D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test., II. Contributory Trademark Infringement Comments Open

D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test.

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It is well settled that “[a]n action for contributory liability is not limited to a manufacturer, but may also extend to licensors, franchisers, or to similarly situated third parties.” Proctor & Gamble Co. v. Haugen, 317 F.3d 1121, 1128-1129 (10th Cir. 2003), citing AT & T v. Winback and Conserve Program, Inc., 42 F.3d 1421, 1432 (3d Cir. 1994). See also, e.g. L & L Wings, Inc. v. Marco-Destin, Inc., 676 F.Supp.2d 179, 191-192 (S.D.N.Y. 2009) (applying Inwood to impose contributory liability on landlord and management consultant). 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, the standard application of the Inwood test in which the court determines whether the defendant has either “intentionally induce[d] a third party to infringe the plaintiff’s mark or supplied a product to a third party with actual or constructive knowledge that the product is being used to infringe the [plaintiff’s] mark,” was inapposite. See Lockheed Martin Corp. v. Network Solutions Inc., 194 F.3d 980, 983 (9th Cir. 1999) citing Inwood Lab., Inc. v. Ives Lab., 456 U.S. 844, 853-854, 102 S.Ct. 2182, 72 L.Ed. 606 (1982).

In these situations, i.e. where the plaintiff has not alleged intentional inducement and yet cannot 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, “[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 (citations omitted). Accord, Kuklachev v. Gelfman, 2009 WL 804095 (E.D.N.Y. 2009)(quoting Lockheed Martin but dismissing contributory liability claim against defendant employees who provided services to infringing show)(slip opinion); Tiffany v. eBay, 576 F.Supp.2d 463, 505 (S.D.N.Y. 2008)(quoting Lockheed Martin; dismissing contributory liability claim against online marketplace), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010), cert denied, 131 S.Ct. 647 (2010);  See also Louis Vuitton Malletier, S.A, v. Akanoc Solutions, 591 F.Supp.2d 1098, 1111 (N.D.Cal. 2008)(quoting Lockheed Martin , defendants’ motion for JMOL denied, 2010 WL 5598337 (N.D. Cal.).

Note that the Second Circuit has yet to definitively decide the question of whether Inwood applies in the non-product context. In Tiffany v. eBay, the court refrained from deciding the question because eBay there dropped its argument that it should not be subject to Inwood. 600 F.3d at 105-106. 600 F.3d 93, 105-106 (2d Cir. 2010) affirming in part and remanding in part, 576 F.Supp.2d 463 (S.D.N.Y. 2008), cert denied, 131 S.Ct. 647 (2010). Cases following Tiffany have continued to apply Inwood in the “non-product” context. See, e.g., GMA v. BOP, 2011 WL 446196 (S.D.N.Y) (applying Inwood to a company that supplied showroom services to the fashion industry); Sellify v. Amazon, 2010 WL 4455830 (S.D.N.Y.)(applying Inwood to the online sales company Amazon); and Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367 (S.D.N.Y.)(applying Inwood to credit card processing companies) .

 

In one case, the plaintiffs argued unsuccessfully that the defendants – who had licensed their intellectual property rights in fictitious characters to others who used them to make counterfeit jewelry — had supplied an intangible “product” rather than a “service.” Nomination Di Antonio E Paolo Gensini S.N.C. v. H.E.R. Accessories, Ltd., 2009 WL 4857605 at *5 (S.D.N.Y) (“Nomination I”). The court disagreed, reading Inwood narrowly to require the “product” to be the actual infringing product, and applied the “direct control and monitoring” test to the “service” of supplying the  intellectual property rights. Id.  Though the plaintiffs’ assertions that the defendants “monitored and pre-approved” the infringing products were ultimately sufficient to allege direct control and monitoring, the court dismissed the contributory liability claim for failure to allege knowledge. Nomination Di Antonio E Paolo Gensini S.N.C. v. H.E.R. Accessories, Ltd., 2010  WL 4968072 (S.D.N.Y)(“Nomination II”), on review following dismissal with leave to amend in Nomination I, supra.

 The plaintiffs were affiliates of an Italian jewelry manufacturer,  “Nomination.”  Nomination made  “composable” or modular jewelry, including necklaces, bracelets, and earrings, the individual links of which could be selected by the purchaser to create a customized piece sold under the Nomination trademark. Nomination I, supra at *1.  Nomination alleged contributory trademark infringement against a group of defendants in the media and entertainment industry, “the Licensor defendants” who were licensing their intellectual property rights in fictitious characters such as SpongeBob Square Pants, Betty Boop, and Popeye, to a second group of alleged direct infringers, “the Supplier defendants.” They in turn were manufacturing and distributing counterfeit jewelry links depicting these characters and bearing Nomination’s trademark. Id.

Nomination alleged that the Licensor defendants “knew or should have known at the time they entered into license agreements with the Supplier defendants, that they were contributing to” the direct infringement of Nomination’s trademark by those defendants. Nomination I, supra at *2. It alleged further that it had put “many” of the Licensors on notice that one of the Supplier defendants was using their intellectual property to infringe  Nomination’s trademark, but that the infringement continued. Id. Nomination consequently sued both the Supplier and Licensor defendants, alleging, inter alia, direct and contributory trademark infringement, respectively.

Nomination’s contributory liability claim was based on the second prong of Inwood – supplying a product – which the company contended should not be limited to “physical, tangible products.” Nomination I, supra at *4, *5. The Licensor defendants argued that the plaintiffs had neither stated a contributory liability claim under Inwood nor pleaded facts sufficient to allege knowledge there under, and moved under Rule 12(b)(6) to dismiss the contributory liability claim. The court agreed, finding the plaintiffs had misapplied Inwood. It viewed the defendants’ licensing of intellectual property rights as providing a service rather than a product, and applied the “direct control and monitoring” analysis pursuant to Lockheed, supra. Nomination, supra at *5.

The Nomination I court read Inwood narrowly to require the licensor defendants to supply the actual infringing product. While the court acknowledged that Inwood should not be restricted to “physical, tangible products,” it rejected the plaintiff’s reliance on the “products vs. services” distinction as the basis for their contributory liability claim. Conflating the second prong of the Inwood test with the Lockheed “direct control and monitoring” formula, and incorporating language from Hard Rock Café, the Nomination I court inquired whether the defendant “manufactured or distributed the “instrumentality used by a third party to infringe the plaintiff’s mark or instead [did] not actually manufacture or distribute the good that is ultimately palmed off as made by someone else.” Nomination I, supra at *5, citing Lockheed Martin, 194 F.3d at 984 and Hard Rock Café, 955 F.2d at 1148 (emphasis added by the court).

