Tag Archives: Secondary Trademark Liability

Locution, Locution, Locution: IP Licensors – Service Suppliers or Product Providers?

Secondary Trademark Liability | Bloomberg BNA

Buy me!

Consider the following scenario: Company A is a well-known film producer that licenses its intellectual property rights in famous cartoon characters to Company B, a jewelry manufacturer. Company B in turn features those characters in bracelets that infringe Company C’s marks. Company C sues both Company B and Company A, alleging direct and contributory trademark infringement, respectively.

In this situation, how should the court apply contributory liability doctrine to the Company A, the licensor defendant? As explained in the website overview, that doctrine prescribes a different standard depending on whether the defendant has supplied a product or a service to the direct infringer. How then should the court view Company A? Has it supplied the direct infringer with an intangible “product” – its intellectual property? Or has it provided it with a “service” – the licensing arrangement? Neither option seems to capture the essence of the licensor-licensee relationship. And yet the difference is not merely a matter of form: In the latter case, Lockheed Martin’s version of the Inwood Labs. test would apply, with its additional requirement that the plaintiff show “direct control and monitoring” of the instrumentality of infringement.[1]

While the courts generally agree that contributory liability doctrine applies in the licensing context,[2] they have wrestled with how, precisely, to characterize the relationship between the licensors and licensees. In the three cases discussed below, the courts considered licensing relationships in the context of contributory liability. In two of the cases, the courts assumed thatLockheed Martin would apply,[3] while the third court reserved judgment pending further developments in the case.[4] Each court had a different view of how to characterize the licensor’s relationship with its licensee. More …

Secondary Trademark Infringement: Don’t wait for the movie!

Critics agree:  Buy the Jane Coleman and Griff Price’s Secondary Trademark Infringement from Bloomberg BNA –or you’re liable to miss the big one!

Secondary Infringement

Best of 2011: Poor eBay!

First posted April 27, 2011.ebay-logo-02

News item:

eBay just reported first quarter earnings today posting revenue of $2.5 billion, an increase of 16% from the same period of 2010. eBay’s net income on a GAAP basis of $475.9 million, or $0.36 per diluted share, and non-GAAP net income of $619.0 million, or $0.47 per diluted share, representing a 12% increase compared to the same period of 2010. The retail giant narrowly beat analyst expectations, which were 46 cents per share on revenues of $2.48 billion. eBay says that the first quarter increase in earnings was due primarily to sales growth and a lower effective tax rate.

10 Years of LIKELIHOOD OF CONFUSION®

10 Years of LIKELIHOOD OF CONFUSION®

Nice!  I wish I had one of those.

But it does bring to mind the following bunch of words I do have, and which I wrote on this very place in space, on the topic of eBay’s essentially unconditional non-liability for contributory trademark infringement in connection with the sale on eBay of counterfeit goods: Read More…

Best of 2009: The DMCA and the search engine

DMCA 1998Posted on August 6, 2009.

Traverse Legal:

Mary Roach has a great post at CircleID on an area that we have talked about extensively, namely, copyright takedowns under the Digital Millennium Copyright Act.  Mary’s post covers the more specific strategy of sending takedown notices to search engine providers, such as Google, Yahoo, and MSN, to effectively reduce access to stolen creative materials.

10 Years of LIKELIHOOD OF CONFUSION®

10 Years of LIKELIHOOD OF CONFUSION®

That’s worth checking out.  How does it work?  As Mary writes,

[R]ather than identifying the infringing copyrighted material itself, rights owners must instead identify the search result or directory page which links to a webpage containing the infringing material. For example, this would require providing the keyword or keyword phrase used in a search or directory query, plus the URL(s) which point to the infringing websites in the DMCA complaint.

You can just imagine the bells going off in my head when I read that formulation.

Read More…

GEICO Isn’t Good News for Google

Originally posted 2005-02-21 21:14:00. Republished by Blog Post Promoter

Geico logo with geckoRemember the GEICO v. Google case? My former law partner and long-time spouse Jane Coleman does. She’s writing a chapter on secondary trademark infringement liability for the second edition of a book on trademark counterfeiting now being edited by our colleague Brian Brokate, a partner at Gibney Anthony & Flaherty.  wrote the definitive reference work on secondary trademark infringement.  (Brian is one of the leading anti-counterfeiting lawyers in the country. )  Her conclusion is one that Google and its lawyers doubtless know well: Having no trademark monitoring policy may be trouble, but a little policing may be worse than none at all.

