II. Contributory Trademark Infringement: A. Contributory Liability Doctrine: The Inwood Standard
The notion that a party who does not himself infringe another’s trademark may nevertheless be indirectly liable for such infringement is not expressly provided for in the Lanham Act, but rather has emerged from case law over the years. See generally John T. Cross, “Contributory Infringement and Related Theories of Secondary Liability for Trademark Infringement,” 80 Iowa Law Rev. 101, 109-129 (1994), for an extensive treatment of the legal source of contributory infringement. See also Georgia Pacific Consumer Products, LP v Von Drehle Corp., 2010 WL 3155646 (4th Cir.)(analyzing plaintiff’s claim “under the judicially created doctrine of contributory trademark infringement, derived from the common law of torts”); Tiffany v. eBay, 600 F.3d 93, 103-104 (2d Cir. 2010) (“[c]ontributory trademark infringement is a judicially created doctrine that derives from the common law of torts”), affirming in part and remanding in part, 576 F.Supp.2d 463, 502 (S.D.N.Y. 2008), cert denied, 131 S.Ct. 647 (2010); Procter & Gamble Co. v. Haugen, 317 F.3d 1121, 1128-1129 (10th Cir. 2003) (discussing same); Polo Ralph Lauren Corp. v. Chinatown Gift Shop, 855 F.Supp. 648 (S.D.N.Y. 1994), plaintiff’s motion for summary judgment denied, 1996 WL 67700 (S.D.N.Y. 1996) (contributory liability has emerged from judicial decisions).(Unpublished opinion).
The standard for analyzing contributory liability claims was set forth by the Supreme Court in the case of Inwood Laboratories Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 853-854 (1982). Although the Court had already recognized contributory trademark infringement years earlier in William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526 (1924), Cross, supra, has explained that Warner predated Erie R.R. v. Tompkins, 304 U.S. 64 (1938) which “cast into doubt the validity of all existing federal common-law rules.” Inwood is consequently “important primarily because it reaffirms the existence of the cause of action.” See Cross, supra at 101 and 101 n.3, and cases cited therein. And see Transdermal Products, Inc. v. Performance Contract Packaging, Inc., 943 F.Supp. 551 (E.D. Pa 1996) (Inwood “merely confirmed the continued vitality of contributory infringement under federal statutory law”), citing AT & T Co. v. Winback and Conserve Program, Inc., 42 F.3d 1421, 1432 (3d Cir. 1994). Modern courts therefore begin their analyses of contributory liability claims with the standard set forth in Inwood. See e.g. National Federation of the Blind, Inc. v. Loompanics Enterprises, Inc. 936 F.Supp. 1232, 1244 (D. Md. 1996)(noting same). See also, Tiffany v. eBay, 576 F.Supp.2d 460, 502-503 (rejecting plaintiff’s argument that it apply a “reasonable anticipation” standard for contributory infringement as an alternative to the standard set forth in Inwood), affirmed in part and remanded in part, 600 F.3d 93, 110 n.15 (2d Cir. 2010), cert denied, 131 S.Ct. 647 (2010); MetroPCS Wireless, Inc. v. Virgin Mobile USA, L.P., 2009 WL 3075205, *17 (N.D.Tex.)(citing Inwood for the proposition that “the standard is not whether defendant “could reasonably anticipate” possible infringement”).
Inwood involved a trademark violation claim brought by a prescription drug manufacturer, Ives Laboratories (“Ives”), against a number of generic drug manufacturers, including Inwood Laboratories (“Inwood”). Ives manufactured the patented drug cyclandelate, and sold it to wholesalers, retail pharmacists and hospitals in colored capsules under the registered trademark CYCLOSPASMOL. Inwood, supra at 844, 846-7. After the company’s patent expired, several generic drug manufacturers began marketing the drug, intentionally copying the appearance of the CYCLOSPASMOL capsules. Id. at 847.
Seeking injunctive relief and damages, Ives brought an action in federal district court against those companies. Id. at 849. It alleged that some pharmacists had dispensed generic drugs mislabeled as CYCLOSPASMOL. Id. Although Ives did not allege that the defendants themselves applied the Ives trademark to the capsules they sold, it contended that by virtue of their use of “look-alike capsules” and catalog entries comparing prices and revealing the colors of generic capsules, those companies contributed to the pharmacies’ infringing activities. Id. at 850. The district court denied Ives’s request for injunctive relief, and the Second Circuit affirmed, remanding the case back with trial guidelines as to finding secondary liability. Specifically, the Second Circuit court instructed that the companies would be liable if “they suggested, even by implication, that retailers fill bottles with [the generic drug] and label the bottle with Ives’ trademark or if the [generic drug companies] continued to sell [the drug] to retailers whom they knew or had reason to know were engaging in infringing practices.” Id. at 851-852 (citation omitted).
Applying those guidelines at trial on remand, the district court again entered judgment in favor of the generic drug companies. It found that the generic drug companies had not suggested, even by implication, that pharmacists should dispense generic drugs incorrectly identified as CYCLOSPASMOL. Id. at 852. And see MDT Corp. v. New York Stock Exchange, Inc. 858 F. Supp. 1028, 1033-1034 (C.D. Cal. 1994)(applying the same standard). It also found that the companies did not “continue to provide drugs to retailers whom they knew or should have known were engaging in trademark infringement.” Id. at 852, n.12. It specifically found further that actual instances of mislabeling by pharmacists occurred too infrequently to justify the inference that the generic companies’ catalogs and use of imitative colors had “impliedly invited” druggists to mislabel, and to the extent that such mislabeling had occurred, it had not been deliberate. Id. at 852 -853.
