Secondary Liability for Trademark Infringement
Secondary Liability for Trademark Infringement
(Updated February 26, 2024)
The Lanham Act does not expressly cover the idea that a party who does not directly infringe another’s trademark may nevertheless be indirectly liable for such infringement (also referred to as secondary liability for trademark infringement). Rather, secondary liability in the trademark context is a judicially created doctrine that has evolved, and continues to evolve, through case law over the last century. Georgia Pacific Consumer Products, LP v. Von Drehle Corp., 618 F.3d 441, 449 (4th Cir. 2010) (analyzing plaintiff’s claim “under the judicially created doctrine of contributory trademark infringement, derived from the common law of torts”); Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93, 103-104 (2d Cir. 2010) (“[c]ontributory trademark infringement is a judicially created doctrine that derives from the common law of torts”), affirming in part and remanding in part, 576 F. Supp. 2d 463, 502 (S.D.N.Y. 2008), cert denied, 131 S. Ct. 647 (2010); Procter & Gamble Co. v. Haugen, 317 F.3d 1121, 1128-1129 (10th Cir. 2003) (discussing same). More cases have been brought as contributory liability claims than as claims for vicarious infringement, though the law continues to develop in this area.
This article explores the basic background of secondary liability for trademark infringement as well as the recent developments where courts have stretched the old precedents to fit new contexts present in the online area, where some unexpected rulings have come about and opened doors for further development of the law in the years to come.
Background and Early Development on Secondary Liability for Trademark Infringement
The first theory of secondary liability to emerge was contributory liability. The 1982 Supreme Court case of Inwood v. Ives set forth the two-part standard for contributory infringement. 456 U.S. 844, 854 (1982). To establish contributory liability under Inwood, a plaintiff must show that the defendant either (1) “intentionally induce[d] another to infringe” his or her trademark or (2) “continue[d] to supply its product to one whom it knows or ha[d] reason to know [was] engaging in trademark infringement.” Id. Since Inwood, courts have begun to find this test inapposite in situations where the plaintiff can neither allege intentional inducement nor point to a specific product, but where the defendant has contributed in some way to trademark infringement. In these situations, a modified version of the Inwood standard has evolved in which the court considers the extent of control the defendant has over the infringing activity. Specifically, courts have held that direct control or monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark allows for expansion of Inwood’s ‘supplies a product’ requirement for contributory infringement. See Lockeed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 9984 (9th Cir. 1999). Regardless, a key fact for determining the strength of a contributory liability claim is the defendant’s knowledge.
The second theory for secondary infringement recognized by the courts is vicarious liability. This theory has not been articulated as clearly as contributory infringement, but has evolved in federal courts generally through two approaches—(1) application of agency principles to parties involved in trademark infringement and (2) the joint-tortfeastor liability doctrine. See Bannff Ltd. v. Limited, Inc., 869 F. Supp. 1103, 111 (S.D.N.Y. 1994); Am. Tel & Tel. Co. v. Winback & Conserve Program Inc., 42 F.3d 1421, 1437 (3d Cir. 1994) (for application of agency principals to parties involved in trademark infringement); David Berg & Co. v. Gatto Int’l Trading Co., 884 F.2d 306, 311 (7th Cir. 1989) (for discussion of joint tort-feasor liability). See Bannff Ltd. v. Limited, Inc., 869 F. Supp. 1103, 111 (S.D.N.Y. 1994); Am. Tel & Tel. Co. v. Winback & Conserve Program Inc., 42 F.3d 1421, 1437 (3d Cir. 1994) (for application of agency principals to parties
Of all the ways that secondary liability for trademark infringement appears, the online sphere is by far the context that receives the bulk of attention and interest. Internet commerce has forced courts to deal with the difficult issues that did not exist decades ago of how to deal with infringement in an online space where transactions take place between parties at a constant and staggering rate. Because this paper is focused on the online context, it will focus on cases discussing contributory trademark infringement within that sphere.
Contributory Trademark Infringement – The Inwood Standard Generally
The standard for analyzing contributory liability claims comes from the Supreme Court case, Inwood Laboratories Inc. v. Ives Laboratories, Inc., where the Court reaffirmed the existence of the cause of action under federal law and provided a clean standard for analysis. 456 U.S. 844, 853-54 (1982). In Inwood, the manufacturer of a generic drug produced its product with the same coloring and general appearance as the brand name drug sold by the plaintiff. Id. at 847. Although the plaintiff didn’t allege that the generic manufacturers themselves applied the trademark to the capsules they sold, it contended that by virtue of their use of “look-alike capsules” and catalog entries revealing the colors of the generic capsules, those generic manufacturing companies contributed to the pharmacies’ infringing activities. Id. at 850.
