D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test: 2. Internet Activity: (b) Internet Websites
The Lockheed formula has been applied to subsequent contributory liability claims arising out of various other Internet activities. Thus, to hold a defendant liable for contributory infringement on an Internet website, a plaintiff must prove both that it directly controlled and monitored the activities of the infringing website, and that the defendant had actual or constructive knowledge of the infringement. Fare Deals, Ltd. v. World Choice Travel.com, Inc., 180 F.Supp.2d 678 (D.Md. 2001).
Note that a plaintiff alleging contributory liability in connection with the sale of counterfeit goods on a website need not show that a defendant has “the ability to literally shut down the website” the court held in Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367, *16 (S.D.N.Y.). In that case the court held that if the website were “functionally dependent” on the defendant credit card processing companies’ services, that allegation “would be sufficient to demonstrate the control needed for liability.” Id. Gucci is discussed in greater detail in Sections II.B.1. and II.D.3.
By contrast, advertisers who merely posted banner ads and links to their sites on an allegedly infringing website could not be held contributorily liable for such infringement, the court held in Fare Deals, supra. In Fare Deals, the plaintiff corporation, “Fare Deals,” operated a business providing travel services, primarily by arranging transportation reservations and tours for its customers. It had used the FARE DEALS mark in connection with its business and applied for registration of the service mark “Fare Deals Ltd.” several years prior to filing its lawsuit, though registration did not issue until approximately one month thereafter. When it began to develop a website to promote its business, it discovered that the domain name <faredeals.com> had already been registered to another party to sell on-line travel services. Fare Deals, supra at 680. The plaintiffs subsequently discovered links from the <faredeals.com> website to the defendants “Hotwire” and Hotel Reservations Network, Inc. (“HRN”). By clicking on a Hotwire banner ad posted on the site and linked to Hotwire’s web site, customers could make airline reservations and purchase airline tickets from Hotwire. Similarly, a link to HRN posted on the site allowed customers to go to its website to book hotel reservations.
Fare Deals alleged that the owners of the <faredeals.com> website and its advertisers, HRN and Hotwire, had agreed to divide up proceeds of sales made at the HRN and Hotwire websites. It sued both the website owners and the two advertisers, alleging, inter alia, contributory trademark infringement by the two advertisers. Both HRN and Hotwire moved to dismiss, arguing that Fare Deals had failed to state a valid claim for contributory liability. Id. at 681, 687-691, 696-697.
The court agreed, relying upon the principles for Inwood’s application outside the manufacturer-distributor context articulated in the Lockheed Martin-Fonovisa-Hard Rock Café line of cases. It acknowledged at the outset that “[c]ontributory infringement occurs in either of two circumstances: when the defendant intentionally induces a third party to infringe the plaintiff’s mark, or when the defendant supplies a product to a third party, knowing that third party is using the product to infringe the mark.” Fare Deals, supra at 687-688, citing Inwood Labs., Inc., 456 U.S. at 854, 102 S.Ct. 2182. Since Fare Deals claimed only the latter basis for contributory infringement, it was required to prove that HRN and Hotwire supplied a product to the <faredeals.com> website owners with actual or constructive knowledge that its product was being used to infringe the “Fare Deals” mark. See Fare Deals, supra at 687-688 and 697. The “product” paradigm in Inwood, however, was inapposite in Fare Deals, as no actual product was involved. The court therefore turned to the line of cases applying Inwood outside of the “product” context.
Specifically, the court relied upon the Ninth Circuit’s formula articulated in Lockheed Martin, supra in the which court concluded 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, supra at 984, cited in Fare Deals, supra at 689.
The Fare Deals court found that HRN was like the domain name registrar, NSI, in Lockheed Martin. Namely, it “neither provided a product to the owners or operators of the <faredeals.com>web site nor directly controlled and monitored the site in a manner sufficient to justify expansion of the “supplies a product” requirement to include HRN’s activity.” Fare Deals, supra at 689. Moreover, it had no authority to control the operations of the <faredeals.com> web site. Id. The fact that it had licensed its own mark to the alleged direct infringer did not place on HRN a duty to prevent the infringer’s use of its mark. Id, citing Mini Maid Serv. Co. v. Maid Brigade Sys., Inc. 967 F.2d 1516, 1520 (11th Cir. 1992), discussed infra. See also, Nomination Di Antonio E Paolo Gensini S.N.C. v. H.E.R. Accessories, Ltd., 2009 WL 4857605, *6 (S.D.N.Y)(analogizing contributory liability claim against licensor to claim against the advertisers in Fare Deals ).
Moreover, unlike the flea-market owners in Hard Rock Café and Fonovisa, HRN was not critical to the viability of the allegedly infringing web site, the court concluded. It had not actively support the allegedly infringing business, having neither steered customers toward the website nor promoted it in any way. See id. at 689. Whereas the flea-market operators had provided the “very medium” through which the infringing vendors conducted their businesses[,]” even if HRN severed its link to the site, the alleged infringement could continue. Id. at 690.
The Fare Deals plaintiff also failed to demonstrate that HRN had the requisite knowledge to impose contributory liability under the Inwood standard, failing to show it had any kind of notice prior to receiving the plaintiff’s demand letter. Fare Deals, supra at 690. Notwithstanding that the letter may have imposed an obligation on the part of HRN to investigate the site, the court found that the letter did not obligate HRN to terminate the link to the site. It concluded that the conduct of HRN following the receipt of the demand letter could not as a matter of law be deemed willful blindness. The court therefore granted HRN’s motion to dismiss. Willful blindness is discussed in detail, supra.