However, the Supreme Court’s language in Inwood is broadly worded. The second prong of its two-part test extends contributory liability to one who “continues to supply its product to one whom it knows or it has reason to know is engaging in trademark infringement.” Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982); and see discussion in IIA. Indeed, no other court following Inwood — including ones cited by the Nomination II court — has limited the application of the Inwood standard to defendants supplying the actual infringing product. See e.g. Lockheed Martin v. Network Solutions, 194 F.3d 980, 983 (9th Cir. 1999) (“Contributory infringement occurs when the defendant … supplies a product to a third party with actual or constructive knowledge that the product is being used to infringe the service mark.“)(emphasis added); Hard Rock Café v. Concession Service, 955 F.2d 1143,1148 (quoting Inwood); Fare Deals Ltd. v. World Choice Travel.Com, 180 F.Supp.2d 678, 687 (D.Md. 2001)(“Contributory infringement occurs … when the defendant supplies a product to a third party, knowing that third party is using the product to infringe the mark.”)(emphasis added). But see Perfect 10, Inc. v.Visa Intern. Serv. Ass’n, 494 F.3d 788, 807(9th Cir. 2007)(in dicta paraphrasing the language in Inwood, the court stated that contributory liability applied where the defendant “continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied; the court applied the “direct control and monitoring” test and declined to extend contributory liability)(emphasis added). Furthermore, the language quoted by the Nomination I court from Hard Rock Café regarding the application of Inwood to “people who do not actually manufacture or distribute the good that is ultimately palmed off as made by someone else” is arguably dicta. For a contributory liability case involving a product other than the actual infringing product see A &M Records v. Abdallah, 948 F.Supp.1449 (C.D.Cal. 1996)(defendant supplied blank audiotapes and duplicating equipment to others who ran audiocassette counterfeiting businesses utilizing the tapes and equipment).

The Nomination I court’s comparison of this case to Fare Deals is also hard to follow, because while the defendants in both cases had licensing arrangements with the direct infringer, the similarity ends there: In Nomination I (and II), the licensing was the means by which the defendant supplied the direct infringer with its intellectual property, an intangible product, which in turn became a component of the infringing product. In Fare Deals, by contrast, the licensing was part of the agreement under which the defendant posted advertisements on the infringing website. As the Nomination II court itself noted, the defendant’s role in Fare Deals was “incidental.” See Nomination II at *5, discussed infra.

The Nomination I court nonetheless concluded that the “product” that was infringed, i.e., the counterfeit jewelry links, was analogous to the infringing website in Fare Deals Ltd. v. World Choice Travel.com, Inc., 180 F.Supp.2d 678 (D.Md. 2001), discussed fully in Section II.D.2.(b), infra. In Fare Deals, the plaintiff travel service company discovered that its name had been taken by a competing business as the domain name for its website. It sued the website owners and their advertisers whose links appeared on the site, alleging, inter alia, contributory trademark infringement. The Fare Deals court dismissed the claim, because under the allegations, the defendant “merely licensed it own mark to the alleged direct infringer.” Nomination I, supra at *6, citing Fare Deals, supra. Similarly, the court in Nomination reasoned, “the Licensor Defendant did not distribute or manufacture the “product,” [i.e. the jewelry links] but merely leased their own mark to the Supplier Defendants.” Nomination I, supra. It would seem, though, notwithstanding that both cases involve licensing of intellectual property, that the defendants in Nomination I are fundamentally distinguishable from the defendants in Fare Deals: The intellectual property rights to the cartoon characters were an integral, albeit intangible, component of the infringing jewelry while the advertisements on the websites were not integral to that site itself. See Fare Deals, supra at 689 -690, discussing the non-essential nature of the defendant’s advertising to the operation of the infringing website.

Still, convinced that the defendants had supplied a service rather than a product, the Nomination I court applied Lockheed to determine whether the licensor defendants engaged in “direct control and monitoring of the [bracelet links] used by the [Supplier Defendants] to infringe the plaintiff’s mark.” Nomination I, supra at *6, citing Lockheed Martin at 984. Here the court found the complaint deficient, because the plaintiffs alleged only that the licensor defendants “carefully control and monitor the licensing of their respective intellectual property [rights].” Nomination I, supra at*6. Their actions regarding their own marks, the court reasoned, did not “entail that they also monitor and control the manufacture and distribution” of the infringing products. Id. Although the plaintiff did allege further that the licensor defendants were involved in the “development, promotion, and sale” of the infringing jewelry, such allegations were too conclusory to survive the motion to dismiss. See Id. The court therefore dismissed the plaintiffs’ contributory liability claim with leave to amend, and required the plaintiffs to allege facts constituting direct control and monitoring of the infringing product, i.e. the counterfeit jewelry. See Nomination I at *5 -*6.

Responding to the court’s directives, Nomination augmented its contributory liability allegations to reflect the extent of the defendants’ alleged participation in the production of the counterfeit jewelry. Nomination II at *4 – *5. Specifically, it alleged that the Licensor Defendants “entered into contracts [with the Supplier defendants] reflecting a concern that their intellectual property not be used on infringing products and providing for ongoing monitoring of such products. Id. at *4. It alleged further that the Licensor Defendants exercised their rights of pre-approval and monitoring. Id. It appended these agreements to the complaint to show that they provided for the licensor defendants “to receive production samples and purport to require advance approval of the final product.” Id. Approval forms were also annexed to the complaint to indicate that the Licensor Defendants in fact “reviewed and approved final product designs.” Id.

These amended allegations were sufficient to show direct control and monitoring to sustain a claim of contributory liability against the Licensor Defendants, the court found in Nomination II. Maintaining its view that provision of an intellectual property license is a “service,” it noted, as a preliminary matter, that the Second Circuit has yet to definitively decide that Inwood governs in the service context.  See Nomination II at *3 citing Tiffany v. eBay, 600 F.3d 93 (2d Cir. 2010) affirming in part and remanding in part, 576 F.Supp.2d 463 (S.D.N.Y. 2008), cert denied, 131 S.Ct. 647 (2010), where the court applied Inwood without making the determination because the defendant did not contest it. In reaching its decision the court distinguished the Licensor defendants from the advertisers in Fare Deals, noting that the Licensor defendants’ conduct was “more than merely incidental to the alleged infringement.” Id.