The standard is set by a leading case in this area, Inwood Labs. Under Inwood, in a contributory trademark infringement case, a court will find contributory liability if the defendant has either (1) intentionally induced a third party to infringe the plaintiff’s mark or (2) supplied a product to a third party with actual or constructive knowledge that the product is being used to infringe the mark. The GEICO lawsuit, like most such cases, is a Prong Two case.

So, on to Prong Two, then: supplying a product to a third party with knowledge that the product is being used to infringe the mark. Product? Here there is no product; Google provides a service. But based on the principles synthesized in a later decision, Lockheed Martin v. Network Solutions from what are known as the “flea market cases,” the second prong of this definition of contributory infringement can apply to services, too. Then the court applies a modified version of the Inwood standard: It considers the extent of monitoring and control the defendant has over the infringing activity.

So, what happened in the GEICO case? GEICO, a discount insurance company, sued Google for using GEICO’s trademarks to sell advertising on Google’s search engine, alleging contributory trademark infringement. Two practices of Google were at issue:

  1. The sale by Google of GEICO’s marks as search terms or “keywords,” and
  2. The advertisements or “sponsored links” which contained GEICO’s marks in their text, generated by customers who selected those terms.

Regarding the sponsored links, GEICO had argued earlier that Google was contributorily liable, saying, “the advertisers themselves [made] ‘trademark use’ of the GEICO marks by incorporating them into the advertisements, which are likely to deceive customers into believing that the advertisers provide accurate information about GEICO products or are somehow related to GEICO.” GEICO also claimed — remember the “direct control and monitoring” standard of Lockheed — that Google in fact exercised significant control over the content of advertisements that appeared on its search result pages.

Last December, Google asked the U.S. District Court to grant judgment as a matter of law in its favor. It argued that GEICO could not win its contributory liability claim, because it could not prove that “Google affirmatively encouraged or knowingly assisted in violation of trademark law by the alleged infringers.” Google urged that its own internal trademark enforcement policy bans the infringing advertisements at issue, though “some ads occasionally slip through.” It insisted that the “inability to achieve perfect enforcement of that policy” did not give rise to contributory liability, and that there was no evidence that Google condoned or encouraged infringement.

But this would only matter if Prong One — intentional inducement– were at issue. Apparently, it’s not. Google understandably would have the court focus on its good intentions, but this is a Prong Two case such as Lockheed — where, again, the courts ask whether the defendant exercises a level of monitoring and control that Google acknowledges it does effect via its trademark enforcement policy. Google’s argument regarding its internal trademark policing policy may, in fact, prove too much.

It’s not clear that Google can get out of responsibility for ads that “slip through,” given its awareness of the existence of infringing ads. If it can police a little, perhaps it can police a lot. Judge Brinkema’s oral opinion did not address this, but a final written decision by her or an appellate court might. [UPDATE: As of early May, there is still no written decision. It’s a good bet that there won’t be one and the parties will settle…]

The court granted in part and denied in part Google’s motion, allowing the case to go forward on the question of whether Google was contributorily liable for trademark infringement arising out of the sponsored advertisements containing GEICO’s marks. The incentive to settle is high — and maybe that’s why it’s so quiet.

This is why I have argued that auction websites (read: eBay) should be subject to contributory liability for the sale of counterfeit or other infringing merchandise — because they (and other web auctioneers) do have control over the auctions. Courts have repeatedly found contributory infringement where a defendant claims “willful blindness.” Well, it’s certainly a sort of willful blindness to do some kinds of monitoring and not others.

Would it add to the cost of search engines and auctions to do more policing? Yes, of course it would: More fighting over rent. Considering the profits involved, and the tremendous costs imposed on brand owners to try and keep up with counterfeits and online infringers, an outcome that required more policing to protect the IP that contributes to those profits doesn’t seem like an unreasonable one.

