Originally posted 2011-02-09 12:06:20. Republished by Blog Post Promoter


Web host Akanoc hit with $32M contributory TM judgment for customers’ counterfeiting http://bit.ly/3BR6ZW Whoa. More to come … Louis Vuitton v. Akanoc jury verdict http://bit.ly/OCNwr & Aug. dismissal motion http://bit.ly/A1WQ7 My Jan. blog post http://bit.ly/4tYgZ5

Whoa?!  How can this be!  Isn’t all the traffic in the other direction on contributory infringement?  Isn’t that unthinking application of judicial trendiness what’s been making LIKELIHOOD OF CONFUSION® pull his few remaining hairs out?

Not so fast. Jane Coleman explains, in her forthcoming treatise on just that topic, that Akanoc, the ISP in question, was not just another server farm (some citations omitted), but had its cyberfingers all over what was going on with its clients.  That’s why the claim against it was sustained on a motion to dismiss:

Courts have suggested that internet service providers (ISP’s) may, in appropriate circumstances, bear contributory liability for trademark infringement by the websites or other end users they service.  Different ISP’s offer different services, and their liability will turn on the extent of their involvement with infringing customers. . . .

Thus, where the defendant ISPs’ activities included providing Internet Protocol (“IP”) addresses, routing internet traffic to websites and servers that stored internet content, and allowing that content to be accessed through the internet, the court sustained a contributory liability claim against the defendant ISPs, likening them to the flea market operators in Fonovisa. Louis Vuitton Malletier, S.A. v. Akanoc Solutions, 591 F.Supp.2d 1098, 1112 (N.D. Cal. 2008). Akonoc arose out of sales of counterfeits of plaintiff Louis Vuitton’s luxury goods taking place at websites serviced by the defendant ISP’s. Louis Vuitton was able to trace those websites to the defendant ISPs who were apparently hosting them. After several rounds of letters and take-down notices, the company finally filed suit against the ISP’s, alleging both contributory and vicarious trademark infringement liability.

The defendant ISP’s moved to dismiss both claims and the court granted the motion with regard to the vicarious liability claim but refused on the contributory liability claim. . . . The ISP’s argued, among other things, that under Lockheed Martin, they were not required to “monitor the internet.” Louis Vuitton Malletier, S.A. v. Akanoc Solutions, 591 F.Supp.2d 1098, 1112, citing Lockheed, 194 F.3d at 985.

The court rejected their argument, because the services they provided involved them more closely with their customers than those provided by the ISP in Lockheed Martin. That ISP “merely provided a ‘rote translation service,’ by which the defendant translated domain names into IP addresses.”  In Akanoc, however, the ISP’s “physically host[ed] websites on their servers and route[d] internet traffic to and from those websites.” Id. This service, the court held, was “the Internet equivalent of leasing real estate[,]” just as the flea market owners had done in Fonovisa. Taken together with the ISPs’ ability to remove infringing websites, the defendants’ activities “entail[ed] a level of involvement and control that [went] beyond ‘rote translation.’” The court therefore sustained the contributory liability claim against them.

So:  An ISP by any other name would… well, I don’t think they smell sweet or otherwise, but, anyway, it may or may not be “an ISP,” under the law, for all kinds of reasons, and just maybe you can’t get away with just anything because of what you call yourself.  [UPDATE:]  Here the court reasoned that this much ISP’ing was too much — especially considering the high level of specific knowledge of specific infringement that Akanoc just plain ignored.

And the $24 million amount?  Yes, I have learned the hard way that juries can be very dangerous things in trademark cases, because the law is not clear about how exactly trademark damages ought to be measured and neither are most judges.  I will certainly be interested in looking at the jury instructions as to damages.  For now, though, I’m mostly looking forward to the explanation of how this reconciles with the decision in Perfect 10, Inc. v. Visa regarding what constitutes actionable “control” by a third party, because it doesn’t.

Not all judges are created equal either, you know.

UPDATE:  Here are the Akanoc jury instructions and, below, is the Akanoc verdict sheet. Read the jury’s contributory trademark infringement damages verdict (page 8), in light of the jury instructions, and tell me how satisfied you are with the thoroughness with which they came to these numbers:

[ipaper id=19286994]

UPDATE too:  Eric Goldman promised more; here it is.

By Ron Coleman

I write this blog.

12 thoughts on “Not all ISP’s are created equal”
  1. That description sounds like what all Web hosting providers do, even bargain-basement $9.95-a-month ones. Does this decision mean that they’re all obligated to police the content of their customers’ sites? What about the immunity provision of the CDA?

