Third party counterfeiting as proof of knowledge?

QUERY:  Are sales of counterfeit products other than those of the plaintiff valid proof of a defendant’s “knowledge” in a contributory trademark infringement case?

That question typically arises in the flea-market cases (both virtual and brick-and-mortar) where the direct infringers are vendors with a history of “serial counterfeiting” and the plaintiff sues the landlord or online marketplace operator for contributory infringement. The argument is that the defendant knew or should have known he was facilitating infringement of the plaintiff’s mark based on that history. As we discuss in this year’s Supplement, the courts have signaled their willingness, at least at the pleadings stage, to consider such evidence.

But proof of well-known, widespread counterfeiting is precisely the type of evidence found insufficient in the lead case of Tiffany v. eBay (Tiffany)[1]. Tiffany set the modern standard for determining whether a defendant has the requisite knowledge of direct infringement to find contributory liability.[2] (An in-depth discussion of Tiffany appears here and in the Main Volume, Chapter 3) Such “generalized notice of infringement,” the court held in Tiffany, did not satisfy the actual or constructive knowledge element of contributory liability. To hold a defendant liable for contributory trademark infringement, a plaintiff must prove that it knew or had reason to know of specific acts of infringement of the plaintiff’s mark.[3] Generalized knowledge of infringement was, in Tiffany, found insufficient to place an affirmative duty on the defendant to remediate. To hold otherwise would force defendants like eBay to shut down otherwise legitimate business merely because some portion of sales on its website were counterfeit.[4]

Notwithstanding this admonition, several courts have been open to considering evidence that is non-specific, either as to the identity of the direct infringers or as to the actual acts of infringement. Continue reading Third party counterfeiting as proof of knowledge? →

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Contributory False Advertising

This year’s supplement features the Eleventh Circuit’s decision in Duty Free Americas, Inc. v. Estee Lauder Cos. (DFA)[1], another in a growing body of cases to extend contributory liability doctrine beyond the traditional trademark infringement context. In the years since the Supreme Court decided Inwood Labs.[2], courts have generally been predisposed to consider, if not formally recognize, contributory claims across the spectrum of Lanham Act violations.[3] Their basic reasoning has been that all trademark-based claims lend themselves to contributory causes of action because they derive from common-law torts of unfair competition.[4] In DFA, the court expanded on that reasoning when it recognized a claim for contributory false advertising,[5] concluding that the rationale supporting contributory liability in the trademark infringement context applies with even more force to false advertising.[6] Continue reading Contributory False Advertising →

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

Posted on August 4, 2015

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 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 that Lockheed 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. Continue reading Locution, Locution, Locution: IP Licensors – Service Suppliers or Product Providers? →

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UPDATE: Petroliam Nasional Berhad v. — Cert. Denied

Posted on October 6, 2014

The Supreme Court issued its order today denying Petroliam’s petition for writ of certiorari.

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How the 9th Circuit Veered Off Course in Petroliam Nasional Berhad (Petronas) v.

The Misapplication of Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A. (Central Bank)

Posted on September 3, 2014

We’ve had a lot to say — and with good reason — about Petroliam Nasional Berhad (Petronas) v., Inc. (GoDaddy),[1] the Ninth Circuit decision that held there is no cause of action for contributory cybersquatting[2] under the Anti-Cybersquatting Consumer Protection Act (ACPA),[3] which was passed as an amendment to the Lanham Act in 1999. This ruling was no mere “development”; it was a great upheaval in the law. The court’s analysis is at odds with the plain meaning of the statute, its legislative history, and the contributory liability case law construing it. We first reported the decision as a blog post here. A lengthier analysis appeared in the Winter 2014 issue of Bloomberg BNA’s Books Monitor. And the case gets the million-dollar treatment in the upcoming 2014 Supplement to Secondary Trademark Infringement. Each time we looked at the opinion, it became harder to understand it.

In addition to the issues we’ve already addressed is the less obvious but equally problematic dependence by the court on Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A (Central Bank) [4], which involved aiding and abetting liability under the SecuritiesExchange Act of 1934 (the “Exchange Act”).The GoDaddy court relied on that Supreme Court case[5] to help answer an old question that had already been answered, albeit not in the cybersquatting context[5a]: Should courts apply common law principles of secondary liability to the Lanham Act?

Both the Supreme Court and subsequent circuit courts have done so for decades. The Supreme Court resolved the validity of such common law principles under the Lanham Act in 1982 when it set the modern standard for contributory liability in Inwood Labs., Inc. v. Ives Labs., Inc.[6] Inwood Labs.’s two-part test for contributory trademark infringement[7] has been consistently followed by subsequent courts, including the Ninth Circuit.[8] Years later, the question of whether common law principles of agency should apply to the Lanham Act came before the Third Circuit in the landmark case of American Tel. & Tel. Co. Winback & Conserve Program, Inc. (AT &T).[9]There the court acknowledged the validity of vicarious liability (through the paradigm of agency) under the Lanham Act. [10] That case, though not controlling in the 9th Circuit, is nonetheless instructive because the AT &T court considered at length whether the Supreme Court’s ruling in Central Bank should apply to the Lanham Act. Continue reading How the 9th Circuit Veered Off Course in Petroliam Nasional Berhad (Petronas) v. →

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