Former Flea Market Owner Subject to Contributory Liability Claim

Posted on March 10, 2014

Coach v. Sapatis (D.N.H. Jan. 31, 2014)

Much of modern contributory liability doctrine is founded on the flea market cases, where the courts first extended Inwood’s test for contributory trademark infringement outside the “supplies a product” context to flea market owners and operators whose vendors sold counterfeits of the plaintiff’s products. These cases historically distinguish two types of flea market landlords: those who own the flea market itself, leasing booth space to individual vendors, and those who merely own the property on which the flea market is located. Courts have declined to extend liability to the latter category of defendants because they do not exercise direct control over the infringing sales. Flea market owners who are also “operators,” by contrast, are subject to contributory claims because they can terminate their relationship with their vendors upon notice of infringing activity.

In Coach v. Sapatis, (D.N.H. Jan. 31, 2014), however, the defendant property owner was also the former owner of the flea market he had sold to his daughter and, under the allegations, remained actively involved in its ongoing operation after the sale. There the court denied his motion for summary judgment on the contributory trademark infringement claim because his activities went beyond mere ownership of the land on which the flea market was located. As the court made clear, “the defendant’s degree of control over the infringer—rather than his or her nominative status as owner, lessor, or lessee—is the determinative factor.”

The court in Coach v. Sapatis thus clarifies that the rule mentioned above—that mere ownership of the land on which the flea market is located will not trigger contributory liability—is not absolute. This is an important reminder not only in the flea market context, but in other areas, such as corporate ownership liability, where similar principles apply.

 

For in-depth treatment of the topics in this post, see Chapters 3 and 7 of Secondary Trademark Infringement, by Coleman and Price, published by Bloomberg/BNA.

 

 

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Ninth Circuit Holds There is No Cause of Action for Contributory Cybersquatting

Posted on December 12, 2013

Petroliam Nasional Berhad v. GoDaddy.com  (9th Cir. Dec. 4, 2013)

As our book speeds its way to the printer, the Ninth Circuit has made sure we will have a lot to discuss on this blog and in the upcoming supplement to Secondary Trademark Infringement.  Last week it held there is no cause of action for contributory cybersquatting under the ACPA, exercising the nuclear option on a body of case law that says such claims are valid when they involve fact patterns this sweeping decision ignores.

It was an unexpected development in an unlikely case  that involved a tenuous claim of cybersquatting, much less secondary liability for it: Petroliam Nasional Berhad v. GoDaddy.com, where the plaintiff brought a contributory cybersquatting claim against the registrar GoDaddy for registering domain names containing its mark to others who used them to divert traffic to a pornographic Web site. The district court correctly dismissed the claim on a motion for summary judgment because the defendant had acted only in its capacity as a mere registrar whose domain name forwarding service would not subject it to contributory liability under the ACPA.  More to the point, the plaintiff failed to establish direct cybersquatting by the third-party registrants. As with traditional trademark infringement, there can be no contributory cybersquatting without direct cybersquatting, so the district court disposed of the claim without reaching the question of whether the Act allowed for it.

Courts in other cases had already recognized a cause of action for contributory cybersquatting.  But the defendants in those cases, as one court put it, did not “simply register a domain name and then go about [their] business.” They were complicit actors in complex cybersquatting schemes – not mere registrars like GoDaddy.  Acting as both registrars and registrants, the defendants in Verizon Cal. v. Above.com and Transamerica v. Moniker Online implicated themselves in the business of the direct cybersquatters, similar to corporate officer defendants who have been held contributorially liable by virtue of their familiarity with and participation in their companies’ infringing activities.

In fact, not all contributory cybersquatting defendants have even been registrars. In Microsoft v. Shah, the court allowed a contributory cybersquatting claim against a group of individuals and companies who sold their customers a cybersquatting “method” for profiting from the plaintiff’s marks. There the contributory claim was based on a theory of inducement.

Viewed against this backdrop of jurisprudence distinguishing mere registrars from complicit actors, the Ninth Circuit’s decision is hard to understand. The court simply declined to address the issues raised in cases like Verizon Cal. when it affirmed the district court’s grant of summary judgment in favor of GoDaddy.  Instead it said this:

Extending liability to registrars or other third parties who are not cybersquatters, but whose actions may have the effect of aiding such cybersquatting, would expand the range of conduct prohibited by the statute from a bad faith intent to cybersquat on a trademark to the mere maintenance of a domain name by a registrar, with or without a bad faith intent to profit.

