Secondary Trademark Infringement:
2011 – 2012 Overview
This website is dedicated to an examination of the law of secondary liability for trademark infringement – the idea that someone other than a direct infringer can be liable for infringing another’s trademark. Secondary liability for trademark infringement is a relatively recent development in the law, and it has evolved entirely in the courts.
The first theory of secondary liability to emerge was contributory liability. The 1982 Supreme Court case of Inwood v. Ives set forth the two-part standard for contributory infringement and is the starting point for analyzing a plaintiff’s claims. To establish contributory liability under Inwood, a plaintiff must show that the defendant either (1) “intentionally induce[d] another to infringe” his trademark or (2) “continue[d] to supply its product to one whom it knows or it ha[d] reason to know [was] engaging in trademark infringement.” Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982).
In the years following Inwood, cases began to arise in which a defendant contributed in some way to trademark infringement, but not by supplying any particular product to the direct infringer. Thus, courts seeking to determine whether liability was appropriate in such cases found the standard application of the Inwood test inapposite. In these situations, i.e. where the plaintiff can neither allege intentional inducement nor point to a specific “product,” a modified version of the Inwood standard has evolved in which the court considers the extent of control the defendant has over the infringing activity. Specifically, courts have held that “[d]irect control and monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark permits the expansion of Inwood Lab[oratories]’ ‘supplies a product’ requirement for contributory infringement.” Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999).
A second theory for secondary infringement recognized by the courts is vicarious liability. 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. Rather, vicarious liability has evolved in the federal courts under two main approaches: One is the application of agency principles to parties involved in trademark infringement. The second approach is derived from joint tortfeasor liability doctrine and incorporates elements of agency law as well. The ways in which vicarious liability can arise under these two standards are discussed in this treatise.
Of all the contexts in which secondary liability has been raised, whether contributory or vicarious, the Internet has by far generated the most interest and attention. The advent of Internet commerce has created new problems for the law to address. On the Internet, buying and selling take place among a seemingly infinite number of parties in a matter of moments, making it difficult both to police and remediate infringement. These issues came to light in Tiffany v. eBay, where the court observed that “more than six million new listings are posted on eBay daily, and at any given time, some 100 million listings appear on the website.” Tiffany v. eBay, 576 F.Supp.2d 463, 475 (S.D.N.Y. 2008), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010). For application of secondary liability doctrine in a variety of specific Internet contexts, see the treatise outline.
Since the initial release of this treatise in September 2009, courts have addressed a number of novel issues:
- Affiliate Marketing — Should online retailers be liable for their affiliates’ trademark infringement? Two courts have declined to extend contributory liability to online merchants for the infringing activities of their affiliates. The attenuated relationship between the two parties did not support a claim of either contributory or vicarious liability in 1-800 Contacts v. Lens.com and Sellify v. Amazon.
- Is the licensing of IP rights in cartoon characters used to make counterfeit jewelry a “service” or a “product”? The plaintiff in Nomination Di Antonio E Paolo Gensini S.N.C. v. H.E.R. Accessories, Ltd. argued unsuccessfully that the defendant licensors supplied a “product,” albeit an intangible one. The court disagreed, and saw the defendants as providers of a “service,” triggering a “direct control and monitoring” analysis. Indeed, the licensing of IP rights has been contemplated as a service, as for example in Fare Deals, which the court referenced. But Nomination seems distinguishable, because the right to use those characters became manifest as an integral component of the infringing product – the counterfeit jewelry depicting those characters and bearing the plaintiff’s mark – whereas in Fare Deals it did not.
- Damage Awards – Can the secondary infringer face higher damages than the direct infringer? This was the outcome in Roger Cleveland Golf Co. v. Price (sic), where the jury was afforded broad discretion in awarding statutory damages. A new section on remedies explains that the law regards contributory infringers and direct infringers as joint-tortfeasors, and how a secondary infringer may be equally responsible for damages, notwithstanding his indirect role in the underlying infringement.
More cases have been brought as contributory liability claims than as claims for vicarious infringement, though the law is certainly still evolving in this area. The key factor in determining the viability of a contributory liability claim is the defendant’s knowledge. Sometimes the knowledge requirement is readily met with direct evidence such as correspondence revealing a relationship between the direct and indirect infringers. At other times, however, plaintiffs are hard-pressed to meet the knowledge requirement under Inwood. Even where it has been met, it is often because the plaintiffs put the defendants on notice of the infringing activity, in which case the defendants may have taken remedial action, to which courts have been very sympathetic. In Tiffany v. eBay, for example, the court was satisfied that, notwithstanding the volume of complaints by Tiffany, eBay had taken “appropriate steps” through its notice-and-takedown system, the VeRO Program, to avoid liability.
The organization of this treatise reflects the development of the two secondary liability doctrines. First, contributory liability doctrine is discussed, beginning with the two-part test articulated by the Supreme Court in Inwood and then its application and expansion in various contexts. Vicarious liability for trademark infringement is discussed in the third section of this treatise, which also covers both the standards followed by the courts for finding such liability and the contexts in which it has been found to apply.
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2011 – 2012 Overview”