The Court found for the generic manufacturers, but explained “liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another” and articulated the following test, which has been consistently followed and expounded upon by subsequent courts:
[e]ven if a manufacturer does not directly control others in the chain of distribution, it can be held responsible for their infringing activities under certain circumstances. Thus, if a manufacturer or distributor [1] intentionally induces another to infringe a trademark, or if it [2] continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially [sic] responsive for any harm done as a result of the deceit. Id. at 853-54 (emphasis added).
Thus, the analysis of a contributory trademark infringement claim requires the application of a two-part test, where liability should be imposed if either factor is established, regardless of whether a manufacturer directly controls others. Id.
Expansion of Inwood—the Direct Control and Monitoring Test in the Online Context
More recently, the contributory liability doctrine articulated in Inwood has been expanded beyond the manufacturer-distributor context to apply in situations where a party has not necessarily supplied a product, but may have provided a service, such as in many online spheres. The standard for imposing contributory liability for trademark infringement on the Internet was first enunciated in Lockheed Martin Corp. v. Network Solutions Inc., a case where the plaintiff trademark holder sued the domain name registrar for selling rights to the domain names skunkworks.com, skunkwrks.com, and skunkwerks.com even though the plaintiff owned the federally registered service mark, SKUNK WORKS. 194 F.3d 980, 981 (9th Cir. 1999).
In Lockheed, the court concluded that “[d]irect control and monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark permits the expansion of Inwood Lab’s ‘supplies a product’ requirement of contributory infringement.” Id. at 984. However, the court found that since domain name registration alone does not amount to trademark infringement, the expansion of Inwood to this context would be inappropriate and it would be unreasonably difficult to monitor the entire Internet. Id. at 961-62.
The requirements that a defendant (1) “monitor and control” the instrumentality of the alleged infringement and (2) that the defendant have actual or constructive knowledge of the alleged infringement, are closely related. While there is no particular precedent for combining the two requirements, at least one court has explicitly required that each be proven independently. Fare Deals, Ltd. v. World Choice Travel.com, Inc., 180 F. Supp. 2d 678, 691 (D. Md. 2001). In Fare Deals, Ltd. v. World Choice Travel.com, Inc., the court found that “[e]ven if the facts suggested … that [the defendant] might be contributorily liable because it ‘supplied a product’ to the infringers or directly controlled and monitored the means of infringement, [the defendant could not] demonstrate the requisite knowledge of the infringing activity to find it liable under Inwood Laboratories.” Id. The court in Fare Deals expressly required that the plaintiff “prove both that [the defendant] directly controlled and monitored the activities of the [plaintiff’s] site and that [the defendant] had actual knowledge of the infringement.” Id. at 697 (emphasis added). For other cases in which the two elements are analyzed separately, see Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367 *13 -*16 (S.D.N.Y); and Tiffany v. eBay, 576 F. Supp. 2d 463, 506-507, 508-510 (S.D.N.Y. 2008), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010), cert denied, 131 S. Ct. 647 (2010).
Recent Texas Cases on Liability for Secondary Trademark Infringement
“There are two theories of secondary liability for trademark infringement: ‘vicarious liab[ility] based on agency principles,’ and contributory infringement.” Magee v. Nike Inc., No. 3:21-CV-01726-G-BT, 2023 WL 3357594, at *4 (N.D. Tex. Apr. 24, 2023), report and recommendation adopted, No. 3:21-CV-1726-G-BT, 2023 WL 3362607 (N.D. Tex. May 10, 2023).
