses are willing to travel long distances to the United States for litigation.

Second, in the case of large-scale malicious lawsuits against domestic businesses, many sellers can be considered to jointly communicate with platforms such as Amazon. As an e-commerce platform in the United States, a large number of merchants on the same platform were maliciously sued. Wish hired an American law firm in October 2019 and December 2019 to formally respond to the lawsuit filed by HSP (Hughes Socol Piers Resnick & Dym, Ltd.), and all of them achieved certain results. Therefore, this is also a possible way to safeguard rights.

Third, negotiate the settlement amount. If the amount in the merchant’s account is not large, but you don’t want to give up the account, then you can consider negotiating a settlement with the other party. In general cases, the settlement amount proposed by the other party is about 30%-70% of the remaining amount in the merchant’s account. According to the statistics of cases handled in the past, after negotiations between domestic and foreign lawyers, the proportion of settlement compensation can be reduced to 5%-20% of the amount at the time of freezing in some cases.

The dilemma of infringing sellers:

American law firms have initiated lawsuits against sellers in China round after round, and learned that most sellers have the following difficulties:

Many sellers are experiencing this for the first time. Faced with transnational legal lawsuits, they are helpless and flustered … The account funds are frozen, resulting in insufficient cash flow, and the store can’t suspend its business further (the only store of individual sellers is frozen). The time is very urgent. It is difficult to contact and hire local lawyers in the United States, such as: trust issues, litigation is almost charged by the hour, and the total cost is incalculable … To sum up, we want to handle cross-border infringement legal cases as efficiently and safely as possible, and reduce the processing time cost and compensation of current cases, and choose the appropriate case handling channels.