Louis Vuitton v. Akanoc: Letters to ISP Demanding Takedown of Infringing Websites Played Critical Role in Jury Finding that ISP Had Knowledge of Trademark Infringement
Digital media law: As reported yesterday by Jaikumar Vijayan of ComputerWord.com, on August 28, a San Jose, California jury reached verdict in excess of $32M favor of Louis Vuitton Malletier against ISP operator Akanoc Solutions, Inc. and related defendants on contributory trademark and copyright infringement claims. Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., U.S.D.C., Northern District of California, Case No. C07-03952. The contributory trademark infringement claims in this case are similar to those raised in Tiffany v. eBay. Tiffany (NJ) Inc. v. Tiffany and Co., 576 F.Supp2d 463 (S.D.N.Y. 2008). However, the trials in the two cases have produced opposite results, largely based on the differing views taken by the courts of the evidence that can be used to show knowledge of infringing activity.
Louis Vuitton is the distributor of the well-known line of luxury handbags that bear the distinctive LV trademark. Akanoc offers traditional ISP webhosting services. However, its website indicates that it specializes in providing English-language webhosting services to Chinese companies, to assist in their sale of goods into the U.S. Its site states that "Attracting American clients through use of an online web presence is the key to success!" and that " Our company specializes in creating unique solutions to solve urgent needs of information exchange between the two nations based on the extensive background knowledge of the Chinese economy."
In 2006-2007, Louis Vuitton had its investigators purchase goods sold using its trademarks from websites hosted by Akanoc. Each item purchased was sent using a return address in China. After inspection, Louis Vuitton concluded that the goods were counterfeit. Louis Vuitton then sent letters to Akanoc identifying the websites that it believed were selling counterfeit goods and asking Akanoc to take down the sites. Akanoc acted to take down at least some of the sites. However, in its amended complaint, Louis Vuitton identified dozens of infringing websites that it claimed were still operational as of July 2008.
Louis Vuitton went forward at trial solely on contributory trademark and copyright infringement theories -- and prevailed on both of these claims, winning a jury award of $31.5M on its trademark claims and $900,000 on its copyright claims. Trial documents indicate that this victory was, at least in part, the result of the relaxed view taken by Judge James Ware of the evidence that is admissible and/or sufficient to establish a defendant's knowledge of the presence of infringing activity by the users of its services.
In Inwood Labs, Inc. v. Ives Labs, Inc., 456 U.S. 822, 102 S.Ct. 2182 (1982), the U.S. Supreme Court stated that "if a supplier of 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." Id. at 855. These rules have been held to apply whether the supplier is providing an ingredient for the infringer's product, or a service, such as space in a flea market, for the infringer to sell his wares. Hard Rock Café Licensing Corp. v. Concession Services., Inc., 955 F.2d 1143, 1148-49 (7th Cir. 1992).
In Tiffany v. eBay, Tiffany attempted to establish the "know or had reason to know" prong of Inwood by: (i) introducing demand letters that it sent eBay in which it stated that large quantities of counterfeit merchandise were being sold on eBay, (ii) by introducing the fact that it had told eBay that Tiffany's investigation had determined that 73.1% of the Tiffany items it purchased in 2004 were counterfeit, and (iii) by introducing the thousands of takedown notice forms that it sent eBay alleging that specific listings were counterfeit.
However, Judge Sullivan, of the Southern District of New York, found that such evidence only gave eBay generalized knowledge the infringing activity was occurring on its site, and that specific knowledge of infringement was necessary to satisfy the Inwood knowledge requirement. Under its business model, eBay never had the chance to physically inspect the goods sold through its site and, even if it had possessed this ability, would not have been able to distinguish genuine goods from counterfeits. Moreover, Tiffany admitted that some genuine goods were sold on eBay. As such, eBay's generalized knowledge that some counterfeits were present was not "sufficient to impute knowledge to eBay of any specific acts of actual infringement."
The plaintiff in Louis Vuitton v. Akanoc relied on these same categories of evidence to establish the "knowledge" element for contributory infringement. One major group of evidence introduced by Louis Vuitton was internal emails sent from the defendants to the operators of its websites that referred to takedown notices the defendants had received from various trademark holders. A number of emails read along these lines:
"Dear Sir: We have received letter complaint from legal authority that your server . . . is hosting website: watchesreplica.net which engaged in sale of counterfeit products. Please take down the specific website immediately, or we will disconnect the abuse IP. Thanks for your cooperation. Security SS."
Other evidence included demand letters from putative trademark holders demanding takedowns, including letters and emails from Lacoste, various Swiss watch manufacturers, and Louis Vuitton itself. See Louis Vuitton v. Akanoc, Opposition to MIL #5, Docket No. 118.
While Akanoc attempted to exclude these documents as evidence of subsequent remedial measures, Judge Ware concluded that its was admissible "to show Defendants' knowledge of and control over infringing websites." See Order re: Motions in Limine, Docket No. 183. According Louis Vuitton's briefing during trial, this evidence was presented to the jury as evidence of Akanoc's actual and/or constructive knowledge of infringement. And, it appears to have been the primary evidence relied on by the jury for their finding that Akanoc had knowledge of infringing activity. See Opposition to Rule50(a) Motion, Docket No. 214.
There are other differences between the two cases. eBay appears to have state of the art systems in place to gather and respond to trademark and copyright infringement claims. Louis Vuitton's counsel told me that the evidence showed that Akanoc's response to trademark and DMCA takedown notices was far less effective. However, the opposite result in the two cases also reflects the two District Court's differing views on the evidence necessary to show knowledge of infringement. Perhaps these differing views of the knowledge requirement will be resolved when the 2nd Circuit reaches a decision in Tiffany v. eBay (or by the 9th Circuit, if the Louis Vuitton case is appealed).
The take-away for digital media companies that provide services to third party sellers is that it is critical to set up and maintain a system for appropriately responding to notices of trademark and copyright infringement. Ignoring this area of compliance could cost you your business.
David D. Johnson is a business lawyer whose practice focuses on litigation and other issues relating to digital media and consumer electronics companies. David can be contacted at (310) 785-5371 or DJohnson@jmbm.com.