Specific Applications of Secondary Liability for Trademark Infringement
Domain Name Registrars - Trademark Infringement Liability
Domain name registrars have not typically been held contributorily liable for trademark infringement committed by their registrants because courts have found that they lack the requisite degree of monitoring and control over the activity of the registrants. See Lockheed Martin Corp. v. Network Solutions Inc., 194 F.3d 980 (9th Cir. 1999), affirming 985 F. Supp. 949 (C.D. Cal. 1997); Size, Inc. v. Network Solutions, Inc., 255 F. Supp. 2d 568 (E.D. Va. 2003); Academy of Motion Picture Arts and Sciences v. Network Solutions, Inc., 989 F. Supp. 1276 (C.D. Cal. 1997); Petroliam Nasional Berhad v. Godaddy.com, Inc., No. C 09-5939 PJH, 2010 U.S. Dist. LEXIS 99963, *12 (N.D. Cal. Sept. 9, 2010) (stating that “it is generally inappropriate to extend contributory liability to the registrar absent allegations that the registrar had unequivocal knowledge that the domain name was being used to infringe a trademark”). The rise of the Internet as a medium for retail and advertising has created the most interesting sphere of secondary liability for trademark infringement actions—some claims concern the dissemination of counterfeit goods and some relate to the misdirection of consumers to website offering products competing with those advertised. See Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93, 96 (2d Cir. 2010) (explaining Tiffany’s claim against the online auction service because of the availability of counterfeit “Tiffany” merchandise for purchase); Austl. Gold, Inc. v. Hatfield, 463 F.3d 1228, 1240-41 (10th Cir. 2006) (finding an unauthorized distributor liable for trademark infringement for using the plaintiff’s trademark as a metatag and for advertising plaintiff’s products through sponsored links on a website, indicating an intent to cause consumer confusion).
One of the first major cases to consider the online use of trademarks was Lockheed II, which is discussed above. 194 F.3d 980 (9th Cir. 1999). In that case, Lockheed Martin claimed that Network Solutions, Inc. (“NSI”), a domain name registration service, infringed its trademarks by registering domain names similar or identical to Lockheed Martin’s marks. Id. at 983. The Ninth Circuit held that NSI was not liable for direct infringement based on the reasoning of the district court that found that NSI had not “used” the marks in commerce. Id. at 984-85 (describing NSI as an agent and noting that NSI was involved only in the registration of domain names, and not in the use of domain names in connection with goods and services on the Internet). In its decision about “use,” the district court noted that there are two purposes of domain names—a technical purpose as an address and an identification purpose as an indication of the source of products—and NSI’s use was only to designate host computers on the Internet. See Lockheed Martin Corp. v. Network Solutions, Inc., 985 F. Supp. 949, 961 (C.D. Cal 1997). By contrast, where the plaintiff’s allegations against the defendant domain name registrar made out a complex scheme of cybersquatting, the court rejected the defendant’s motion to dismiss the contributory liability claim against it. Transamerica Corp. v. Moniker Online Services, 672 F. Supp. 2d 1353 (S.D. Fla. 2009) (differing from Lockheed, which involved rote translation, the facts depicted a domain name registrar that acted in concert with other defendants to profit from the infringing activities of its customers). However, because Lockheed Martin II involved a very specific type of online service provider—a registering agent—it is not completely clear how its iteration of the Inwood test is to be applied in other internet-related scenarios.
Internet Websites- Trademark Infringement Liability
The Lockheed framework has been applied to subsequent contributory liability claims arising out of other types of Internet activities. Thus, as mentioned above, to hold a defendant liable for contributory infringement on an Internet website, a plaintiff must prove both that it directly controlled and monitored the activities of the infringing website, and that the defendant had actual or constructive knowledge of the infringement. See Fare Deals, Ltd. v. World Choice Travel.com, Inc., 180 F. Supp. 2d 678 (D.Md. 2001).
In Fare Deals, mentioned above, advertisers who merely posted banner ads and links to their sites on an allegedly infringing website could not be held contributorily liable for such infringement. Id. The plaintiff “Fare Deals” operated a business providing travel services and had used the FARE DEALS mark in connection with its business and had taken steps to apply for a service mark. When it began to develop a website to promote its business, it discovered that a domain name, “faredeals.com”, had already been registered to another party to sell on-line travel services. Id. at 680. The “faredeals.com” website had links to other defendants, such as Hotwire, where customers could make reservations by linking to Hotwire’s web site. Fare Deals alleged that the owners of the “faredeals.com” website and its advertisers, like Hotwire, had agreed to divide up proceeds of sales made at the Hotwire website, and sued both the website owners and the advertisers alleging contributory infringement by advertisers such as Hotwire. Id. at 681, 687-691, 696-697. The court in Fare Deals, ended up finding that Hotwire and the other advertisers were like the domain name registrar, NSI, in Lockheed Martin. Namely, it “neither provided a product to the owners or operators of the ‘faredeals.com’ web site nor directly controlled and monitored the site in a manner sufficient to justify expansion of the ‘supplies a product’ requirement to include [the advertisers’] activity.” Id. at 689.