Credit card companies get green light to profit from, enable Internet piracy

Originally posted 2007-07-04 23:59:37. Republished by Blog Post Promoter

credit_card_logos_10.gif

Reuters reports that in Perfect 10, Inc. v. Visa Intl. Serv. Assn., 494 F.3d 788, 793 (9th Cir. 2007) the Ninth Circuit has affirmed (opinion here), 2-1, a ruling that there is no third-party copyright or trademark liability for credit card companies such as Visa and MasterCard or the banks that process their transactions, arising from their central — essential, really — role in the sale of counterfeit merchandise (including, as in this case, unauthorized copies of dirty pictures) on the Internet:

Writing for the majority, Judge Milan Smith Jr. said credit card processors, unlike Web search providers, do not direct online traffic. “They in no way assist or enable Internet users to locate infringing material, and they do not distribute it,” Smith wrote.

“Here, the infringement rests on the reproduction, alteration, display and distribution of Perfect 10’s images over the Internet,” Smith wrote.

If you didn’t guess from the title, I disagree with this. Why do judges keep missing this? The credit card companies are very much in the profit chain of infringing websites — websites that do nothing but sell counterfeit goods — and they make no serious effort, even when notified, to prevent this activity from occurring.

I am not just shooting from the hip here. I researched this issue extensively for a Very Important Client, and came to the conclusion that, under the right circumstances, liability should, indeed, attach. I cannot understand, for example, why the Ninth Circuit spends so much time focusing on the fact that the credit card companies do not themselves operate the infringing websites the way flea market operators (who have been held contributorily liable) operate the markets where counterfeit items are sold. That is besides the point. I find this language particularly frustrating:

[T]he ability to exert financial pressure does not give Defendants the right or ability to control the actual infringing activity at issue in this case [as would be required to find liabilty]. . . Defendants can only refuse to process credit card payments to the offending merchant within their payment network, or they can threaten to do so if the merchant does not comply with a request to alter content. While either option would likely have some indirect effect on the infringing activity, as we discuss at greater length in our analysis of the Grokster “stop or limit” standard below, so might any number of actions by any number of actors.

Since when is the fact that other things would also work mean that the law will not require a party in a position to prevent illegality — and which is profiting from the transactions — to do what is in its power?

I’m not alone; not by a long shot. The dissenter? Read More…

Secondary Trademark Infringement: The Monograph

Now it’s out!  The book that transcends the Secondary Trademark Infringement website — itself now converted to a blog by Jane Coleman that will report on and analyze ongoing developments in this area (such as this one on the topic of the Ninth Circuit’s recent screwup on the law of contributory cybersquatting — is now available for purchase from Bloomberg / BNA.

I make no claim here to objectivity.  But I will say it anyway: this book is very, very good; and if you think you know it because you used the old online treatise, you are mistaken.

Buy one one for everyone in your family!

The text below is adapted from the Bloomberg / BNA website.

Secondary Trademark Infringement BookSecondary Trademark Infringement by Jane Coleman and Finnegan’s Griff Price is the first and only comprehensive work on the law of secondary liability for trademark infringement—an area that is quickly becoming an important topic of interest among both practicing attorneys and scholars. The treatise is ground-breaking in its analytical power. Meticulously organized and accessible, it is an ideal reference work for legal and business professionals who use, or whose stakeholders use, trademarks on the internet, who seek guidance with respect to this growing area of potential legal risk.

Secondary Trademark Infringement covers important topics, such as:

  • Infringement liability of businesses that offer internet facilities to third parties using trademarks or trademark-protected goods in commerce, including retailers, auctioneers and distributors
  • Company exposure to liability for the online activities of their hosting customers or advertisers
  • Legal issues arising from web-hosting and other Internet infrastructure or connectivity
  • Exposure reduction measures for companies and institutions that do not use or facilitate trademark use directly, but are part of a commercial chain of activity and present a tempting “deep pocket” or accessible litigation target for claims based on activities of others in the chain

Read More…

eBay, VeRO and the Scientologists

Originally posted 2008-12-10 23:26:21. Republished by Blog Post Promoter

Last February Scott Pilutik, an aggressively anti-religion blogger and lawyer, posted this excellent piece about the abuse by the Scientology cult of eBay’s VeRO program, which eBay waves around to show what it’s doing to combat counterfeiting on the Internet (though of course the courts have mainly relieved it of having to do much of anything).  The “church” uses VeRO to prevent ex-members from selling a piece of mechanical garbage called an e-meter to either novitiates, souvenir hunters or whoever else would want to buy them on eBay.

