Originally posted 2014-02-07 13:20:00. Republished by Blog Post Promoter

Internet Cases logoEvan Brown reports, as he does so often, about an important ruling that deals another blow to attempts at using intellectual property, and particularly its growing penumbras in the secondary liability area, law as a magic legal elixir to fix ever perceived legal or commercial problem:

After defendant left plaintiff’s employment to co-found a competing company, plaintiff sued defendant personally for copyright infringement based on the new company’s website’s resemblance to plaintiff’s website. The infringement theory was interesting – plaintiff alleged that defendant did not commit the infringement himself, but that he was secondarily liable for playing a significant role in the direct infringement by the new company’s employees. . .

It didn’t fly in BioD, LLC v. Amnio Technology, LLC, 2014 WL 268644 (D.Ariz. January 24, 2014).  Evan explains:

In this case, the court held that plaintiff had not alleged enough detail to state a claim of secondary liability against defendant. Instead, the complaint simply recited the elements of contributory and vicarious liability. . . .

[Plaintiff failed to allege that d]efendant, as a non-employee (but founder) of the new company, was personally responsible for the content of the new company’s website. (Interestingly, the court held it was not sufficient to allege that defendant was a founder of the new company. Although plaintiffs alleged some factual details about what was actually copied from plaintiff’s website, they alleged no factual details as to defendant’s personal involvement in the infringement.) . . .

Plaintiff’s attempts to impose secondary liability were (if they had worked) a clever method for accomplishing the same objective as piercing the corporate veil. Granular control by the individual founder could be equated with the “alter ego” aspect of the veil-piercing analysis. The absence of such specific control by the individual defendant, however, left the possibility of liability only with the company.

This last paragraph does raise an important issue:  “Granular control by the individual founder could be equated with the ‘alter ego’ aspect of the veil-piercing analysis.”  Here the missing factual piece seems to have been the actual connection between the former employee, also the “founder” of the allegedly infringing website, and his actual control — necessary under vicarious liability doctrine (the secondary approach relevant here) — over the infringers.

It seems this was an attempt to use secondary liability “get at” the former employee, whose fingerprints were deftly, or perhaps entirely innocently, nowhere to be found on the allegedly infringing website, personally on the copyright claim.  It is a commonplace in infringement cases, of course, that infringing conduct can “only be performed by people,” and not companies, and plaintiff’s attorneys often hold or play the personal-liability card as they deem appropriate in an infringement claim.  The assertion of personal liability is not so much a veil-piercing exercise, which is premised on vitiating the corporate fiction entirely, but a theoretically squishy (I didn’t say wrong) imposition of direct (usually joint and several liability) on the individual principal himself.

First lesson learned:  Key management and other employees with meaningful development and creative responsibility should be subject to fair but enforceable and specific employment contracts with strong and specific IP and trade secrets provisions.

Trademark lawyer Ron ColemanAnother lesson:  “similar website” cases are a dime a dozen — and are usually worth that much to litigate, whether under a contract theory or tort.  That’s “worth,” not “cost.”  At the end of the day, I tell clients who inquire about these offenses what they really already know:  Their web-based business will succeed or fail based on their firms’ ability to deliver products or services better, faster and cheaper.

If they can build that on top of some first-mover advantage derived from a clever website concept, so much the better.  Where they want to be, however, is in a situation where by the time their web design is knocked off, they’re about to roll out the new design or enhancement to keep their satisfied customers and develop new ones.

At the end of the day, it’s value, not elusive “rights,” that justify a legitimate business — and keep its expenses (legal, that is) from being bloated by Quixotic and exotic legal expeditions.  These are mainly calculated to punish competitors, instead of just beating them in the marketplace — or to avoid competing on value altogether.

UPDATE:  There is, of course, an exception to every rule:

Allegations that a commercial website copied the stylistic choices of the plaintiff’s widely recognized website were sufficient to state a claim of trade dress infringement, the U.S. District Court for the Eastern District of Louisiana ruled Aug. 23 (Express Lien Inc. v. Nat’l Ass’n of Credit Mgmt. Inc., E.D. La., No. 2:13-cv-03323-LMA-DEK, 8/23/13).

A claim pursuant to the Lanham Act, 15 U.S.C. § 1125(a), can be brought to protect a website’s appearance, or trade dress, without the need for a registered trademark, Judge Lance M. Africk said, citingHealthpoint Ltd. v. River’s Edge Pharmaceuticals LLC, No. 03-984 (W.D. Tex. Feb. 14, 2005).

The court said that a viable trade dress action had been alleged because the plaintiff claimed that the defendant copied stylistic choices such as the color, font, and hyperlinks of the plaintiff’s distinctive and well-recognized webpage.

By Ron Coleman

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