On appeal once again, the Second Circuit reversed the district court’s judgment, rejecting its findings and holding that it failed to give sufficient weight to evidence presented by the defendants. Id. at 855-857. Without expressly stating the district court’s findings were clearly erroneous, the Court of Appeals then reviewed the evidence itself, and concluded that the evidence did establish a Lanham Act violation. Id. at 854, 857. The defendants subsequently petitioned the Supreme Court for a writ of certiorari, which granted the petition and found that the Second Circuit had clearly erred in setting aside the lower court’s findings of fact and substituting that court’s review of the evidence with its own. Id. at 857-858.
In reaching its conclusion, the Supreme Court re-affirmed the basic principle that
“liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another.” Id. at 853. Thus, “[e]ven if a manufacturer does not directly control others in the chain of distribution, it can be held responsible for their infringing activities under certain circumstances.” Id. at 853-854.
Furthermore, the Court established a two-part test for evaluating contributory liability claims. Specifically,
if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.
Id. at 854.
The two-part test articulated by the Supreme Court in Inwood has been consistently followed and expounded upon by subsequent courts. See, e.g. Perfect 10, Inc. v. Visa Int’l Service Ass’n, 494 F.3d 788, 807 (9th Cir. 2007); Lockheed Martin Corp. v. Network Solutions, Inc. 194 F.3d 980, 983 (9th Cir. 1999); Polymer Technology Corp. v. Mimran, 975 F.2d 58, 64 (2d Cir. 1992); David Berg and Co. v. Gatto Int’l Trading Co., Inc., 884 F.2d 306, 311 (7th Cir. 1989); Sealy, Inc. v. Easy Living, Inc., 743 F.2d 1378, 1381-1382 (9th Cir. 1984); Tiffany v. eBay, 576 F.Supp.2d 463, 502 (S.D.N.Y. 2008), affirmed in part and remanded in part, 600 F.3d 93, 106 (2d Cir. 2010), cert denied, 131 S.Ct. 647 (2010); Monotype Imaging, Inc. v. Bitstream Inc., 376 F.Supp.2d 877 , 2005 WL 1653604, *8 (N.D. Ill. 2005); Monsanto Co. v. Campuzano, 206 F.Supp.2d 1271, 1274 (S.D. Fla. 2002); Fare Deals, Ltd. v. World Choice Travel .com, Inc. 180 F.Supp.2d 678, 687 (D. Md. 2001); Medic Alert Foundation United States, Inc. v. Corel Corp. 43 F.Supp.2d 933, 940 (N.D. Ill. 1999); National Basketball Association v. Sports Team Analysis and Tracking Systems, Inc., 939 F.Supp. 1071, 1108 (S.D.N.Y. 1996); MDT Corp. v. New York Stock Exchange, 858 F.Supp. 1028, 1033 (C.D. Cal. 1994).
For cases reciting the Inwood two-prong test but dismissing the contributory liability claim for failure to plead sufficient facts to support it, see Too Marker Products, Inc. v. Shinhan Art Materials, Inc., 2010 WL 786041 *6 (D. Or.); and Guantanamera Cigar Co. v. Corporacion Habanos, S.A., 672 F.Supp.2d 106, 113 (D.D.C. 2009). And see, Coach Inc, v. Asia Pacific Trading Co., Inc., 676 F.Supp.2d 914, 927-928 (C.D.Cal. 2009) (C.D.Cal.)(granting defendants’ motion for summary judgment of no contributory liability where plaintiffs failed to show that the alleged direct and indirect infringers “worked in conjunction with one another” while engaging in conduct that violated plaintiff’s trademark rights).
More recently, the contributory liability doctrine articulated in Inwood has been expanded beyond the manufacturer-distributor context, to apply in situations where a party has not necessarily supplied a product, but may have provided a service or the like. See Tiffany v. eBay, 600 F.3d 93, 106 (2d Cir. 2010)(assuming without deciding that Inwood applied to the online auction site eBay), affirming in part and remanding in part, 576 F.Supp.2d 463, 502, 507 (S.D.N.Y. 2008), cert denied, 131 S.Ct. 647 (2010). See also Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999)(Inwood standard could be applied to the Internet if there were evidence of monitoring and control); Fonovisa, Inc. v. Cherry Auction, Inc. 76 F.3d 259, 264-265 (9th Cir. 1994)(applying the Inwood standard to swap meet owners, holding that “Inwood …laid down no limiting principle that would require defendant to be a manufacturer or distributor.”); Hard Rock Café Licensing Corp. v. Concession Services Inc., 955 F.2d 1143, 1149 (7th Cir. 1992)(finding that Inwood test extends to landlords and licensors).
The remainder of this section will discuss the elements of a contributory liability claim pursuant to Inwood. It will then explore the expansion of the “product” requirement as it has been applied by the courts outside the manufacturer-distributor context contemplated in Inwood. As will be seen, this expansion has had particular implications for trademark infringement over the Internet. The application of contributory liability doctrine to Internet activity, as well as in many other contexts, will be discussed in detail below.