The Nomination II court also compared the Licensor defendants to the credit card companies in Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367 (S.D.N.Y.) discussed at II.D.3, noting that it was the “combination” of the defendants’ intellectual property rights and the infringing links that “allowed the infringement to succeed.” Nomination II at *5.  Significantly, it noted that “the infringing links were not marketed simply as a “Nomination Link” but rather as for example a “Dora the Explorer Nomination link or “SpongeBob Squarepants Nomination link.” Id. The “prominent role” played by the Licensor defendants’ intellectual property,” coupled with the allegations that the defendants “monitored and pre-approved the infringing products,” were sufficient to allege contributory liability. Id. The court, however, ultimately found that the plaintiff had still failed to adequately plead knowledge, and dismissed the plaintiff’s contributory liability claim. Id. at *6 and see II.B.3.(a)

Note that the requirements that a defendant (1) “monitor and control” the instrumentality of the alleged infringement and (2) that the defendant have actual or constructive knowledge of the alleged infringement, are closely related. One court has implied that they overlap. See Government Employees Insurance Co. v. Google, Inc., 330 F.Supp.2d 700, 705 (E.D. Va. 2004), discussed infra, where the court found that the claim by the plaintiff that the Internet marketing company Overture monitored and controlled third-party advertisements was sufficient to plead the actual or constructive knowledge required to allege contributory infringement.

There is no particular precedent for combining the two requirements, however. On this point, one court has explicitly required that each be proved independently of one and other.  See Fare Deals, Ltd. v. World Choice Travel.com, Inc., 180 F.Supp.2d 678, 691 (D. Md. 2001), discussed infra, where the court found that “[e]ven if the facts suggested … that [the defendant] might be contributorily liable because it “supplied a product” to the infringers or directly controlled and monitored the means of infringement, [the defendant could not] demonstrate the requisite knowledge of the infringing activity to find it liable under Inwood Laboratories.” The court in Fare Deals expressly required that the plaintiff “prove both that [the defendant] directly controlled and monitored the activities of the [plaintiff’s] site and that [the defendant] had actual knowledge of the infringement.” Fare Deals, supra at 697, citing Inwood. (Emphasis added). Notwithstanding the court’s language in the GEICO case, supra, it would seem that the court still must make two separate inquiries in a  “non-product” contributory liability case: one as to whether a defendant “monitors and controls” the instrumentality of infringement and the second, as to whether a defendant has actual or constructive knowledge of that infringement.  For other cases in which the two elements are analyzed separately, see Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367 *13 -*16 (S.D.N.Y); and Tiffany v. eBay, 576 F.Supp.2d 463, 506-507, 508-510 (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).

This section will discuss both the evolution of the “monitoring and control” test and its application in various contexts. The first cases to extend Inwood involved actions against flea market owners. See Fonovisa, Inc. v. Cherry Auction, Inc. 76 F.3d 259 (9th Cir. 1996); Hard Rock Café Licensing Corp. v. Concession Serv., Inc. 955 F.2d 1143, 1149 (7th Cir. 1992), discussed infra. In these cases the court viewed the defendants as a type of landlord subject to contributory liability by way of common law tort principles. Thereafter the Ninth Circuit examined a claim of contributory liability against an Internet domain name registrar in Lockheed Martin Corp. v. Network Solutions, Inc., supra. Drawing on the court’s discussions in Hard Rock Café and Fonovisa, the court declined to extend contributory liability in this case. In reaching its decision, however, it articulated the foregoing “monitoring and control” standard that has been re-applied in many other cases of contributory liability on the Internet. See, e.g. Tiffany v. eBay, 576 F.Supp.2d 463, 506 (S.D.N.Y. 2008) (adopting Lockheed Martin analysis to apply Inwood to eBay, the online auction site), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010), cert denied, 131 S.Ct. 647 (2010). These cases, as well as those arising in other contexts, are discussed below.

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(a) In General, 1. Landlords, D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test., II. Contributory Trademark Infringement Comments Open

D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test: 1. Landlords (a) In General

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A landlord whose premises are the site of infringing activity may be held contributorily liable for a plaintiff’s damages, provided the plaintiff can demonstrate that the landlord’s failure to prevent such activity was the cause of those damages. See 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) (unpublished opinion).  See also Laugh Factory, Inc. v. Basciano, 608 F.Supp.2d 549, 564 (S.D.N.Y. 2009)(a landlord may be contributorily liable for the infringing acts of a tenant, citing Polo Ralph Lauren); Habeeba’s Dance of the Arts,Ltd. v. Knoblauch, 430 F.Supp.2d 709, 714-715 (S.D. Ohio 2006)(sustaining claim for contributory trademark infringement against YWCA athletic club that allowed infringing event to take place at its facilities). In Polo Ralph Lauren, the plaintiffs, Polo Ralph Lauren, Rolex Watch U.S.A., Inc. and Louis Vuitton, alleged that three retailers were using their landlords’ premises to sell goods that infringed their trademarks. They further alleged that the landlords who leased the premises were aware that their tenants were selling counterfeit goods on the premises and did nothing to prevent the activity. Id. at 649. (Note that plaintiffs sued both under federal law and under the New York Real Property Law Section 231(2).) The plaintiffs sued not only the retailer defendants, but also their landlords for contributory infringement. After they secured a default judgment against the retailer defendants, the landlord of one of those defendants brought a motion to dismiss, arguing inter alia that the Lanham Act did not provide a cause of action for damages against someone who indirectly aids the violation of the statute. The court disagreed and denied the motion, noting that although there is no explicit language in the Act, Inwood provided judicial precedent for interpreting the statute to include a cause of action for contributory infringement. The court further relied on Hard Rock Café, discussed in detail infra, to extend the theory of contributory infringement outside the manufacturer/distributor context.

In a later unpublished decision on both parties’ motions for summary judgment, the same court nevertheless refused to require the landlord to contribute to the amount of the default judgment against its tenant, finding no basis for attributing the landlord’s behavior to any of the damages assessed therein. See Polo Ralph Lauren, 1996 WL 67700 at *2. The court assumed, for purposes of both motions, that the landlord had a responsibility to “take reasonable steps to rid the premises of the illegal activity.” Id. at *1.  In reaching its decision, the court examined the “damage period” of approximately six months, proposed by the plaintiffs as the time beginning from when the landlord was notified of its tenant’s counterfeiting activities and ending with the date of the entry of the default judgment. The court noted that the landlord had, within the first month, served notices to vacate on the tenant. The plaintiffs argued that the landlord should have followed up with an eviction action. The court found, however, that the landlord believed in good faith there was insufficient evidence to evict. More fundamentally, the court found that even if an eviction action had been taken, it would not have been completed by the end of the damage period. Id. at *2.

