B. The Elements of Contributory Liability under Inwood: 3. The Requirement of Actual or Constructive Knowledge: (c) Willful Blindness — (iii) Knowledge Followed by Remedial Measures
Where a defendant, upon being notified of potential infringement, corrects the alleged infringement, the court will take such action into account in its general analysis of the element of knowledge under Inwood. Although the courts have not, in these cases, necessarily applied the “willful blindness” test, they are nevertheless discussed here because they tend to be treated as part of the courts’ knowledge inquiry and do bear on the question of whether a defendant acted with disregard to such notification. But see, however Tiffany v. eBay, discussed below, where the court discusses remedial measures in the context of willful blindness. 576 F.Supp.2d 463, 513-515 (S.D.N.Y. 2008), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010), cert denied, 131 S.Ct. 647 (2010). It bears noting that remedial measures arguably should also be considered by the courts with regard to whether a defendant has “induced” infringement under the first prong of Inwood, supra.
Thus, in a number of instances, remedial measures taken by contributory infringement defendants upon learning of potential direct infringement have precluded a finding of liability by the courts. See, e.g., Procter & Gamble Co. v. Haugen, 317 F.3d 1121, 1129-1130 (10th Cir. 2003); Medic Alert Found. U.S., Inc. v. Corel Corp., 43 F.Supp.2d 933, 940 (N.D. Ill. 1999). See also Am. Tel. and Tel. Co. v. Winback and Conserve Program, Inc. 42 F.23d 1421, 1433 n.14 (3rd Cir. 1994)(agreeing with district court’s conclusion that plaintiff could not have proceeded under contributory liability theory where defendant, upon having objectionable acts of its sales representatives brought to its attention, “took appropriate steps to reprimand and discipline the sales representative.”)(citation omitted); Sealy Inc. v. Easy Living, Inc., 743 F.Supp. 1378, 1382 (9th Cir. 1984) (noting that “[a] manufacturer may escape liability if it takes effective measures to prevent infringing uses by its distributors.”), discussed in detail supra. And see 1-800 Contacts v. Lens.com, 755 F.Supp.2d 1151, 1187 (D. Utah 2010)(rejecting the contributory liability claim where evidence was insufficient to show that defendant failed to take appropriate action to stop its affiliate from publishing infringing advertisements and email exchanges with affiliate network demonstrated defendant was trying to resolve the problem and defendant had no contact information for the affiliate); The National Basketball Association and NBA Properties, Inc. v. Sports Team Analysis and Tracking Systems, Inc., 939 F.Supp.1071, 1108-1109 (S.D.N.Y. 1996)(rejecting contributory liability claim based on retailer’s catalog erroneous claim that defendant manufacturer’s product was “officially licensed” by NBA, finding that defendant had notified the retailer within ten days of its discovery and had further followed up with numerous phone calls until error was corrected in the next catalogue).
In Procter & Gamble, the plaintiff was Procter & Gamble Company (“P & G”), the manufacturer of household products. It sued its competitor, Amway Corporation, as well as a group of distributors of Amway’s products, bringing various Lanham Act and state tort law claims, based on allegations that the distributors had disseminated a voicemail message identifying P & G products as being somehow connected with the Church of Satan and as having “Satanic” qualities. Procter & Gamble, 317 F.3d at 1123, 1124. The district court dismissed or granted summary judgment on all of P & G’s claims, and P & G appealed to the Tenth Circuit. On review, the Tenth Circuit reversed in part and remanded in part. Procter & Gamble, 222 F.3d 1262 (10th Cir. 2000). On remand, the district court granted summary judgment to Amway, rejecting all of P & G’s claims, including its assertion of contributory trademark infringement, which it had apparently raised for the first time without using the actual term in its previous pleadings. See Procter & Gamble, 317 F.3d at 1129. And see Video Professor, Inc. v. Amazon.com, Inc., 2010 WL 882646, *3 (D.Colo.)(denying plaintiff’s request to extend discovery relevant to a contributory liability claim where plaintiff had failed to include the claim in its complaint, citing Haugen as precedent for not reading such a claim into “broad allegations of a complaint for trademark infringement.”).The district court concluded that P & G had waived the claim, but that it would nevertheless examine it on the merits. Even upon doing so, however, it found that regarding the element of knowledge, Amway could not be held liable for contributory infringement. P & G again appealed to the Tenth Circuit, which affirmed the district court. Id.
The Tenth Circuit, acknowledging that its previous mandate to the district court might somehow be construed as resuscitating P & G’s contributory liability claim along with its other Lanham Act claims, agreed in the interest of thoroughness to revisit the merits of P& G’s contributory liability claim against Amway. See Procter & Gamble, 317 F.3d at 1129. Citing Inwood, it identified the two elements of contributory liability at issue in this case as (1) whether Amway had supplied a product to its distributors; and (2) whether it did so with knowledge of the direct infringement, which it assumed for purposes of its review had taken place. See id. at 1128-1129, and 1129 n.5. The first element was not at all in dispute. Id. at 1129. As to the second element, the court found that the district court correctly rejected the claim, having found that not only did Amway not know about the Satanic messages, but, “upon learning [of them] Amway suggested that [one of the Distributor Defendants] issue a retraction, which he did.” Id. at 1130, citing the district court order.
