Is a host or sponsor of online content obliged to police itself to prevent counterfeiting by third parties using its services? If yes, what is the extent of that duty? And how much is enough? Susan Kayser investigates.
An online service provider (OSP) may refer to an e-commerce marketplace, Internet service provider, web host, web designer, or another OSP. The US decisions to date show that OSPs that have mechanisms in place to screen or alert them to direct trademark infringement or counterfeiting—and use those mechanisms— have typically been found not liable.
But mechanisms need to be in place regardless of any notice of a claim from a rights owner—an OSP cannot sit back and wait for specific notice. Nor can OSPs assist or facilitate counterfeiting by ‘knowingly’ failing to prevent infringement. OSPs also need to ensure that their neutral customer assistance does not facilitate counterfeiting; sales needs to communicate with the legal team—and vice versa.
An OSP can be liable for another’s direct counterfeiting or trademark infringement if it intentionally induces someone to infringe, or if it continues to supply its services to someone whom it knows, or has reason to know, is engaging in trademark infringement. A plaintiff must show that the OSP had both ‘knowledge’ of the infringement, and ‘direct control’ and monitoring of ‘instrumentality’ used to infringe.
‘Knowledge’ of the direct infringement includes actual and constructive knowledge. ‘Generalised’ knowledge that counterfeiting may be occurring is not sufficient. If there isan easy and inexpensive means to identify or stop the infringement, however, not knowing the specific identity of the infringer will not excuse a failure to stop the infringement.
The Tiffany v eBay (2010) dispute was the first US case to apply the law of contributory infringement to an OSP—here, the ebay.com website. Addressing the ‘knowledge’ prong, the court found that generalised knowledge that its site was being used to sell counterfeits was not sufficient.
It said: “Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.” The court held that Tiffany failed to show that eBay knew or had reason to know of specific instances of infringement beyond those identified by Tiffany in formal notices of claimed infringement.
While Tiffany v eBay may have been the first case to apply the law of contributory infringement to an OSP, it is hardly the last word for either brand owners or online platforms.
A logical take-away from eBay is that ‘generalised’ knowledge is insufficient and therefore rights owners must send a notice of infringing activity for every violation. The Digital Millennium Copyright Act (DMCA) established a notice-and-takedown procedure that requires copyright owners to provide formal notice of online copyright infringement. Many OSPs have createdthat also require this procedure for trademark claims. Some, relying on the eBay ruling, assume that a DMCA-like procedure for trademarks is sufficient to insulate them from contributory liability.
However, an OSP can be liable for contributory trademark infringement where there is evidence of actual or constructive knowledge of the infringing activity, including willful blindness or intentional inducement. A year after the eBay decision, the Court of Appeals for the Ninth Circuit, in Louis Vuitton Malletier SA v Akanoc Solutions, Inc, clarified that actual or constructive knowledge (‘reason to know’) is sufficient to show ‘knowledge’. Merely implementing a DMCA-style procedure for trademark infringement and solely relying on the rights owner to provide notice of direct infringement is not sufficient when an OSP has ‘reason to know’ about infringement.
In Chloé SAS et al v Sawabeh Info Servs Co et al, filed in May 2011, six luxury brands sued tradekey.com (TradeKey), the second largest business-to-business (B2B) website in the world, for contributory infringement. The brands did not send notices of claimed infringement to TradeKey, which argued that it could not be liable without a formal notice.
In October 2013, the US District Court for the Central District of California entered summary judgment in favour of the six luxury brands, finding that they had “conclusively demonstrated” that TradeKey“knowingly supplied the services of their B2B website to thousands of TradeKey members, offering for sale counterfeit goods in bulk ... and further assisted members offering for sale counterfeit goods ...”.
There is some interplay between the ‘knowledge’ and ‘control’ factors. Where the OSP has significant control, less knowledge may be required. Where there is specific knowledge, less control may be required. The ease and cost of preventing the infringement will be considered by the court.
For example, eBay was spending nearly $20 million annually on anti-counterfeiting measures, promptly removed reported infringing listings, provided seller information, suspended sellers, restricted cross-border trading for some brands, and “consistently took steps to ... develop anti-fraud measures as such measures became technologically feasible”, according to the Tiffany v eBay decision. eBay’s efforts and expenditures to prevent counterfeiting clearly influenced the court’s ruling.
In Akanoc, a case in 2013, the court found that the defendant, a web hosting company, had direct control over the ‘master switch’ that kept the websites online and available. In 1-800 Contacts, Inc v Lens.com, Inc, another case from 2013, the Court of Appeals for the Tenth Circuit held that a company could be liable for the infringement of a competitor’s trademark by its affiliate’s advertising, even if the companyhad no knowledge of the specific affiliate that posted the infringing advertisement.
Noting the ease with which the company could have stopped the infringement—by sending a blast email to all its affiliates—the lack of knowledge as to which specific affiliate had infringed would not preclude liability. “When modern technology enables one to communicate easily and effectively with an infringer without knowing the infringer’s specific identity, there is no reason for a rigid line requiring knowledge of that identity.”
This is consistent with Perfect 10, Inc v Amazon, a 2007 case, where the the Court of Appeals for the Ninth Circuit, in remanding to the district court, noted that a computer system operator could be hit with contributory copyright liability if it has actual knowledge that specific infringing materials are available using its system, and can take simple measures to prevent further access.
While the law defining how OSPs need to respond to infringement claims is still evolving, it is clear brand owners do not bear sole responsibility for policing online infringement. OSPs that do not take affirmative steps to prevent infringement are likely to face liability for the actions of thirdparty infringers who use their services.
The views expressed here are those of the author and not Jones Day or any of its clients. References are available on request to the author. Susan Kayser is a partner at Jones Day. She can be contacted at: email@example.com
This article was first published on 27 March 2014 in World IP Review
online service providers, tradekey, counterfeiting, tiffany v ebay