For similar reasons, as to the second advertiser, the Fare Deals court found that Hotwire could not be found contributorily liable for the alleged trademark infringement on the <faredeals.com> site. Again turning to the principles in the Lockheed Martin-Hard Rock Cafe-Fonovisa line of cases, the court found that Hotwire “simply did not control and monitor the [site] to such an extent as to impose upon it any contributory liability.” Id. at 696-697. As to whether Hotwire had the requisite actual or constructive knowledge, again the only type of notice Hotwire had was two letters from the plaintiff. The first was a letter accusing Hotwire of having registered the <faredeals.com> domain name. The second, dated one week later, was a demand letter. As was the case for HRN, the court found that while the demand letter may have imposed a duty to investigate on Hotwire, it did not obligate Hotwire to sever its link to the web site. (See supra for a full discussion of willful blindness.) It therefore granted Hotwire’s motion for summary judgment. Id. at 697.
Similarly, mere association with an allegedly infringing website, without more, has been found to be insufficient to impose contributory liability on a non-infringing third party. There must be evidence that the third party controlled and monitored the contents of the website to justify an extension of the contributory liability doctrine beyond the manufacturer-distributor context set forth in Inwood. See SB Designs v. Reebok Int’l., Ltd., 338 F.Supp.2d 904 at 913 (N.D. Ill. 2004), citing Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999), for the suggestion that contributory liability theory could be applied to the Internet if there were evidence of monitoring and control.
In SB Designs, supra, the plaintiff “SB Designs” owned the CROSSOVER KING registered trademark for basketball apparel. The trademark consisted of the image of a male basketball player performing a “crossover” dribble with a moving ball image and the trade name “CROSSOVER KING” underscoring the logo. SB Designs, supra at 906. In the years prior to filing their complaint, SB Designs contacted the defendant Reebok, the manufacturer of athletic shoes, on a number of occasions to pitch the CROSSOVER KING concept. Reebok had an endorsement agreement with the professional basketball player Allen Iverson, and SB designs had hoped that Reebok would use the CROSSOVER KING concept in conjunction with its Allen Iverson apparel. SB Designs, supra at 906. Although Reebok executives initially had a number of meetings and correspondence with the plaintiff, they ultimately declined interest and broke off contact. SB Designs, supra at 906-907.
Subsequently, the plaintiffs claimed to have seen a number of Reebok television commercials as well as various third-party Internet websites that infringed on their CROSSOVER KING trademark. They therefore sued Reebok for both direct and secondary trademark infringement under the Lanham Act, claiming inter alia, contributory liability for the alleged infringement on the third-party websites. Vicarious liability is discussed in detail infra.
The plaintiffs’ contributory liability claim largely focused on the website of Crossover Promotions, Iverson’s promotional company. Specifically, they claimed that Reebok sponsored the website and that “Crossover Promotions [was] actively attempting to position and promote Iverson as the so-called ‘Crossover King.’” Id. at 907. In addition, they stated a general claim that there were “other websites contain[ing] material that infringed the CROSSOVER KING marks.” Id. at 908. Reebok responded with a motion to dismiss, which the court ultimately converted to a summary judgment motion and granted.
Most of the plaintiffs’ claims against the Crossover Promotions website were not related to infringing products allegedly supplied by Reebok. SB Designs, supra at 912-913. Rather, they claimed that the website displayed Crossover Promotions’ allegedly infringing mark. They further claimed that Reebok sponsored the Celebrity Summer Classic tournament, which was advertised on the Crossover Promotions website with the same mark. They pointed out that Reebok’s “RBK” logo appeared on the website, indicating its sponsorship. Id. Reebok conceded that it sponsored the event and that in addition, it supplied shoes and apparel for the tournament. The plaintiffs, however, adduced no evidence that these Reebok products infringed their trademark. Since Reebok was not alleged to have supplied any infringing products, at issue was whether the court should extend the Inwood Laboratories standard beyond the manufacturer-distributor context as the Seventh Circuit had done in Hard Rock Café, 955 F.2d 1143 (7th Cir. 1992).
The court refused to do so, noting that the Seventh Circuit’s expansion of the “product” requirement for contributory infringement was much more limited than the plaintiffs would have it. Specifically, the court rejected the plaintiff’s argument that “a non-infringing supplier is contributorily liable if the product it supplies is associated in some way with an infringing product that the supplier did not supply.” Id. It also rejected their assertion that “the sponsors of an event who supply products for the event, without more, are contributorily liable for infringement committed by the event’s promoters or organizers.” Id.
Furthermore, the court noted that the Seventh Circuit’s expansion of contributory liability “was premised on a defendant’s direct control and monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark.” Id, citing Hard Rock Café, 955 F.2d at 1149 and Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999). Reebok, however, maintained that it exercised no control over Crossover Promotions’ conduct or materials, which the plaintiffs could not disprove. The court therefore granted summary judgment. SB Designs, supra at 913.
As to the remaining third-party websites, the court also granted Reebok’s summary judgment motion, for even more fundamental reasons. The plaintiffs simply failed to explain how those websites infringed their mark, referring only to fan messages and postings or the mere sale on one of the websites of Reebok apparel. See id. at 913-914. Moreover, they had presented no evidence that Reebok had even sponsored or was in any way associated with any of the websites. Nor had they shown that Reebok supplied any products sold or displayed on any of the websites. Their arguments for contributory liability therefore similarly could not survive summary judgment. Id. at 914.