Internet Service Providers (“ISPs”) - Trademark Infringement Liability
Courts have held that Internet service providers (“ISPs”) themselves may also be liable for contributory trademark infringement based on the extent of their role in the infringing website they service.
Perhaps the most demonstrative case in establishing the threshold for how much involvement by an ISP constitutes contributory liability is Louis Vuitton Malletier, S.A. v. Akanoc Solutions. Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc. 591 F. Supp. 2d 1098 (N.D. Cal. 2008). Louis Vuitton, a high-end luxury goods retailer, discovered the sale of counterfeit Louis Vuitton goods on websites serviced by the defendants. Collectively, defendants sold their IP addresses and the use of their servers to customers who can then use them to host their website content. Defendant Managed Solutions Group, Inc. owned the Internet servers, defendant Akanoc Solutions, Inc. operated the Internet servers, and defendant Steven Chen owned and managed both Managed Solutions and Akanoc.
After unsuccessfully issuing several demand letters, take-down notices, and reminders concerning multiple websites, Louis Vuitton filed suit alleging contributory and vicarious liability against the defendants. While the court dismissed the vicarious liability claim, the contributory liability claim was allowed to proceed. As succinctly stated by the Ninth Circuit under the rationale of Inwood, “[t]o prevail on its claim of contributory trademark infringement, Louis Vuitton had to establish that Appellants continued to supply its services to one who it knew or had reason to know was engaging in trademark infringement.” Furthermore, “[b]ecause Appellants provided services rather than a product, Louis Vuitton also needed to establish [under Lockheed Martin] that Appellants had direct control and monitoring of the instrumentality used by a third party to infringe Louis Vuitton’s marks.” Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 658 F.3d 936, 942 (9th Cir. 2011).
The defendants argued that under Lockheed Martin, defendants were not required to monitor the Internet. However, the court distinguished the ISP in Lockheed Martin as merely providing a rote translation service by which the ISP translated domain names into IP addresses. In contrast, the ISP in Louis Vuitton physically hosted websites on their servers and routed Internet traffic to and from those websites.
Upholding the jury’s verdict finding contributory liability against defendants Akanoc and Chen, the court held that the several demand letters, take-down notices, and reminders that identified specific websites selling counterfeit Louis Vuitton goods supported the jury’s finding of knowledge. Furthermore, the court found that the operator and manager defendants had numerous tools at their disposal for monitoring their servers and terminating abusive users. But, with respect to defendant Managed Solutions, the court held and the Ninth Circuit affirmed that ownership of the server equipment alone was not sufficient to support a claim of contributory liability.
The level of an ISP’s knowledge of its customer’s infringing website and its involvement in the same directly determines its liability. For example, even where no demand letters or take-down notices are issued alerting the ISP to the infringing nature of a customer’s website, contributory liability has been found where an ISP is intimately involved in the creation and support of an infringing customer’s website. See Roger Cleveland Golf Co. v. Price, C/A No. 2:09-CV-2119-MBS, 2010 U.S. Dist. LEXIS 128044 (D.S.C. Dec. 3, 2010). Individual website owner defendants owned several websites including copycatclubs.com and billed itself as “your one stop shop for the best COPIED and ORIGINAL golf equipment on the internet.” ISP defendant Bright Builders argued that its sole involvement in this case was as a web hosting entity and Bright Builders was unaware of individual defendants’ counterfeit activities. Based on the plaintiff’s uncontested evidence demonstrating how Bright Builders not only created and developed the websites, but also provided in depth coaching and mentoring to assist in selling the golf clubs, the court ruled against Bright Builders.
Courts have also ruled against ISPs seeking to shield themselves from contributory trademark infringement using the Communications Decency Act of 1996. See Gucci America, Inc. v. Hall & Associates, 135 F. Supp. 2d 409 (S.D.N.Y. 2001). In Gucci America, ISP defendant Mindspring moved to dismiss the claims against it arguing that the Communications Decency Act of 1996 (“CDA”) protected it from contributory liability. In rejecting this argument, the court held that while section (c)(1) of the CDA provided that Mindspring shall not be treated as the publisher or speaker of any information provided by its customers, section (e)(2) of the CDA was controlling. Section (e)(2) of the CDA states that “nothing in this section shall be construed to limit or expand any law pertaining to intellectual property.” Furthermore, the Gucci court agreed that the dicta in Lockheed Martin did not foreclose the possibility that an ISP “whose computers provide the actual storage and communications for infringing material” may be liable for contributory trademark infringement. Id. at 416.