Where the defendant landlord and two direct infringing stores were separate corporations all owned by the same party, the court sustained the plaintiff’s motion for summary judgment and imposed contributory liability on the landlord, jointly and severally with the direct infringers. L & L Wings, Inc. v. Marco-Destin, Inc., 676 F.Supp.2d 179, 191-192 (S.D.N.Y. 2009). Under these circumstances, the court readily found knowledge on the part of the landlord corporation, which had received the same written notice of infringement as had the direct infringers. Id. at 192.

L & L Wings arose out of a dispute over a licensing agreement between the plaintiff, “Wings” a beachwear retailer, and its competitor, an individual with whom the plaintiff had shared an interest in three other companies several years prior to the litigation. At that time, the plaintiff’s principal owners decided to transfer their interest in those companies to the competitor. L & L Wings, supra at 183. As part of the transaction, the plaintiff entered into a licensing agreement which was signed by each of four corporate defendants owned by the competitor: two separate corporations that each operated competing stores, the corporation landlord for one of the stores, and a fourth company that provided management consulting services to the two stores. Id. at 183 -184. The licensing agreement allowed the defendants to use the plaintiff’s mark and trade dress for a number of years, after which such rights terminated. Id. at 184.

Notwithstanding the terms of the licensing agreement, which the court determined to be valid and binding, the defendants continued to use the plaintiff’s marks in the competing stores after the termination date. See Wings, supra at 185-187. The plaintiff not only reminded one of the store defendants of the termination date on two separate occasions, but also sent a cease and desist letter to all four defendants. Id. at 184. After being contacted by dissatisfied customers who bought merchandise in the defendants’ stores, thinking that the stores were owned by the plaintiff, the plaintiff sued all four defendants, alleging, inter alia, both direct and contributory liability for trademark infringement. See Id. It moved for summary judgment on the contributory liability claim, which the court granted, having found direct infringement arising out of the defendants’ breach of the licensing agreement. Id. at 189.

The Wings court reached its decision applying the Inwood test. Wings, supra at 191. That the defendant landlord provided a service and not a product was unavailing, the court decided, finding sufficient precedent, including Polo Ralph Lauren, supra, for applying the Inwood contributory liability test to defendants that supply a service. See Wings, supra at 192 and cases cited therein.

As to the knowledge element under Inwood, the fact that all four corporations shared the same owner compelled the court’s decision. It was undisputed, for example, that “the four defendants ha[d] shared nearly identical corporate officers, directors and main office employees.” Wings, supra at 191. The plaintiff’s former business partner signed the licensing agreement on behalf of each of the four defendant corporations. Id. Finally, as noted above, the defendant landlord received the same written notice of infringement as did the other three parties. On this basis alone, the court concluded that it had actual knowledge of the infringing activity sufficient to impose contributory liability, jointly and severally with the direct infringers. Id.

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(b) Flea Markets, 1. Landlords, D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test., II. Contributory Trademark Infringement Comments Open

D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test: 1. Landlords (b) Flea Market Owners

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Contributory liability has been imposed by the courts on flea market owners by application of both the Inwood standard and common law tort principles. See Hard Rock Café Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143, 1148 (7th Cir. 1992); and see Fonovisa, Inc. v. Cherry Auction, Inc. 76 F.3d 259 (9th Cir. 1996)(endorsing the Hard Rock Café court’s analysis). For purposes of contributory liability analysis, a flea market owner has been viewed as a type of landlord. Nevertheless, such liability for trademark infringement in the context of flea markets is treated separately from the above discussion. This separate discussion is appropriate not only because of the distinct set of facts these cases present, but also because of the wider implications they have for analogous activity on the Internet, particularly with regard to on-line auction sites.

Flea markets, also known as “swap meets,” share a number of common characteristics. Generally speaking, at flea markets, shoppers pay a nominal entrance fee to come to purchase various merchandise from individual vendors who operate out of tables or booths throughout the flea market. Unlike mall landlords, who typically take a percentage of store sales, hence benefiting directly from any infringing activity, flea market owners typically do not. Rather, they generate income from vendors by letting booth space on a short-term basis, charging either a daily or monthly rental fee. The owner may provide parking space and promote its business by posting signs or other advertising. It also may have general rules for vendors regarding merchandise that is prohibited, e.g. “illegal merchandise.” While the owner’s supervision of the flea market might be minimal, it nevertheless typically retains the right to exclude any vendor. Compare Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 at 261 (9th Cir. 1996) with Hard Rock Café Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143 at 1146 (7th Cir. 1992).

Indeed, it has been observed that a flea market owner is “not merely a landlord; it also advertises and promote[s] the activity on its premises, sells admission tickets to buyers and supervises the premises.” Hard Rock Café v. Concession Services, Inc., 955 F.2d 1143, 1148 (7th Cir. 1992)(quoting district court’s memorandum).  See also Fare Deals, Ltd. V. World Choice Travel.com, Inc., 180 F.Supp.2d 678, 679 (D. Md. 2001), where the court  observed that “liability in the flea-market cases rested on more than the relatively passive degree of control and monitoring usually exercised by a landlord.”

Thus, a flea market owner may be contributorily liable for the trademark violations of its vendors if it knows or has reason to know of them and chooses not to investigate.  Hard Rock Café, 955 F.2d 1143, 1149 (7th Cir. 1992). In Hard Rock Café, the owner of the “Hard Rock” trademark sued a flea market owner and operator, “CSI,” for the sale of counterfeit “Hard Rock” t-shirts by one of its vendors. CSI had a policy of “cooperating with any trademark owner that notifie[d] [it] of possible infringing activity,” and there had, in fact, been a number of seizures of counterfeit goods at CSI’s flea markets. Hard Rock Café, supra at 1146. CSI was not notified of these seizures before hand, however, and had no subsequent involvement in any of them. On the other hand, the court further observed, CSI knew the seizures had occurred and did not investigate them. Id.  In the instant case, at no point before filing suit had Hard Rock warned CSI that the t-shirts were counterfeits. Hard Rock Café, supra at 1146, 1147.

To decide whether CSI should be held liable for contributory infringement, the Hard Rock court had to determine whether the Inwood test could be extended beyond its original context of manufacturer and distributor. In Inwood, the Court said that “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.” Hard Rock Café, supra at 1148, citing Inwood Laboratories, Inc., v. Ives Laboratories, Inc. 456 U.S. 844 at 854, 102 S.Ct.  2182 at 2188 (1982)(footnote omitted). This statement, the Hard Rock court observed, was not readily applicable to those who do not actually manufacture or distribute the counterfeit goods. Id.