Similarly, remedial measures taken by a software company that had incorporated potentially infringing images into its “clipart” program weighed against a finding of contributory liability in Medic Alert Found. U.S., Inc. v. Corel Corp., 43 F.Supp.2d 933, 940 (N.D. Ill. 1999). In that case, the facts of which are discussed in detail supra, the plaintiff, Medic Alert Foundation, (“Medic Alert”) had notified the defendant software company, Corel, of the alleged infringement of its trademark some years prior to trial. Medic Alert, 43 F.Supp.2d at 935. Corel thereupon immediately contacted the company from which it had licensed the allegedly infringing images to see whether licensing permission could be attained from Medic Alert. Id. When this effort failed, Corel identified the offending image and, shortly thereafter, “remastered” its software product to delete the image in question. As described by the court, remastering “is a process by which changes are made to an existing version of a software product between inventory runs.” Id. Thus, as of a certain date, all of the Corel software that ever contained the image in dispute either was no longer being shipped or had been remastered to exclude the image. Id. Nonetheless, because Corel did not track the information, it could not guarantee that its entire inventory had been cleared of the allegedly infringing software, and in fact evidence was brought forth of a consumer having thereafter obtained such software. See id.
As noted above, among the claims brought by Medic Alert against Corel was a contributory liability claim in connection with the activities of one of its customers, which, in apparent violation of its end-user agreement, altered one of the images in question to read “Health Alert” and then used it on its mail solicitations for vitamins. See Medic Alert, 43 F.Supp.2d at 935. Medic Alert argued, inter alia, that notwithstanding the foregoing remedial measures taken by the defendant, by failing to recall its software and thereby continuing to sell its existing inventory containing the disputed images, Corel committed contributory trademark infringement. Corel moved for summary judgment, arguing inter alia, that it had no knowledge of any infringement prior to its contact with Medic Alert and that once it learned that Medic Alert challenged the image, it had taken steps to eliminate the image from its software. Id. at 940.
The court agreed, finding the evidence insufficient as a matter of law to support a finding of contributory liability. Medic Alert, supra at 940. In reaching its decision, the court acknowledged not only the effect of the end-user agreement, discussed above, but also the fact that by the time the alleged infringement by the customer came to Medic Alert’s attention, Corel had already taken remedial measures to remove the images in question. Notably, the court rejected out of hand the argument that Corel should be held liable for all existing software whose distribution into the market place pre-dated its remedial measures. See id.
Remedial measures taken both before and after the beginning of litigation insulated the defendant from the plaintiff’s claim of willful blindness in Tiffany v. eBay, 576 F.Supp.2d 463, 513-515 (S.D.N.Y. 2008), affirmed in part and remanded in part, Tiffany v. eBay, 600 F.3d 93 (2d Cir. 2010), cert denied, 131 S.Ct. 647 (2010). In that case, Tiffany, the luxury jeweler, sued eBay, the online marketplace, asserting contributory liability for trademark infringement arising out of the sale of counterfeit Tiffany silver jewelry on its website. Tiffany, supra at 469. Tiffany alleged that hundreds of thousands of counterfeit silver jewelry items had been offered for sale on eBay’s website, and that eBay “facilitated and allowed these items to be sold” there. Id.
It was undisputed that eBay was generally aware of infringing activity on its website and in fact had put in place a number of anti-fraud measures in response. Tiffany, supra at 514, and see infra at “online marketplaces” for a detailed discussion of these measures. Nevertheless, Tiffany argued that eBay should have been even more proactive in rooting out infringing sellers, bringing evidence of various other measures it could have taken but did not. Id. at 514. eBay’s failure to take these additional steps, Tiffany argued, constituted willful blindness. Id.
The court acknowledged that there were other potential avenues of inquiry eBay did not pursue, but none of these mattered because, as discussed below, absent any specific knowledge of infringement, it had no affirmative obligation to do so. Tiffany, supra at 515. Willful blindness, the court continued, ““requires more than mere negligence or mistake” and does not lie unless the defendant knew of a high probability of illegal conduct and purposefully contrived to avoid learning of it, for example, by failing to inquire further out of fear of the result of the inquiry.” Tiffany supra at 515, citing Nike, Inc. v. Varitety Wholesalers, Inc., 274 F.Supp.2d 1352, 1369-70 (S.D.Ga.2003).
The anti-fraud measures put in place by eBay expressly negated any such finding, the court held. Tiffany, supra at 515. Specifically,
it cannot be said that eBay purposely contrived to avoid learning of counterfeiting on its website, or that eBay failed to investigate once it learned of such counterfeiting. To the contrary, in the face of such general awareness, eBay took significant steps to prevent counterfeiting by developing the VeRO Program, which seeks to remove individually infringing listings. Moreover, … when eBay became aware, through its VeRO Program, of Tiffany’s good faith belief that a listing was infringing, it investigated and removed that listing from its website.
Id. In view of all these measures, the court found that Tiffany had failed to prove that eBay “deliberately ignored counterfeiting activity of which it was aware,” precluding a finding of willful blindness on its part. Id.
On appeal, the Second Circuit upheld with the district court’s findings and conclusions as to eBay’s actual knowledge and willful blindness. Specifically, it reiterated that when made aware of offending listings through NOCI’s and buyer complaints, eBay removed those listings and suspended repeat offenders from its website. 600 F.3d at 109. Thus, “eBay was not willfully blind … [because it] did not ignore the information it was given about counterfeit sales on its website.” 600 F.3d at 110. (citations omitted). The Second Circuit decision is discussed in more detail in Sections II.B.3. (a) and II.B. 3. (c).