The Online Marketplace - Trademark Infringement Liability
eBay successfully defended itself against Tiffany Inc.’s contributory liability claim based largely on its practice of removing potentially infringing listings and/or suspending sellers identified by trademark holders as selling counterfeit goods through its Verified Rights Owner (“VeRO”) program. See Tiffany Inc. v. eBay, Inc., 576 F. Supp. 2d 463 (S.D.N.Y. 2008), affirmed 600 F.3d 93 (2d Cir. 2010).
Upon discovering that a large number of counterfeit Tiffany merchandise was being sold on the online marketplace website eBay, Tiffany, a high-end luxury jewelry retailer, lodged complaints with eBay. eBay, in turn, unsuccessfully recommended that Tiffany participate in its VeRO program. Instead, Tiffany demanded, among other things, that eBay prevent sellers from listing 5 or more Tiffany products at once. While the court held that eBay was subject to Inwood, rejecting eBay’s argument that it lacked control, the court held and the Second Circuit affirmed that eBay lacked the requisite level of knowledge required by Inwood, since Tiffany did not identify the specific listings that infringed. The court established that trademark owners have the burden of policing their trademarks in online marketplace websites, where online marketplace website owners provide an adequate process to remove potentially infringing listings once reported. Id.
Search Engine Companies - Trademark Infringement Liability
A search engine company’s potential contributory liability stems from its sale of trademarks, used as keywords or search terms, to third parties. See Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009) (finding that recommending a trademark as a search term was a “use in commerce” of the trademark that could potentially infringe such a trademark). Prior to Rescuecom, Google allowed and encouraged trademark owners and competitors alike to bid on the same trademarks for keyword searches through its AdWords program even though it did not allow advertisers to use another’s trademark within the actual displayed text of a paid search result. However, the Rescuecom court found that even the AdWords program could cause Internet users to mistakenly believe that a displayed competitor’s ad produced as a result of a search involving a trademark pertains to a product associated with that same trademark. Thus, the recent rulings do not hold that buying or selling a trademark as a search keyword alone constitutes infringement, but rather a trademark owner must still prove that consumers are confused. Id. For companies like Google, this has the effect of making it difficult for them to get rid of cases on purely legal grounds and has brought more trademark litigation in this area with the fact-issue of consumer confusion to litigate.
While the current state of the law across the circuits is uncertain with respect to the extent necessary of a search engine company’s involvement to constitute contributory liability, some courts, following the rationale of the Tiffany court, have found contributory liability only where a search engine company knowingly continued to supply its services to an infringing third party. Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531 (E.D. Va. 2010).In Rosetta Stone, Google was sued for direct and indirect trademark infringement arising out of Google’s sale of certain trademarks as search terms in its AdWords program. The district court, granting summary judgment in favor of Google on all claims, held that Rosetta Stone had failed to show that Google knew or had reason to know that it was supplying its services to parties engaging in trademark infringement. However, the Fourth Circuit Court of Appeals recently vacated the district court’s decision and remanded the case for further proceedings. Rosetta Stone Ltd. v. Google Inc., No. 10-2007, 2012 U.S. App. LEXIS 7082 (4th Cir. Apr. 9, 2012). The Fourth Circuit disagreed with the lower court’s finding that Rosetta Stone failed to show that Google knew or had reason to know that Google was supplying its services to infringing parties, and distinguished the case from Tiffany Inc. v. eBay Inc. by noting that Rosetta Stone did identify specific sellers who were offering or were likely to offer counterfeit products.
Whatever the outcome this case eventually produces, it seems prudent that search engine companies on notice of potential infringement take steps to stop supplying its services to such infringing parties.
Affiliate Marketing - Trademark Infringement Liability
The primary issue in online advertising cases tends to be whether the ad creates confusion as to its source. Kurt M. Saunders, Confusion is the Key: A Trademark Law Analysis of Keyword Banner Advertising, 71 Fordham L. Rev. 543, 551 (2002).In the context of keyword-linked search results, infringing ads are the ones that fail to identify the true sourse of the ad, either by falsely identifying the ad as being from the trademark holder or by giving no indication as to the source of the ad. Id. at 565.