Like tanning goop manufacturers Australian Gold and Designer Skin, Scientology wants to control distribution of its merchandise; like those companies as well, it is mostly selling packaging and marketing, not value, so control over distribution is key to the business model.  Market prices are bad for business when you’re selling something that’s not “really” worth all that much.  Businesses such as these therefore use fallacious claims sounding in intellectual property infringement as proxies for price-inflating market forces that don’t exist.  All too often, the regimes that purport to enforce those laws, be they judges or private companies such as eBay, are all too willing to help outfits such as these abuse them.

Let’s pick up the action here: Read More…

Inducement to contribute to infringe … to roll on

Originally posted 2011-01-20 22:38:14. Republished by Blog Post Promoter

Michael Atkins:

Novel causes of action for contributory cybersquatting and contributory dilution appear to viable here in the Western District [of Washington].

On Jan. 12, Western District Judge Ricardo Martinez refused to dismiss such claims plaintiff brought in Microsoft Corp. v. Shah.

In that case, Microsoft alleges defendants, among other things, induced others to engage in cybersquatting and dilution by instructing them on how to use Microsoft trademarks to increase traffic on their Web sites. Microsoft also alleges defendants sold a product that contained software that enabled buyers to create Web sites incorporating Microsoft marks to help sell emoticon-related software, including a video narrated by defendant Amish Shah.

Defendants moved to dismiss, arguing claims for contributory cybersquatting and contributory dilution are not recognized.

The court denied the motion.

This is an interesting development, and one to watch, in light of what I see as the overall reluctance of courts to extend the law of secondary liability for trademark infringement — including with respect to domain name registrars.

Best of 2010: Gucci v. Frontline Processing: Giving credit for infringement where it’s due

Originally posted 2010-12-28 08:30:01. Republished by Blog Post Promoter

First posted July 12, 2010.

This is an adaptation of a summary and analysis of the recent decision in Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367 (S.D.N.Y.), discussed here casually earlier. Jane Coleman’s definitive online treatise Secondary Trademark Infringement has recently been updated and the impact of this decision integrated into the text; a full update is planned for September. The complete analysis of Gucci, including full citations, can be found here.

The essential role played by credit card companies in online trademark infringement was recognized in Gucci America, Inc. v. Frontline Processing Corp. In that case, the court allowed contributory infringement claims to go forward against companies that had established credit card processing for an online counterfeit merchant. The payment for the counterfeit goods sold on its website was part of the infringing process, the court reasoned, drawing on Judge Kozinski’s dissent in Perfect 10, Inc. v. Visa Intern. Serv. Ass’n, and most of the infringing sales – of which the companies allegedly knew or should have known – were consummated using credit cards.

Gucci v. Frontline arose out of successful trademark infringement litigation brought by Gucci, the well-known manufacturer of luxury goods, against an online merchant operator of a website called “TheBagAddiction.com,” in which the owners admitted to liability for selling counterfeit Gucci products. Thereafter, Gucci turned to the three companies that had helped the merchant obtain credit card services, alleging both vicarious and contributory liability for trademark infringement. One of the three defendants, Durango Merchant Services acted as a middleman, while the other two, Frontline Processing Corporation and Woodforest National Bank, provided credit card processing services to the merchant.

In rejecting the defendants’ motion to dismiss, the court allowed the contributory liability claims to go forward as to all three defendants, but on different legal theories in accordance with their roles. As to Frontline and Woodforest, the court found the pleadings sufficient to allege contributory trademark infringement, based on their knowledge and control over the infringing activity on the website. As to the middleman, Durango, the court found the pleadings sufficient to allege contributory infringement based on an inducement theory.

As to Frontline and Woodforest, the court also found the pleadings stated a claim for contributory trademark infringement, based on the defendants’ knowledge and control over the infringing activity on the website. Citing eBay and Perfect 10, the Gucci court reiterated the direct control and monitoring test, stating that

[e]ven if a defendant does not seek out and intentionally induce a third-party to commit trademark infringement, it may still be held liable for the infringement if it supplied services with knowledge or by willfully shutting its eyes to the infringing conduct, while it had sufficient control over the instrumentality used to infringe.

