A little outside the world of pure domaining, but as another example of how trademark owners are continuing to press for greater protection for their brands and expanding those they are trying to hold responsible for infringement, comes the news that a jury in the U.S. District Court for the Northern District of California found 2 Web hosting companies and their owner (personally) liable, for contributing to trademark and copyright infringement for hosting sites selling counterfeit Louis Vuitton goods.
The jury awarded damages of $32.4 million against hosting companies Akanoc Solutions Inc., Managed Solutions Group Inc., and the owner of the 2 companies, Steven Chen.
Of the amount awarded, $31.5 million was for contributory trademark infringement and $900,000 for contributory copyright infringement.
I know you might be asking yourself “what the hell is Contributory Trademark Infringement?”
Good question.
The reason you have never heard of it is this is the FIRST case in which a jury has bought this theory and awarded damages based on this theory.
Contributory Trademark Infringement is when a participant in the chain, in this case a hosting company, knew, or SHOULD HAVE known, that they are enabling illegal activities, and therefore the theory goes has an obligation to remedy the situation. Entities that fail to do so, are legally responsible for contributing to the illegal activities.
The jury found that the hosting companies knowingly allowed Web sites they hosted, to sell products that infringed Louis Vuitton’s copyrights and trademarks and awarded the damages.
Just to be clear here, there was no argument that the hosting companies owned the site or got any direct financial benefit (commission or otherwise) from the sale of the items.
The hosting company was held liable for the acts of its client.
Certainly a must read for anyone hosting sites for others.
Also the question can be asked, who else could be sued in the future for acts of others, under this Contributory Trademark Infringement theory?
The plantiff either had a great legal team or the jury had the collective intelligence of a hamster.
David
Or a combination of the two.
Or they convinced six people that once a hosting company has been notified of a criminal activity on a site they are hosting they have a duty to terminate the account and cease hosting the site.
Don’t dismiss this case so easily, it could become a well recognized legal principal.
In law there are other people in other situations which are held liable for acts of others.
I totally agree wth you David. These trademark cases are getting more and more ridiculous.
Mike:
Believe me, I’m not dismissing this. If I owned an ISP I’d be extremely concerned because this seems to be more than a bit of a stretch. What’s next? ISPs that host gambling sites being hauled into court in Kentucky?
David
Sure.
How about a hosting company that gets a letter from Verizon saying that they are hosting a domain that infringes on their trademark, even a parked page.
Will this theory be extended to this situation?
Trademark groups have already successful pulled registrars into this mess, as witnessed by the Onlinenic decision.
The reality of the situation: Will a hosting company risk the costs of defense and a huge judgment, not just against it, but its owners as well, or just pull the site(s) down upon receipt of a letter from a trademark holder?
“SHOULD HAVE known, that they are enabling illegal activities”
If a REIT owns an apartment building and a tenant is selling drugs out of the apartment unbeknownst to the property owner, is the landlord/REIT liable?
Is the REIT required to investigate the daily activities of its tenant? I hope not.
If a REIT owns an office building, are they required to investigate the daily business activities of its tenant?
Will the REIT that owned the office building that housed Bernard Madoff’s ponzi scheme, be liable?
Will the lawyers for Louis Vuitton company file suit using “Contributory Trademark Infringement” against the container company, trucking company, etc. They should have known when the bill of lading stated “purses” that they were counterfeit?
I sure hope this case is overturned.
Domain
This ruling is not saying that every hosting company needs to investigate what each site hosted on their servers is doing.
What the ruling says that if a hosting company gets a complaint or notice that one of the sites they are hosting is in violation of the law, then they have to do something.
Regarding landlords many have been held liable for damages if someone breaks into someone’s apartment, or attacks someone on their grounds.
Do we know if the hosting company was notified of the infringement in advance of the suit?
If so, then the hosting company has to become an expert in trademarks, patents and copyrights.
Which will result in all U.S. based hosting companies to immediately discontinue hosting accts that receive any complaint, legitimate or not.
So, If I complain to your hosting company that I have a TM on the word “domain”, they should take down your site or be liable, citing this case. I’m sure some will immediately pull the plug because it is not worth the fight.
The biggest beneficiary will be hosting companies outside the U.S.
Especially, countries that have a reputation of moving slowly on lawsuits, ie. India.
Domain
The case indicates that the trademark holder did notify the hosting company prior to the case being filed and expected the hosting company to take action.
“””Which will result in all U.S. based hosting companies to immediately discontinue hosting accts that receive any complaint, legitimate or not.””
Exactly, this is what I’m saying.
No Bueno for hosting companies, parking companies and those who use either of those services which is all of us.
“””The biggest beneficiary will be hosting companies outside the U.S.
Especially, countries that have a reputation of moving slowly on lawsuits, ie. India.”””
Correct.
I do not think what Louis Vuitton is enforcing is very relevant to what other companies may be able to enforce.
Louis Vuitton has probably the most strict control of any brand I know. There is no such thing as Louis Vuitton distributor or re-seller. You can only buy Louis Vuitton from their own boutiques or from their online store – LouisVuitton.com. So, from what I understand, every online Louis Vuitton seller other that LouisVuitton.com is selling fake bags. That makes it pretty simple to enforce.
Jon
I think your looking at this the wrong way.
Your talking about legal issues that have to be determined in a court of law.
I’m talking about the reality of the situation which is if you own a hosting company and get a letter from dell computer that one of the domains your hosting violates their trademark, would you tell them to go to hell or ignore their letter and spend tens of thousands or more defending the suit knowing there was some risk of losing and getting hit for millions in damages, or just pull the plug on the site?