By way of analogy, the court hypothesized that a temporary help service that supplied workers to the vendor might not be liable, even if it knew the vendor were selling counterfeit goods. The question therefore was whether the defendant flea market owner was more like the manufacturer of a mislabeled good or like the latter example of the temporary help service. Id. To answer this question, the court hearkened back to its earlier treatment of trademark infringement as a species of tort, turning to the Restatement of Torts to guide its inquiry. See id., citing David Berg & Co. v. Gatto Int’l Trading Co., 884 F.2d 306, 311 (7th Cir. 1989).

The court concluded from the Restatement that the common law imposes the same duty on the flea market owner as on manufacturers or distributors. Hard Rock Café, supra at 1149, citing Restatement (Second) of Torts Section 877(c) & cmt. D (1979). Namely, the flea market owner could be liable if it knew or had reason to know of its vendor’s trademark violations. Hard Rock Café, supra at 1148-1149.

The court further determined that the district court’s finding of willful blindness on the part of the defendant would have been an appropriate basis on which to find the flea market owner liable.  See id, citing Louis Vuitton S.A. v. Lee, 875 F.2d 584, 590 (7th Cir. 1989)(willful blindness “is a sufficient basis for a finding of violation of the Lanham Act.”) However, the lower court had failed to make an unambiguous finding in this regard. The court therefore remanded for a finding as to whether the owner had reason to suspect its vendor was selling counterfeit goods but nevertheless chose not to investigate. Hard Rock Café, supra at 1149. See also the discussion of willful blindness, supra.

Hard Rock Café’s application of the Inwood test was endorsed by the Ninth Circuit in Fonovisa, Inc. v. Cherry Auction, Inc. 76 F.3d 259 (9th Cir. 1996), a case involving counterfeit sales at a swap meet.  In that case, the plaintiff corporation, Fonovisa, owned copyrights and trademarks in music recordings. It was undisputed that third party vendors at the swap meet, Cherry Auction, routinely sold counterfeit recordings in violation of Fonovisa’s copyrights and trademarks, and that – unlike in the Hard Rock Café case — Cherry Auction was aware of such sales. The court also observed at the outset that  Cherry Auction “retain[ed] the right to exclude any vendor for any reason, at any time, and thus [could] exclude vendors for patent and trademark infringement.” Fonovisa, 76 F.3d 259, 260, 261. Fonovisa brought its original complaint in district court against Cherry Auction and its operators, for both direct and indirect copyright infringement as well as for contributory and vicarious trademark infringement. See Fonovisa, Inc. v. Cherry Auction, Inc., 847 F.Supp. 1492 (E.D. Cal. 1994).  These claims were all dismissed on the pleadings by the district court and Fonovisa appealed, inter alia, the dismissal of its claim for contributory trademark infringement.

On appeal, the Ninth Circuit reversed, reaffirming the Hard Rock court’s application of the Inwood test in this context. It noted that the Inwood court “laid down no limiting principle that would require defendant to be a manufacturer or distributor.” Fonovisa, supra at 265. It agreed with the plaintiff that while Cherry Auction had not supplied the counterfeit recordings themselves, it had supplied the “necessary marketplace for their sale in substantial quantities.” Thus it concluded, just as the court had in Hard Rock, that “a swap meet can not disregard it vendors’ blatant trademark infringements with impunity.” Fonovisa, 76 F.3d 259, 265. It therefore held that Fonovisa had stated a claim for contributory trademark infringement. Id.

Note that although the court’s language regarding Cherry Auction having provided the “necessary marketplace” to the infringers has been reiterated, it is not at all clear that the Ninth Circuit intended that criterion to stand alone. Compare Ford Motor Co. v. GreatDomains.com Inc., 177 F.Supp.2d 635, 646-647 (E.D. Mich. 2001)(where plaintiff argued that a domain name auction site provided the “necessary marketplace” for third-party infringement), with Lockheed Martin Co. v. Network Solutions, Inc., 194 F.3d 980, 984-985 (9th Cir. 1999)(where the court notes the language in Fonovisa but does not incorporate it into its final analysis).  Although the fact that a defendant provided the necessary marketplace to an infringer might inform the court’s analysis, it does not, by itself, answer the question of whether the plaintiff has met the monitoring and control requirements articulated not only in both hard Rock Café and Fonovisa, but in Lockheed Martin and all the subsequent contributory liability cases discussed below.

Indeed, property ownership alone was insufficient to establish that the defendant landlord exercised control over the sale of the infringing products at a flea market operated on his property in Louis Vuitton Malletier v. The Flea Market, Inc., 2009 WL 1625946 (N.D.Cal. 2009)(slip opinion).  In that case, the plaintiff luxury goods company, Louis Vuitton, asserted a contributory liability claim against a business partnership that owned the property on which the large open-air flea market operated. Louis Vuitton, supra at *1. That business partnership and the owner of the flea market were two separate business entities, though the same individuals were involved in running each one. Louis Vuitton, supra at *2. In its pleadings, the plaintiff failed to support its contributory liability claim with sufficient facts to demonstrate that the property owner exercised control over flea market operator, notwithstanding their shared ownership and control. Louis Vuitton, supra at *2. Consequently, the property owner was able to distinguish its case from Fonovisa, where the defendant both owned and operated the market, arguing that it merely leased land to the flea market operator, “without exercising any specific, direct control over the Flea Market’s tenants’ business operations.” Id. The court agreed and dismissed the contributory liability claim with leave to amend, finding that “[n]o case supports the proposition that a property owner may be liable for contributory trademark infringement if it only leases property to a separate and distinct entity, which in turn operates a flea market and rents space to a vendor, which in turn infringes trademarks.” Id. at *3.

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2. Internet Activity, D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test., II. Contributory Trademark Infringement Comments Open

D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test: 2. Internet Activity

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Internet trademark infringement activity typically has not involved the “product” paradigm contemplated in Inwood. Courts considering these types of cases have therefore had to determine whether to extend the Inwood standard beyond the manufacturer-distributor context, as they had done in the flea market cases, Hard Rock Café and Fonovisa, supra.

The standard for imposing contributory liability for trademark infringement on the Internet was first enunciated in Lockheed Martin Corp. v. Network Solutions Inc., 194 F.3d 980 (9th Cir. 1999) (“Lockheed II”), affirming 985 F.Supp. 949 (C.D. Cal. 1997) (“Lockheed I”), a case involving the domain name registrar, “NSI.” In Lockheed II, discussed in detail below, the court synthesized the analyses in Hard Rock Café and Fonovisa to conclude 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’s ‘supplies a product’ requirement of contributory infringement.” Lockheed Martin, 194 F.3d 980, 984. The direct control and monitoring analysis has been applied throughout the Internet cases discussed in this section.

