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March 16, 2011
Jury Awards Damages Against Web Designer/SEO/Host on Contributory Trademark Infringement Theory--Roger Cleveland v. Prince
By Eric Goldman
I blogged about this case back in December. That ruling was a puzzling head-scratcher holding that a web design/SEO/host firm working with an alleged online retailer of counterfeit goods could be liable for contributory trademark infringement. The ruling didn't make any sense substantively, but the court clearly didn't appreciate the defense counsel's 1.5 page citationless summary judgment brief. The court separately ruled that the website did engage in counterfeiting--thus removing that issue from the jury's consideration--leaving two principal questions for the jury: (1) was the designer/SEO/host secondarily liable, and (2) damages.
The jury concluded that the designer/SEO/host was in fact contributorily liable and that both the website and the designer/SEO/host willfully infringed. The jury then awarded $28,250 in total damages against the website operator and $770,750 in total damages against the designer/SEO/host. As big as these numbers are, they are a drop in the bucket compared to the theoretical case maximum--the jury could have awarded statutory damages for willful counterfeiting of $2M per mark, or $22M in this case.
There are many puzzling aspects of the jury's verdict, but the one that has had me scratching my head all day is how the jury could award greater damages against the contributory infringer than it awarded to the direct infringer--28X greater. We've seen other massive damage awards against contributory IP infringers, but usually those awards are an amalgamation of many individual direct infringers' activities. Here, the jury verdict is only predicated on a single customer's infringement but awards 28X the damages against the secondary infringer. I think I'm missing something big.
The conclusion that the designer/SEO/host infringed willfully is also noteworthy. I haven't gone through the jury arguments, but the earlier ruling hinted that the designer/SEO/host coaxed the web operator into the counterfeiting world and was optimized for providing services to counterfeiting websites. The prior ruling did an absolutely horrendous job explaining exactly what the designer/SEO/host did wrong (a partial reflection of the unhelpful advocacy by its defense counsel), so we don't have a good sense of how likely it is that other web designers or SEOs/hosts will be sucked into the same liability trap. I do think we have some good reason to believe that courts are allergic to the entire "copycat"/"replica" business. Those code-words aren't fooling anyone.
Plaintiff's counsel released a press release touting their victory, saying:
This represents the first time that an SEO/Web Host or other Internet Intermediary was found liable for contributory infringement without having first received actual notification of the counterfeit sales from a third party. The case was presented and pursued by Cleveland Golf/Srixon based on a theory that Bright Builders knew or should have known of the infringing conduct based on the name of the website, the content of the website, and certain discussions Bright Builders had with Prince regarding his web site.
The NLJ article has more chest-beating.
I agree that I can't think of another case where contributory trademark infringement has been found online without so much as a takedown notice. I disagree that this portends a new era of secondary trademark liability; instead, I think it reinforces the likelihood that this case is a one-off attributable to a confluence of things that went wrong (starting with that 1.5 page summary judgment motion).
Even so, I expect that trademark owners will be revving up their engines looking for new defendants. Already, recently I've been hearing a lot of gleeful talk from trademark owners about the utility of the Akanoc case and especially the Gucci v. Frontline case to their enforcement efforts. This case completes a troika of cases in the past year where service providers to counterfeiters have gotten nailed. As the saying goes, bad things come in threes, and three may be the magic number to unleash a flood of new litigation.
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