ISPs Could Be Liable for Web Sales of Counterfeit Goods

by Thomas Long, Legal Editor, CCH Trademark Law Guide

Internet service providers could have engaged in contributory trademark infringement by providing hosting services to websites that allegedly sold counterfeit goods bearing marks owned by luxury goods distributor Louis Vuitton Malletier (Vuitton), according to the federal district court in San Jose, California. Vuitton could proceed with its claims that the ISPs were liable for the third-party website operators' direct infringement.

Third-Party Direct Infringement

Vuitton had made "evidentiary purchases" of products from websites it determined were hosted by the ISPs and were selling counterfeit products. Each product purchased was deemed by Vuitton's "anti-counterfeiting coordinator" to be a counterfeit. In addition, a private detective testified that he purchased "Louis Vuitton"-branded products from websites hosted by the ISPs and forwarded those products to Vuitton to be analyzed for authenticity. Internal e-mail messages sent by employees of the ISPs discussed attempts to remove websites selling counterfeit Louis Vuitton products. Thus, a finder of fact could reasonably determine that the ISPs hosted directly infringing websites, the court said.

Contributory Infringement

A reasonable jury could find that ISPs had actual knowledge that infringing websites were using their services and that the ISPs had sufficient control over the websites to be liable for contributory infringement. The internal e-mail messages, letters from Vuitton's counsel to the ISPs' counsel, and other complaint letters regarding sales of counterfeit merchandise on sites hosted by the ISPs could support a finding of knowledge, in the court's view.

With regard to the question of control, Vuitton presented evidence that the ISPs had the ability to disable individual IP addresses and thereby remove websites using their servers. The ISPs did not merely translate domain names into IP addresses, the court said. They physically hosted websites on their servers and routed Internet traffic to and from those websites. This service was the Internet equivalent of leasing real estate. The ISPs were analogous to flea market operators and could not remain "willfully blind" to trademark infringement taking place on their servers.

Vicarious Infringement

Vuitton could not go forward, however, with its claims of vicarious trademark infringement. There was no evidence indicating that the ISPs had a relationship with a direct infringer that was so close as to be an actual or apparent partnership. Vuitton did not rebut testimony by the ISPs' principal that the ISPs dealt only with resellers of their hosting services and did not have direct contact with website operators.

Louis Vuitton Malletier, S.A., ND Cal., ¶61,355

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