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(a) Domain Name Registrars, 2. Internet Activity, D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test., II. Contributory Trademark Infringement Comments Open

D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test: 2. Internet Activity: (a) Domain Name Registrars

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Domain name registrars have not ordinarily been held contributorily liable for trademark infringement committed by their registrants. See Lockheed Martin Corp. v. Network Solutions Inc., 194 F.3d 980 (9th Cir. 1999) (“Lockheed II”), affirming 985 F.Supp. 949 (C.D. Cal. 1997) (“Lockheed I”); Size, Inc. v. Network Solutions, Inc., 255 F. Supp.2d 568 (E.D. Va. 2003); Academy of Motion Picture Arts and Sciences v. Network Solutions Inc., 989 F.Supp. 1276 (C.D. Cal. 1997). The courts have found that domain name registrars lack the requisite degree of monitoring and control over the activity of their registrants to trigger contributory liability. See Size Inc., supra at 572-573, citing Lockheed II, supra at 984-985; Petroliam Nasional Berhad v. Godaddy.com, Inc., 2010 WL 361970 *4 (C.D. Cal) (noting that “it is generally inappropriate to extend contributory liability to the registrar absent allegations that the registrar had unequivocal knowledge that the domain name was being used to infringe a trademark” and granting defendant’s motion for judgment on the pleadings with leave to amend where facts alleged did not show any direct involvement with potentially infringing uses of domain names).  Note that in the initial stages of  the development of the Internet,  Network Solutions Inc. (“NSI”) was the exclusive registrar in charge of registering domain-name combinations for the top-level domains “ .gov,” “.edu,”  “.com,” “.org,” and “.net.” and was the thus the defendant in most of  the above cases. See Lockheed II, supra at 982.

The registration process at NSI was described in detail by the courts in Lockheed II, supra at 982 and Lockheed I, supra at 953. Registration was initiated by the applicant, who would select a domain name and submit it to NSI on a template over the Internet. Upon approval, NSI entered the domain-name combination in its database directory, which linked domain names with Internet Protocol (IP) addresses of domain name servers. See Lockheed I, supra. Thereafter, when a user entered a registered domain-name combination, NSI would “translate” the domain name into the registrant’s IP address and route the user to that address. See id. The courts noted that ninety per cent of the applications were processed and approved by NSI electronically, within minutes or hours. Id. Ten percent of the applications were reviewed by an employee for various reasons, such as errors in the applications. NSI conducted conflict checks on applications to prevent repeated registrations of the same name. Lockheed I, supra.  It did not, however, investigate registrants’ rights to a particular domain name or monitor the use of a domain name once registered. Lockheed II, supra. Interested parties could avail themselves of NSI’s post-registration dispute-resolution procedure to resolve conflicts involving their domain names. Id.

In Lockheed I,   NSI was sued for contributory infringement by the aircraft manufacturer Lockheed Martin (“Lockheed”), which owned and operated “The Skunk Works” aircraft design and construction laboratory. Lockheed II, supra at 982.   Other registrants (who were not parties to the litigation) had registered various domain-name combinations with NSI that Lockheed alleged infringed upon its SKUNK WORKS service mark. The district court granted summary judgment to NSI and the Ninth Circuit affirmed.

Applying the plain language of the Inwood standard, the Ninth Circuit  said that “[c]ontributory infringement occurs when the defendant either intentionally induces a third party to infringe the plaintiff’s mark or supplies a product to a third party with actual or constructive knowledge that the product is being used to infringe the service mark.” Lockheed II, at 983, citing Inwood Lab., Inc. v. Ives Lab., Inc., 456 U.S. 844, 853-54, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982). Because Lockheed had alleged only the latter basis for contributory liability, the court required it to prove that NSI supplied a product to third parties with actual or constructive knowledge that its product was being used to infringe “Skunk Works.” Lockheed II, supra.

The “product” paradigm in Inwood, however, was inapposite in Lockheed II, as no actual product was involved. The court therefore turned to the flea-market cases, Hard Rock Café and Fonovisa, in which the Seventh and Ninth Circuits had applied Inwood outside of the “product” context. See Hard Rock Café v. Concession Services, Inc., 955 F.2d 1143, 1148 (7th Cir. 1992); Fonovisa, Inc. v. Cherry Auction, Inc. 76 F.3d 259 (9th Cir. 1996) discussed in detail supra. Drawing from those cases, the Ninth Circuit in Lockheed II concluded that

when measuring and weighing a fact pattern in the contributory infringement context without the convenient “product” mold dealt with in Inwood Lab., we consider the extent of control exercised by the defendant over the third party’s means of infringement. … Direct 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 II, supra at 984 (citations omitted).  See also, Tiffany v. eBay, 576 F.Supp.2d 463, 505-507 (S.D.N.Y. 2008) (adopting the Lockheed Martin analysis), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010), cert denied, 131 S.Ct. 647 (2010).

The Ninth Circuit found that the facts in Lockheed II, fell “squarely on the “service” side of the product /service distinction suggested by Inwood Lab. and its offspring.” In that regard,

NSI’s role differs little from that of the United States Postal Service: when an Internet user enters a domain-name combination, NSI translates the domain-name combination to the registrant’s IP Address and routes the information or command to the corresponding computer. Although NSI’s routing service is only available to a registrant who has paid NSI’s fee, NSI does not supply the domain-name combination any more than the Postal Service supplies a street address by performing the routine service of routing mail.

Lockheed II, supra at 984-985.  Moreover, the court noted, quoting the district court, “[w]here domain names are used to infringe, the infringement does not result from NSI’s publication of the domain name list, but from the registrant’s use of the name on a web site or other Internet form of communication in connection with goods or services. …” Lockheed II, supra at 985, citing Lockheed I, 985 F.Supp. at 958. Affirming the district court, the Ninth Circuit thus concluded that NSI’s “rote translation service [did] not entail the kind of direct control and monitoring” of the allegedly infringing activity to justify extending the Inwood Lab.’s “supplies a product” requirement for contributory infringement. Id.

