III. Vicarious Trademark Infringement: A. In General
The Supreme Court has not articulated a standard for finding vicarious liability for trademark infringement, as it has done regarding contributory liability in the case of Inwood, supra. Banff Ltd. v. Limited, Inc., 869 F.Supp.1103, 1111 (S.D.N.Y. 1994). Rather, vicarious liability theory has evolved in the federal courts under two main standards: One is the application of agency principles to parties involved in trademark infringement. See Am. Tel. & Tel. Co. v. Winback & Conserve Program Inc., 42 F.3d 1421, 1437 (3d Cir. 1994) and Fare Deals, Ltd. v. World Choice Travel.com, Inc. 180 F.Supp.2d 678, 684 (D.Md. 2001). The other standard is derived from joint tortfeasor liability doctrine and incorporates elements of agency law as well. See David Berg & Co. v. Gatto Int’l Trading Co., 884 F2d 306, 311 (7th Cir. 1989); Hard Rock Café Licensing Corp. v. Concession Services, Inc. 955 F.2d 1143, 1150 (7th Cir. 1992)(citing David Berg, supra); Government Employees Insurance Co. v. Google, Inc., 330 F.Supp.2d 700, 705 (E.D. Va. 2004); SB Designs v. Reebok Int’l, Ltd., 338 F.Supp. 904, 909 (N.D. Ill. 2004); Fonovisa, Inc. v. Cherry Auction, Inc. 847 F.Supp. 1492, 1499 (E.D. Cal. 1994), reversed and remanded on other grounds, 76 F.3d 259 (9th Cir. 1996). The ways in which vicarious liability can arise under these two standards are discussed in the sections below. Note also, in a related area but beyond the scope of this chapter, that corporate officers in appropriate circumstances may be personally liable for trademark infringement by their corporations. See, e.g. Babbit Electronics, Inc. v. Dynascan Corp., 38 F.3d 1161, 1183-1184 (11th Cir. 1994).
The legal rationale for applying agency law to trademark infringement was explained by the Third Circuit in Am. Tel. & Tel. Co. v. Winback & Conserve Program Inc., 42 F.3d 1421, 1437 (3d Cir. 1994). That case involved a dispute between the American Telephone and Telegraph Company (“AT & T”), the long-distance telecommunications carrier, and one of its resellers, Winback and Conserve Program, Inc. over trademark infringements by the reseller’s sales representatives. Am. Tel. & Tel. Co., supra at 1423. The plaintiff, AT & T, contended that the reseller together with its president (“Winback”), were liable for the infringements under common law principles of agency, including the doctrine of apparent authority, and the court agreed. Id. at 1429, 1434. Am. Tel. & Tel. Co. is discussed in further detail, infra.
In reaching its conclusion that liability based on agency principles was appropriate, the Third Circuit noted at the outset that the “applicability of common law doctrines in litigation under federal statutes depends on whether those principles advance the goal of the particular federal statute which plaintiffs allege has been violated.” Am. Tel. & Tel. Co., supra at 1429, citing Petro-Tech, Inc. v. Western Co. of North America, 824 F.2d 1349, 1356 (3d Cir. 1987)(citations omitted). Because the Lanham Act is derived from tort common law, the court reasoned, “it is self-evident that application of at least some tort concepts of liability will ‘advance the goals of the [the Act.]’” Am. Tel. & Tel. Co., supra at 1433, citing Petro-Tech, Inc., 824 F.2d at 1356.
More fundamentally, while the parties acknowledged that AT & T had the right to sue the defendants’ sales representatives under the Act, they further conceded that it was not feasible for AT & T to initiate lawsuits in separate jurisdictions against each of the sales agents. Am. Tel. & Tel. Co., supra at 1434. “The only feasible way for AT & T to assert its federal rights[,]” the court concluded,
would be to sue the principal, who, if an agency relationship is established, is able to exercise at least some control over its agents, who authorized the sales representatives to enter into contracts on its behalf, and who receives direct financial benefits from those contracts. If the Act prohibited such liability, then infringing actions would continue undeterred, a company would benefit from undeterred unlawful acts, and the statute’s purpose to prohibit unfair competition would go unrealized.
Am. Tel. & Tel. Co., supra at 1434. See also Fare Deals, Ltd. v. World Choice Travel.com, Inc., 180 F.Supp. 678, 684 (D.Md. 2001).