Reviews the origin of secondary liability, specific places where it arises, and remedies

1. SECONDARY LIABILITY FOR TRADEMARK
INFRINGEMENT AND THE INTERNET
BY:
DARIN M. KLEMCHUK

2. Overview
• Origin of Secondary Liability
• Specific Places Where it Arises
• Remedies
• Take Aways
Domain Name
Registrars
Internet
Websites
ISPs
Affiliate
Marketing
Online
Marketplace
Search Engine
Companies

3. Vicarious Liability
Based on the non-infringer’s relationship to the infringer:
• Principal/Agent = Vicarious Liability
• Partnership = Vicarious Liability
• Joint Venture = Vicarious Liability

4.
Background of Secondary Liability
Contributory Liability
- Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982)—a TWO PART TEST
Defendant Ives Laboratories (Supplier of
Generic Pills)
Pharmacist (Direct Infringer)
Added “CYCLOSPASMOL” labels to
Generic Pills
Retail Consumers

5. Contributor liability could attach in two types of cases
involving products:
(a) If a manufacturer or distributor intentionally induces
another to infringe a trademark…
OR
(b) If a manufacturer or distributor continues to supply its
product to one whom knows or has reason to know is
engaging in trademark infringement…
The case did not reach the issue of whether a supplier of
service could be liable for contributory infringement

6. Domain name registrars have not typically been held contributorily liable without some sort of
action outside “core” registering activities.
Lockheed concluded that direct control and monitoring of the instrumentality used by a third
party to infringe the plaintiff’s mark permits the expansion of Inwood’s ‘supplies a product’
requirement of contributory infringement. However, monitoring and controlling the
instrumentality of the infringement must be coupled with proof that the defendant have
actual or constructive knowledge of the alleged infringement.
Lockheed Martin Corporation v. Network Solutions, Inc.
Specific Instances Where it Arises:
Domain Name Registrars

7. 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.
Faredeals.com
Specific Instances Where it Arises:
Internet Websites

8. The level of an ISP’s knowledge of its customer’s infringing website and its involvement in the
same directly determines its liability.
Demand letters, take-down notices, and reminders that identify specific websites selling
counterfeit goods support a finding of “knowledge” in a contributory liability case.
Louis Vuitton Malletier, S.A. v. Akanoc Solutions
Specific Instances Where it Arises:
Internet Service Providers (“ISP’s”)

9. The court established that trademark owners have the burden of policing their trademarks in
online marketplace websites, where online marketplace owners provide an adequate
process to remove potentially infringing listings once reported.
Tiffany Inc. v. eBay, Inc.
Specific Instances Where it Arises:
The Online Marketplace

10. The primary issue in online advertising cases tends to be whether the ad creates confusion as to
its source. In the context of keyword-linked search results, infringing ads are the ones that
fail to identify the true source of the ad, either by falsely identifying the ad as being from the
trademark holder or by giving no indication as to the source of the ad.
1-800 Contacts, Inc. v. Lens.com, Inc.
Specific Instances Where it Arises:
Affiliate Marketing

11. A search engine company’s potential contributory liability stems from its sale of trademarks,
used as keywords or search terms, to third parties.
While the current state of the law is uncertain with respect to the extent necessary of a search
engine company’s involvement to constitute contributory liability, some courts have found it
only where the search engine company knowingly continued to supply its services to an
infringing third party.
Rosetta Stone Ltd. v. Google Inc.
Specific Instances Where it Arises:
Search Engine Companies

12. Remedies Available
• Lanham Act (15 U.S.C. Section 1117)
– Subsection (b)(2) specifically addresses contributory
counterfeiting
• Plaintiff can elect statutory damages or defendants’ profits or plaintiff’s
actual losses resulting from the infringing activity
• Law regards contributory and direct infringers as joint tortfeasors
• Injunctive Relief under 15 U.S.C. Section 1116(a)
• Damages under applicable state law under various
state unfair competition laws

13. Summary and Take Aways
Domain Name Registrars – usually lack requisite
knowledge and control over direct infringer.
Advertising on Website – Advertisers who merely place
banner ads on infringing websites generally not liable
for contributory infringement.

14. Summary and Take Aways
Search Engines – trend is to find no contributory liability
for keyword sales, but to find “use in commerce.” Rosetta
Stone may change all that.
IPS – may be liable for contributory infringement
depending on degree of knowledge and control over
infringing website they host.

15. Summary and Take Aways
Marketplace Websites – liability hinges on the degree of
specific knowledge the marketplace website host had
of direct infringing or counterfeiting.
Affiliate Marketing – Primary issue in online advertising
tends to be whether the ads creates confusion.

16. Key Take Aways
Trademark Owner – Provide significant notice of
infringement to all third parties and request action.
End User/Third Party – Take any notices seriously.

18. Darin Klemchuk is co-founder and managing partner of Klemchuk LLP, a Dallas-
based IP boutique law firm that offers comprehensive intellectual property legal
services, including litigation and enforcement of all forms of intellectual
property as well as registration and licensing of patents, trademarks, trade
dress and copyrights. To contact Mr. Klemchuk, email him at
darin.klemchuk@klemchuk.com