For similar reasons, the court refused to impose contributory liability on NSI in Size, Inc. v. Network Solutions, Inc., 255 F.Supp.2d 568 (E.D. Va. 2003). In that case, the plaintiff “Size,” a television production company, sued NSI for contributory trademark infringement after it allegedly transferred its domain name to another unauthorized party. Size, Inc., supra at 572.  Reiterating the Inwood standard, supra, the court examined whether, under the second prong, NSI had “suppl[ied] a product to a third party with actual or constructive knowledge of the infringement.” Size, supra, citing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844 (1982). Size argued that NSI’s control over the registration and transfer of domain names was sufficient to hold it liable because NSI provided the forum through which the infringement took place. Size, supra. Relying on Lockheed II, supra, NSI maintained that it did not “supply a product” under Inwood. Id. It argued further, pursuant to Lockheed II, that it did not monitor and control the use of domain names in a manner that justified extending the application of the contributory liability doctrine to its activities. Size, supra at 572-573.

The court agreed, echoing the Ninth Circuit’s view that NSI provided a service, insofar as “all that NSI does is “translate’ the domain name into the registrant’s IP address and route users to that address.”  Size, supra at 573. Thus, the court continued, “NSI’s function is more equivalent to the passive messenger service provided by the United States Postal Service than to the more interactive role of a flea-market operator who has a significant degree of control over the activities of its clients.” Size, supra at 573, citing Hard Rock Café Licensing Corp. v. Concession Serv., Inc., 955 F.2d 1143 (7th Cir. 1992). The Size court noted further that there was nothing in Size’s complaint to suggest that NSI had any direct involvement with the activities of the allegedly infringing third party.  Size had thus failed to demonstrate that NSI had “exceeded its role as a neutral stakeholder” in the registration process. Id.

By contrast, where the plaintiff’s allegations against the defendant domain name registrar made out a complex scheme of cybersquatting, the court rejected the defendant’s motion to dismiss the contributory liability claim against it. Transamerica Corp. v. Moniker Online Services, 672 F.Supp.2d 1353 (S.D. Fla. 2009). Far from the “rote translation” involved in Lockheed, supra, the facts alleged in Transamerica depicted a domain name registrar that acted in concert with other defendants to profit from the infringing activities of its customers.

In Transamerica, the plaintiff, “Transamerica,” was a holding company for a group of subsidiary companies engaged in the sale of life insurance and other financial services. It sued the domain name registrar, “Moniker Online”; a related company, “Moniker Privacy”; and “Oversee,” the company that allegedly owned and controlled the Moniker defendants, as well as other unnamed defendants – the ostensible owners of the infringing domain names.  Transamerica claimed, inter alia, that the defendants were contributorily liable for trademark counterfeiting and infringement by their customers who used infringing versions of the Transamerica name in their websites, from which use the defendants profited. See Id. at 1366 (in the context of the ACPA immunity discussion, noting that Moniker received a fee each time an internet user clicked on one of the links attached to the infringing domain sites).

Specifically, Transamerica alleged that Moniker Online registered numerous domain names that were substantially similar to “Transamerica,” and its registered marks, such as “Transamericalifeins.com.” When internet consumers arrived at the website, the plaintiff alleged, they encountered the Transamerica service mark, and upon clicking it, would be “duped into believing they [were] accessing the well-known Transamerica, but instead [were] directed to other entities selling comparable products.” Id. at 1358. The plaintiff further alleged that the “ostensible owners of the infringing domain names are anonymous individuals or fictitious entities who are impossible to locate.” Id.

The defendants argued that these allegations did not satisfy either the inducement or the knowledge and control prong for contributory liability. See Id. at 1363, citing the two-prong standard under Inwood and the control element pursuant to Lockheed, supra. In rejecting this argument, the court noted that Transamerica had alleged that Moniker Online’s activity involved much more than merely registering the infringing domain names:

 

Moniker[did] not simply register a domain name and then go about its business. Instead, Moniker Online allegedly work[ed] with the registrant – generally a fictitious entity – along with Oversee and Moniker Privacy, in order to profit from the infringing use of its trademarks.

 

Id. at 1362. More specifically, the allegations against the defendants included conduct

 

enabling a class of customers comprised of fictitious entities and anonymous individuals to “monetize” counterfeit domain names, acting as their authorized licensee and/or otherwise in concert with them, profiting with them jointly in the process, concealing their identity when challenged, and intentionally or recklessly continuing to supply registration services to them with knowledge that they are fictitious entities engaged in trademark and service mark counterfeiting, or with willful blindness to that fact.

 

Id. at 1363. Finally, Transamerica alleged that the domain name registrar continued to register counterfeit domains to an entity in China “long after it would have been apparent to any registrar in Moniker’s position that its customer was using [its] services to engage in trademark or service mark counterfeiting…” Id.

Given the allegations in the complaint, the court rejected the defendants’ claim that Transamerica had failed to allege “specific knowledge or infringement” or “direct control over the infringing instrumentality.” Id. Any further discussion, the court noted, would go to matters of proof, not to the sufficiency of the complaint, and it therefore denied the motion to dismiss the claim for contributory counterfeiting and infringement. Id. at 1363-1364.

Where the court considered allegations that the domain name registrar had allegedly been “tricked” by the alleged direct infringer into divulging security information about its customer, the Chinese search engine “Baidu,” it dismissed the contributory liability claim against the registrar, “Register.com.” Baidu, Inc. v. Register.com, 2010 WL 2900313 (S.D.N.Y). Although the opinion is not clear as to the exact nature of the direct trademark infringement, much less of the contributory claim, the Baidu court nevertheless addressed in some detail the arguments raised by Register in its motion to dismiss. See Id. at *7.  It found that the immunity provisions of the Anticybersquatting Consumer Protection Act (“ACPA”) were inapplicable, because Register was not acting in its capacity as a registrar by registering or maintaining a domain name. As to the registrar’s secondary liability under Inwood et al., the court found further that Baidu failed to allege the requisite elements — inducement, monitoring and control, and knowledge — to sustain its claim. Id. at *8.

The dispute in this case arose out of a cyber-attack on Baidu by an unnamed individual referred to by the court as “the Intruder,” who pretended to be one of Baidu’s agents. The Intruder deceived one of Register.com’s service representatives into providing him with security information that enabled him ultimately to change the email address for Baidu on file with Register to a new one provided by the Intruder. Armed with this new, bogus email address, the Intruder accessed Baidu’s account with Register, and eventually re-routed Internet traffic from Baidu’s website to one called the “Iranian Cyber Army” site. Baidu contended that in the ensuing havoc, its operations were interrupted for five hours and took two days to fully recover, resulting in the loss of millions of dollars of revenue. Baidu, supra at *2-*3.