One case addressing secondary liability arising out of keyword advertising by affiliates is 1-800 Contacts, Inc. v. Lens.com, Inc., where the defendant online company was not found to be contibutorily liable for the alleged trademark infringement in connection with the keyword advertising of one of its affiliate marketers. 755 F. Supp. 2d 1151 (D. Utah 2010). Although 1-800 Contacts was litigated as a keyword advertising case, it ultimately turned on the actual infringing advertisements generated by one of the defendant’s affiliates. Id. at 1174. The plaintiff discovered that when its name was used as a search term, advertisements for its competitor would appear. The plaintiff contended that Lens.com and its affiliates bid on its service marks as keywords to generate sponsored links on Google and other search engines and that those sponsored links were likely to cause confusion as to sourse, affiliation, or sponsorship. Id. at 1157.
The court held that the purchase of a keyword standing alone did not constitute trademark infringement. Id. at 1174. The court then turned to the question of whether liability for the affiliate’s infringing advertisements could be imputed to the defendant under a theory of contributory liability. Under the second prong of Inwood, the court held that the plaintiff must prove both “knowledge and that defendant continued to supply its ‘service’ despite knowing its affiliates were engaged in trademark infringement.” Id. at 1185. The court found that by virtue of authorizing its affiliates to use its name in their advertisements, Lens.com was subject to the law of contributory infringement. Id. However, the court dismissed the contributory liability claim because there was no evidence to show that the defendant failed to take appropriate steps to stop its affiliate from publishing the infringing advertisements and there was nothing to show that the defendant intended to benefit from the infringement. Id. at 1187.
Damages and Remedies for Secondary Liability for Trademark Infringement
While there is not a plethora of cases focusing on damages for secondary infringement, that is largely because contributory liability claims are dismissed early in the litigation. When contributory trademark claims do survive, the case decisions do not seem to include a detailed discussion of damages as to the secondary infringer. However, secondary infringers and direct infringers have been held equally liable for damages under the Lanham Act because the law regards contributory and direct infringers as joint tortfeasors. See Transdermal Products, Inc. v. Performance Contract Packaging, Inc., 943 F. Supp. 551, 554 (E.D. Pa. 1996) (citing Bauer Lamp Co., Inc. v. Shaffer, 941 F.3d 1165, 1171 (11th Cir. 1991)). Consequently, the contributory infringement defendant can be held entirely responsible for the plaintiff’s damages despite his indirect role in the infringement.
Damages for secondary infringement are governed by the Lanham Act, 15 U.S.C. § 1117. The 2008 amendments to the Act added subsection (b)(2), which specifically addresses contributory counterfeiting, and is the only place in the Lanham Act referencing secondary infringement. A plaintiff can also pursue damages under applicable state law under various state unfair competition laws. See generally Getty Petroleum Corp. v. Island Transp. Corp., 878 F.2d 650 (2d Cir. 1989) (upholding punitive damages award under state unfair competition law where compensatory damages had also been awarded under the Lanham Act).
Counterfeiting Claims Under the Lanham Act
For a counterfeiting claim made under the Lanham Act, a plaintiff is entitled to recover at its election any time before final judgment is entered, statutory damages as an alternative to defendants’ profits or plaintiff’s actual losses resulting from the infringing activity. The Act permits an award of “not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just. See 15 U.S.C. § 1117(c). However, if the court finds that the use of the counterfeit mark was willful, the court has wide discretion and may award damages in an amount “not more than $2,000,000 per counterfeit mark per type of goods sold, offered for sale, or distributed.” Id.