  2. Hi Dan,

    Your argument was raised by the defendant in Gucci v. Hall, where the court ruled that the CDA does not immunize ISPs from trademark infringement claims arising out of information posted on their customers’ websites. The court agreed with Gucci that Sec.230(e)(2)was controlling: “nothing in this section shall be construed to limit or expand any law pertaining to intellectual property.”

  3. You’re right about the definition of modern-day hosting services, Dan. The Akanoc court isn’t wrong to distinguish the services provided by Akanoc from those in the Lockheed case, which were a level of bare-bones service I doubt you can even buy retail any more. But its description, quoted by Jane above, of what Akanoc did do would seem to describe almost any over-the-counter hosting provider.

    As Jane reminds me, too, here there was a very high level of specific knowledge of infringement, Dan, that the ISP just blew off. In my practice when I write letters to ISP’s about specific infringing websites on their servers, I expect and pretty much always get results fast. Their hosting contracts always give them the right to pull the plug on customers for just that. Here Akanoc didn’t do a thing, it seems. I wouldn’t be surprised if that was because someone told them, “No problem, dude, you’re an ISP, you’re always off the hook.”

    I’ve updated my post, however, to make it clear that not just the level of involvement, but also the level of specific knowledge ignored by the defendant (contrast this with the Tiffany case, where eBay, to its credit, responded to Tiffany’s reports of counterfeiting; Tiffany argued that this was too little too late), were key elements of the decision and the verdict here.

  4. I just wonder whether the effect of such litigation will be to make hosting providers of all sorts feel compelled to have itchy trigger fingers for deleting hosted sites and banning customers based on even the most unreasonable and overblown claims of infringement. This might be used by people trying to silence viewpoints for political reasons.

  5. I agree with Mr. Coleman. In my experience. ISP’s typically pull the plug immediately out of an abundance of caution. They will typically shut it down pending investigation or the outcome of the dispute. I think the lawyer sending the letter to the ISP are ethically bound to make sure it is a legitimate claim prior to contacting the ISP.

  6. The reality is that ISPs (along with registrars for example), make very little money on their “core” business. For this reason they have all added other services such as hosting.
    It is all well and good to say that lawyers should be ethically bound to send only legitimate demand letters. However, not all attorneys live up to expectations. And, from my experience, many demands are not in fact issued by attorneys and many appear to be “automated”.
    This case seems to place the entire burden of enforcement on a company simply because it is hosting (or renting) the space where the alleged infringement occurred. Their only recourse is to err on the side of the claimant and take down the site. While one can argue that the ISP can always put it back up following objection by the site owner (or even correction), what ISP in their right mind would favorably view such a request? First, they don’t make enough money to employ lawyers to make such finely thread decisions. Second, they risk further liability claims (not to mention just the cost of defense) if a decision to re-host the site turns out to have been incorrect. And it will not take long for ISPs to share information such that having problems with one ISP will render it impossible to obtain hosting services at another ISP.
    All this does not bode well in terms of First Amendment rights.
    If trends like this continue, I cannot imagine all of the potential risks: (a) ISPs will move out of the US; (b) the cost of creating new online businesses will become too high; (c) …. Ultimately, the brand owners need to realize that they benefit more from having access to the Internet sales channel then from eliminating it by targeting the neutral providers of backbone services.
    Many ”enforcement” cases seem to apply a different set of rules when the defendant is involved in “the Internet”. Take a step back and see if the facts of this case would have played out in the physical world. Replace every Internet-related reference with a reference to a discount mall down the street. Given the facts would the owner of the mall have been held liable (or if so to such an extent)? Should they be? I seriously doubt it. There seems to be a special rule for the Internet.
    I have never accepted the fact that anyone other than the actual infringer could be responsible for infringement. Perhaps I could accept an exception for those who benefits directly from the actual infringing activities as opposed to some general benefit from their client’s activities as a whole. However, such an exception has, IMO, gotten us to where we are now: the offloading of IP enforcement in the Internet world onto the shoulders of various third parties (be it IPS’s auction platforms, Homeland Security or the like) and the use of IP rights to stifle competition. I hear too often the cry that enforcement costs too much. My answer is, well wait: the “right” is not a property; it is an exception to the rule (remember the 1st Amendment?) and grants you a monopolistic opportunity. The value given in exchange is the now fairly widely debunked assumption that in absence of the monopolistic right, we would not all be so creative and that society as a whole would suffer. That it costs you money to enforce your right means only that you need to take that into account when deciding whether or not to see the legal monopoly that is available.

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