This ruling is a game changer
Should a hosting company shut down a customer website on a mere complaint or accusation? Don’t they have to receive an accompanying court injunction? I can’t imagine that every hosting company will be required to make these kinds of judgements without some legal mandate having been provided to them.
Something seriously does not add up in this case. That it went to trial and resulted in this jury verdict is bordering absurd. I suspect inept legal representation at work and an ill-informed jury.
I can see the reasoning behind the verdict, and mostly just feel like that sucks for the hosting company, but then again if they recieved a notice and disregarded it that was an oops.
What I can’t see is how the same tm interests (Verizon et all) don’t get sued over their own wildcard DNS tuposquatting. Oh yea that’s right, they probably won’t sue themselves.
They probably make more money every day off of tm traffic than anyone else in the space. Then they just take that money and use it to pay for lawsuits agains anyone that isn’t in their club.
Mike . this ugly turd raised it’s head a long time ago back in 2001 with this Gucci ruling discussed here : http://www.wilmerhale.com/publications/whPubsDetail.aspx?publication=1499
btw, I’m pretty sure OnlineNic owned the Verizon domains that they got sued over. . . it wasn’t any stretch.
Hello MHB,
It is becoming increasingly evident that the powers that be have increased their legal staffs to all time highs, to protect their interests. The fear in the market place, that is directly tied to the root cause of expressed anger, is approaching all time highs.
Domainers are experincing the wrath of corporate sabre rattling to protect their percieved top dog ranking in the e-commerce marketplace. They are pulling out all the stops. This is seemingly, a position of strenghth. This could not be further from the reality of the current situation.
Allways remember that falling regimes over react out of weakness , NOT Strength. Those who drive the cutting edge of e-commerce will prevail.
Gratefully, Jeff
It is VERY important to maintain Internet CYBER Liability insurance to provide you an attorney should you be sued by some thug losers! You can get it through Lords of London and others! Don’t wait until it is too late and your sued by some AOL crack pots!
I’m with Domain Investor on this one. Perfectly said.
I have experience in civil lawsuits with “juries”. Don’t think for a minute a jury understands what the hell you’re talking about unless you have a great atty. And, don’t forget the Judge. The judge can tell the jury to disregard very pertinent points important to your case, because the judge could have an ulterior motive (money, fame, positioning, etc.) or a lack of understanding of the case, or they’re on drugs or alcoholics. Don’t laugh. At least 10% of all court judges have some diminishment issue.
About a decade ago, I won a FRAUD case against a defendant, but LOST the financial sanctions in the case because when I PROVED the defendant was a fraud and announced it, he LOST his job at a major TV production company. He counter sued. The loss of his job was deemed MORE damaging than the fraud he committed in failing to “produce” my primetime TV event (losing me $300,000). Subsequently, my company was hit with financial penalties by the jury five times more than what they awarded my company for his fraudulent actions. He comes from Hollywood royalty, so you can figure it out from there.
FOOTNOTE: The judge in my case was reprimanded a year before on a ruling she made against a well-known actress, after it was found out that the judge appeared at a premier of a movie the actress decided against appearing in, even though no written contract existed that she would. It ruined her financially.
These types of rulings that make no sense and are seemingly tilted towards the people with power and money, happen every day. I learned that if you whine about it, the more you whine, the act of drinking wine is more productive.
If the judicial system was pure, based on logic, untouchable by influence, and unassailable, then I’d believe in that “Justice for All” part of our pledge. However, many thousands of companies and individuals will tell you the judicial system is… flawed.
The example listed here is perfect for showing that the Jury was in a hurry to get back home, didn’t understand how TM’s work, and the defendant’s atty was asleep at the wheel.
This is a ripe appeal case.
Stephen
That having been said, this is now unless appealed successfully, legal precedence which will be cited in other cases to impose this doctrine on other defendants.
There maybe federal courts in other jurisdictions that decide the same type of case differently and ultimately the Supreme Court of the US may have to decide the case if there winds up being a split in the districts.
However, whether this was a good or bad decision, whether its the lawyers fault, the judge’s fault, the jury fault is at this point irrelevant for the rest of us thay might be affected by this ruling down the line
Trademark groups have already successful pulled registrars into this mess, as witnessed by the Online decision.This could not be further from the reality of the current situation.
Mikey,
I think your article here is one of the most important cases of legal interpretation in TM cases there is. You said it, and I’ll repeat it…
If a hosting company, ISP, or registrar is now held legally responsible for “contributory TM infringement” (what a sham), they are all going to be GUNNING FOR DOMAINERS when we try to host, develop, park, sell, or promote a domain name using their basic services that we WE NEED TO SURVIVE unless we own our own hosting/registrar service.
Just imagine the negative ramifications of this court decision:
Every domain name you buy will be “reviewed” by a panel at each internet company service, in order to determine whether it is a TM “contributory” infringement for them. That will extend to every level of your attempts to MONETIZE the domain.
Dang if that overused phrase, “SLIPPERY SLOPE” doesn’t come into play larger than we ever expected at this point.
Please push this story further than what you have now. I’d do it on my blog, but you got the scoop so it’s your ballgame stadium. Make sure the seats are comfortable, beer is “ok”, the men’s restrooms aren’t a “trough”, and the hotdogs at least have mustard on them.
In other words, dig deeper into this case, because this one will kill domainers faster than any other “court decision” about domain investing.
Stephen Douglas