Baidu sued Register for its damages, asserting, inter alia, a claim for contributory trademark infringement. Baidu, supra at *1.  Specifically, Baidu alleged that “the Intruder’s use of the trademark “Baidu” in the domain name “baidu.com” … constituted trademark infringement, and that Register facilitated that infringement by providing the Intruder with access to Baidu’s account at Register.” Id. at *7.  As noted above, little in the opinion sheds light on the direct infringement claim against the Intruder. Register moved under Rule 12(b)(6) to dismiss the contributory liability claim on two grounds: (1) that it was immune from liability for trademark infringement under 15 U.S.C. Sec. 1114(2)(D)(iii) of the Lanham Act (the safe harbor provisions of the ACPA)  and (2) that the complaint failed to state a claim for contributory liability pursuant to Inwood and caselaw following it.

As to Register’s argument that it should be protected by the ACPA immunity provisions, the court disagreed, citing the plain language of the statute:

A domain name registrar, a domain name registry, or other domain name registration authority shall not be liable for damages under this section for the registration or maintenance of a domain name for another absent a showing of bad faith intent to profit from such registration or maintenance of the domain name.


Baidu, supra at *7 citing 15 U.S.C. Sec. 1114(2) (D)(iii) (emphasis added). The court consequently reasoned that the immunity provisions apply when a registrar registers or maintains a domain name for another. It found that Register’s actions, however, “went well beyond those of a mere registrar,” when it allowed the Intruder to compromise Baidu’s account. Id.

Note that it is not entirely clear why Baidu’s actions, or failure to act, would not involve “maintenance” of Baidu’s domain name, considering that administration of access for a domain is a typical aspect of domain maintenance. The court acknowledged that “while Register’s actions arguably concerned the maintenance of Baidu’s account with Register, they did not concern the maintenance of Baidu’s domain name.” Baidu, supra at *7 (emphasis added). The court did not elaborate, however, on the substance of this distinction. It simply found that because its actions “occurred in the context of security protocols and access to an account[,]” they went beyond those contemplated in the statute, and therefore rejected the immunity defense. Notwithstanding the inference from the allegations that there was an absence of “bad faith intent to profit” on Register’s part, the court did not reach that issue. Id.

Applying the Inwood test, however, the court found that Baidu failed to state a claim for contributory trademark infringement. Baidu, supra at *7- *8. Secondary liability arises, the court recited, when “a manufacturer or distributor intentionally induces another to infringe a trademark, or  … continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement. Id., citing Inwood. It further cited Hard Rock Café, Lockheed Martin, and Tiffany for the application of Inwood in the service provider context, noting the “direct control and monitoring” of the direct infringer required under Lockheed, and the specific knowledge of the infringement required under Tiffany. See Id.  Given the allegations that Register had been “tricked” by the intruder, the court found no allegation of inducement on Register’s part. Moreover, Baidu had not alleged any facts to show that Register directly controlled and monitored the Intruder. Id. at *8.  Finally, Register had no knowledge of the alleged infringement, other than general knowledge of the risk of cyber-attacks, which the court held fell short of the standard for contributory infringement under the cases. Id.

For a discussion of domain name registrar contributory liability prior to the Ninth Circuit’s decision in Lockheed II, see Academy of Motion Picture Arts and Sciences v. Network Solutions Inc., 989 F.Supp. 1276, 1279-1280 (C.D. Cal. 1997). In that case the plaintiff, “the Academy,” brought a preliminary injunction motion requiring NSI to cease its registration of domain names it contended infringed on its registered marks, “ACADEMY AWARDS” and “OSCAR.” Its claims for relief included contributory trademark infringement, to which the court applied the Inwood two-prong standard. Academy, 989 F.Supp. 1276, 1279-1280, citing Fonovisa v. Cherry Auction, 76 F.3d 259, 264 (9th Cir. 1996). (Note that the court supra at 1279-1280 also appears to have recited the standard for contributory copyright infringement; however, this does not seem to have misled its analysis.) In this case the court did not wrestle with the product/service dichotomy, but rather examined the knowledge requirement of the second prong of Inwood, namely, “that the defendant continued to supply a product knowing that the recipient was using the product to engage in trademark infringement.” Id.  It concluded that the Academy had not adequately proved that NSI had the requisite level of knowledge or control to support a likelihood of success finding, and therefore denied it preliminary injunction motion. Id.

In reaching its conclusion, the court compared NSI’s role as a registrar to the swapmeet owners in Fonovisa, supra. It noted that while in Fonovisa the swapmeet owner was aware that infringing goods were being sold on its property, NSI “could not possibly have actual knowledge that the registered owners of the domain names at issue [were] involved in infringing activities.” Academy, supra at 1280. It observed further that while the swapmeet owner and its vendor shared the same physical space, NSI and its registrants “have no physical contact and no contact even in “cyberspace” following the initial registration.” Id. Note that, notwithstanding the court’s reliance on NSI’s lack of  “actual knowledge,” the Ninth Circuit in Fonovisa clearly does not require such actual knowledge, but rather expressly endorses the Hard Rock Café court’s willful blindness standard. See Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 265 (9th Cir. 1996).

For a discussion regarding the interface between the Anti-Cybersquatting Protection Act (ACPA) safe harbor for domain name registrars (Lanham Act Sec. 32 (2) (D), 15 U.S.C. 1114(2) (D)) and contributory liability doctrine, see Petroliam Nasional Berhad v. Godaddy.com, Inc., 2010 WL 361970 (C.D. Cal)(acknowledging the applicability of contributory infringement standards to claims of contributory cybersquatting, but granting defendant’s motion for judgment on the pleadings with leave to amend); Ford Motor Co. v. GreatDomains.com Inc., 177 F.Supp.2d 635, 646-647 (E.D. Mich. 2001)(rejecting plaintiff’s contributory liability claim against a domain name auction site, because plaintiff failed to meet “heightened” knowledge requirement in light of underlying policy of the ACPA). And see Solid Host, NL v. Namecheap, Inc, 2009 WL 2225726, *14- *19 (C.D. Cal.), a case of first impression in which the court, on motion to dismiss, sustained the contributory cybersquatting  liability claim against the domain name registrar, where the registrar acted in its capacity as registrant of the “stolen” domain name. Relying on the court’s language in Ford Motor Co., supra., the court held that “’exceptional circumstances’ must be shown to prove the degree of knowledge required to impose contributory liability for cybersquatting. Solid Host, supra at *18, citing Ford Motor Co., 177 F.Supp.2d at 647. Contributory cybersquatting is discussed in further detail in Section II.D.2.(f).

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