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. GoDaddy.com — 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. GoDaddy.com

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. GoDaddy.com, 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. GoDaddy.com →

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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. Continue reading Ninth Circuit Holds There is No Cause of Action for Contributory Cybersquatting →

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