Some examples of damages in contributory infringement cases are quite striking. In Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., discussed above, the Ninth Circuit implemented the $10,500,000 damage award to be joint and several against both contributory infringers. 658 F.3d 936, 947 (9th Cir. 2011). In Roger Cleveland Golf Co. v. Price, the jury imposed almost 30 times greater damages on the secondary infringer as on the direct infringer. C/A No. 2:09-CV-2119-MBS, 2012 U.S. Dist. LEXIS 46065, *31 (D.S.C. March 30, 2012). The court held that the jury’s award of $70,000 against the contributory infringer was only 3.5% of the $2,000,000 per mark it was authorized to award. Id. at *30. The direct infringer had to pay damages of only $2,500 per mark. Id. at *30. The court expressly stated that the jury was entitled to consider the differences between defendants, their financial abilities, and their respective characteristics in awarding different damages for the purposes of deterring future infringement. Id. at *31. A number of other courts have awarded statutory damages in contributory liability cases. See Cartier Int’l v. Ben-Menachem, 06 Civ. 3917 (RWS), 2007 U.S. Dist. LEXIS 95366, *36-40 (S.D.N.Y. Dec. 19, 2007) (where court found contributory liability on part of defendant parents, who were willfully blind to their sons counterfeiting business in their home, and awarded statutory damages, costs, and fees); Microsoft v. Black Cat Computer Wholesale, 269 F. Supp. 2d 1118, 119, 123-24 (W.D.N.Y. 2002) (finding owners of company contributorily liable for company’s sale of counterfeit software and awarding statutory damages and attorneys’ fees). It is also worth noting that the Lanham Act provides for treble damages if the infringement is intentional unless extenuating circumstances exist and attorneys’ fees in exceptional cases. See 15 U.S.C. § 1117(a) and (b). Additionally, courts have consistently concluded that there is no right to indemnification or contribution under the Lanham Act. See Getty Petroleum Corp. v. Island Trasnp. Corp., 862 F.2d 10, 16 (2d Cir. 1988) (“No express right of contribution exists under the Lanham Act, and [the district court] correctly concluded that it was inappropriate to imply such a right.”), cert. denied, 490 U.S. 1006 (1989).
Importantly, the Lanham Act provides for injunctive relief under 15 U.S.C. § 1116(a). In Louis Vuitton Malletier, the appellate court noted that the district court ordered a permanent injunction pursuant to § 1116(a) against defendants who operated server equipment that hosted infringing websites. 658 F.3d 936, 941 (9th Cir. 2011). The district court found that the plaintiffs established irreparable harm based on trial testimony demonstrating that “the presence of counterfeit products in the market dilute[d] the exclusivity of [p]laintiff’s products in a manner that could not easily be compensated with monetary damages.” Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., No. C 07-03952 JW, 2010 U.S. Dist. LEXIS 85266, *60 (N.D. Cal. March 19, 2010); see also A&M Records v. Adallah, 948 F. Supp. 1449 (C.D. Cal. 1996).
Updated Collection of Secondary Liability for Trademark Infringement Cases
Cases:
Magee v. Nike Inc., No. 3:21-CV-01726-G-BT, 2023 WL 3357594 (N.D. Tex. Apr. 24, 2023), report and recommendation adopted, No. 3:21-CV-1726-G-BT, 2023 WL 3362607 (N.D. Tex. May 10, 2023).
Master Saddles Inc. v. Taylor, No. 3:20-CV-3709-B, 2021 WL 1814697 (N.D. Tex. May 6, 2021).
Epic Tech, LLC v. Fusion Skill, Inc., No. 4:19-CV-2400, 2021 WL 1599378 (S.D. Tex. Apr. 23, 2021), on reconsideration, No. 4:19-CV-2400, 2021 WL 2596433 (S.D. Tex. June 24, 2021).
See Ohio State Univ. v. Redbubble, Inc., 989 F.3d 435, 442 n.1 (6th Cir. 2021) (“OSU fails to mention that there are two types of secondary liability under the Lanham Act: vicarious trademark infringement and contributory trademark infringement. The Supreme Court described contributory infringement, stating, ‘if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorily [sic] responsible for any harm done as a result of the deceit.’ This differs from the agency-law-based vicarious Lanham Act liability test that this Circuit adopted in Grubbs. But both have elements that differ from direct Lanham Act liability. Because OSU does not raise a contributory infringement argument, we decline to consider the merits of a potential claim under that framework.”) (quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982)).
Conclusion
Secondary liability in the trademark context continues to be an interesting area of law as it develops, and appears to have room for creative arguments as certain technology develops in the online sphere. The Internet is just the beginning in many respects, as it evolves into a difficult-to-police marketplace with numerous parties buying and selling or trying to sell. In fact, these issues came to light in Tiffany v. eBay, where the court observed that “more than six million new listings are posted on eBay daily, and at any given time, some 100 million listings appear on the website.” Tiffany v. eBay, 576 F. Supp. 2d 463, 475 (S.D.N.Y. 2008), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010).
For additional reading, see our article Background of Secondary Liability for Trademark Infringement on the Internet and the presentation Secondary Liability for Trademark Infringement on the Internet.
For more information on this topic, please visit our Trademark Litigation service page, which is part of our Trademarks practice. Questions, contact Darin Klemchuk.
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