2013 WL 6246460 at *3 (emphasis added).

None of the foregoing cases has even remotely suggested that secondary liability would extend to such “rote” activity as the “mere maintenance of a domain name.” In the much more relevant contexts where contributory liability presumably would lie, the courts have made clear that a cause of action for contributory cybersquatting would reach precisely the defendants whose conduct the Act was meant to prohibit  — those who are complicit actors in cybersquatting schemes.

For in-depth discussion of the topics in this post, including contributory cybersquatting, see Chapters 1, 3, 4, and 9 in Secondary Trademark Infringement, by Coleman and Price, to be published by Bloomberg BNA this month.

 

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Buy Bloomberg BNA’s Secondary Trademark Infringement by Jane Coleman and Griffith B. Price, Jr.

Secondary Trademark Infringement BookSecondary Trademark Infringement is the first and only comprehensive work on the law of secondary liability for trademark infringement—an area that is quickly becoming an important topic of interest among both practicing attorneys and scholars. The treatise is ground-breaking in its analytical power. Meticulously organized and accessible, it is an ideal reference work for legal and business professionals who use, or whose stakeholders use, trademarks on the internet, who seek guidance with respect to this growing area of potential legal risk.

Secondary Trademark Infringement covers important topics, such as:

  • Infringement liability of businesses that offer internet facilities to third parties using trademarks or trademark-protected goods in commerce, including retailers, auctioneers and distributors
  • Company exposure to liability for the online activities of their hosting customers or advertisers
  • Legal issues arising from web-hosting and other Internet infrastructure or connectivity
  • Exposure reduction measures for companies and institutions that do not use or facilitate trademark use directly, but are part of a commercial chain of activity and present a tempting “deep pocket” or accessible litigation target for claims based on activities of others in the chain

Secondary Trademark Infringement features extensive and detailed case law analysis and commentary and practice notes that discuss a wide variety of subjects of practical interest and importance to attorneys and business executives alike. These include notes on substantive and procedural issues in secondary trademark infringement litigation (from both the trademark owner’s and the accused infringer’s point of view), recovery of damages and injunctive relief and guidelines for trademark protection and enforcement as well as risk management for internet service providers and other service providers. Secondary Trademark Infringement also addresses developing areas of law in online commerce and social networking.

 

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Reviews

“This first monograph focusing specifically on secondary trademark infringement bids fair to become a definitive desk reference on a topic of growing importance. Notwithstanding the limitation suggested by its title, the book expansively considers secondary infringement and liability for dilution/tarnishment and cybersquatting as well, and addresses its topic in not only classic trademark disputes but also a variety of special situations, including franchising, web hosting, credit card services, and several others. Beginning with policy, doctrine, and the basic elements of a claim, the book is logically and meticulously well-organized and easy to read and use as a reference. Enhanced by an engaging and user-friendly writing style, and a straightforward approach to its subject, the book offers analysis of the applicable case law as well as practice notes. It’s an instant necessity for the desktop or bookshelf of any serious trademark practitioner.”

Robert C. Cumbow, Attorney, Graham & Dunn PC

Secondary Trademark Infringement is a comprehensive and up-to-date guide to the law of secondary liability for trademark infringement. To my knowledge, it provides the only complete review and analysis of all the relevant cases, legal theories and emerging issues relating to someone other than the direct infringer being accused of infringing another’s trademark. And unlike many other treatises, it includes a full complement of excellent Practice Notes written by a seasoned IP litigator. Topics covered include (i) the elements of contributory trademark infringement, (ii) secondary trademark infringement on the Internet, (iii) a comparison of secondary trademark and secondary copyright infringement, and (iv) a review of other “subspecies” of secondary trademark infringement and their respective legal standards. For anyone seeking practical insight on how to litigate secondary liability cases, or answers to questions on the topic in general, Secondary Trademark Infringement is an essential reference work that belongs on every trademark attorney’s bookshelf. It is a well written, well organized, straightforward guide that delivers on its promise of providing a full overview and examination of this dynamic area of the law.”

—Oliver Herzfeld, SVP and Chief Legal Officer, Beanstalk, a leading global brand licensing agency and part of the Diversified Agency Services division of Omnicom Group

 

 

 


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