Moreover, an allegation of the defendants’ general knowledge that infringement is taking place is not sufficient. “[A] service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods,” the court emphasized, citing further language in Tiffany that “’Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.'”

Both credit card processing companies either knew or should have known that they were servicing an infringing site, under the facts alleged, the court concluded. In both cases, a Durango agent had a dual role as both an employee of his company and a sales representative for the two credit card companies, and the court consequently accepted the allegations charging the companies with his knowledge. Thus, regarding Frontline, Gucci alleged that that company was aware of customers’ written acknowledgement of purchasing “replicas” as directed by the Durango agent. Read More…

Give the man credit

Originally posted 2010-06-28 01:00:01. Republished by Blog Post Promoter

Federal squares

Let's hear it for New York

Judge Harold Baer of the U.S. District Court for the Southern District of New York (the “home court” for LIKELIHOOD OF CONFUSION®)  has never been afraid to stick his neck out, at least a little bit.  He’s done it this time in the battle of, or rather by, the brands against trademark counterfeiting.   In a decision dated June 23rd, Judge Baer has bucked the trend against finding secondary trademark liability against hardly any party that profits from counterfeiting by denying a motion to dismiss claims of contributory trademark infringement brought by Gucci against a group of credit card processing companies in Gucci America Inc. v. Frontline Processing Corp., et al. (The decision is here.)

This is a favorite topic of mine, and obviously a still developing area of law.  Three years ago almost to the day I wrote the following in these very pixels:

Reuters reports that in Perfect 10, Inc. v. Visa Intl. Serv. Assn., 494 F.3d 788, 793 (9th Cir. 2007) the Ninth Circuit has affirmed (opinion here), 2-1, a ruling that there is no third-party copyright or trademark liability for credit card companies such as Visa and MasterCard or the banks that process their transactions, arising from their central — essential, really — role in the sale of counterfeit merchandise (including, as in this case, unauthorized copies of dirty pictures) on the Internet:

Writing for the majority, Judge Milan Smith Jr. said credit card processors, unlike Web search providers, do not direct online traffic. “They in no way assist or enable Internet users to locate infringing material, and they do not distribute it,” Smith wrote.“Here, the infringement rests on the reproduction, alteration, display and distribution of Perfect 10′s images over the Internet,” Smith wrote.

If you didn’t guess from the title, I disagree with this. Why do judges keep missing this? The credit card companies are very much in the profit chain of infringing websites — websites that do nothing but sell counterfeit goods — and they make no serious effort, even when notified, to prevent this activity from occurring. . . . I’m not alone; not by a long shot. The dissenter? Only Alex Kozinski, who also recognizes that the majority errs — really, in my view, demonstrates real intellectual dishonesty — in that they

recognize, as they must, that helping consumers locate infringing content can constitute contributory infringement but they consign the means of payment to secondary status. … But why is locating infringing images more central to infringement than paying for them?

Here Judge Baer, considering the facts as alleged in the Gucci case, had no problem overcoming the high (too high, I’ve argued) standard set by the Second Circuit in Tiffany v. eBay for a finding of  “willful blindness“:

Here, Gucci has made substantial factual allegations about the knowledge of all three defendants.   Read More…

eBay appeal: The gang’$ all here

Originally posted 2008-12-09 14:37:21. Republished by Blog Post Promoter

Eric Krangel reports that Amazon and Google join in on the Tiffany v. eBay appeal:

It’s not hard to see where the interest is coming from: A ruling against eBay could have ramifications for Amazon Marketplace or Google Checkout as well.

Yes, ramifications indeed.  We contentiously reported earlier developments here.  Thinking this morning about the issues discussed at that first post, as well as subsequent discussion in the comments, we formulated the following possible way of stating our problem with the “what do you want eBay to do, anyway?” argument:

If you have a small business such as a flea market or are the landlord of a retail establishment, and are “willfully blind” to infringement taking place on your premises, and you profit from that activity, you may be held liable for indirect infringement.

But if you build a large enough business, in whole or part, on infringement — no problem!  What do you want us to do, anyway?