If your brand name products are protected by registered trademarks and copyright, you now have a new weapon in the fight against counterfeit goods being sold on Internet websites thanks to the folks at Louis Vuitton. The luxury goods maker just won a jury verdict against web hosting company Akanoc Solutions, Inc., Managed Solutions Group, Inc. and Akanoc’s founder Steven Chen to the tune of $32.4 million in damages. The federal district court is also expected to issue a permanent injunction prohibiting the defendants from hosting websites that sell goods that infringe on Louis Vuitton’s trademarks and copyrights. Ca-ching!
The decision was issued earlier this week and as of this writing may still be appealed. But it is still significant because until this case came along Internet web hosting companies typically sidestepped liability for contributory infringement – they simply claimed they didn’t know and were uninvolved with the web content they were hosting.
That was the battle high-end jeweler Tiffany has fought for years. It unsuccessfully pursued eBay in court claiming the online auction website contributed to the sale of counterfeit Tiffany look-alikes by turning a blind eye to its online vendors. Tiffany is appealing those decisions and this new Louis Vuitton decision will no doubt help.
What’s striking about the Louis Vuitton case is that Louis Vuitton claimed “most, if not all” of the sites hosted by Akanoc and Managed Solutions Group were selling knock-off LV products. It suggested a pretty high level of mischief. In addition, internal Akanoc e-mail indicated that the company was aware of the counterfeit complaints, but took no action. In particular, one of Steven Chen’s e-mails said, “we just don’t have a lot of experience with [complaint letters], and we don’t have any mechanism to take care of letter complaints.”
That attitude and the lack of responsibility it represents did not sit well with the jury. Even though Akanoc had a web hosting use policy, they failed to enforce it. As a result of their lax enforcement their hosting service became a fertile ground for vendors selling counterfeit goods and that formed the basis for extending the legal theory of contributory liability. It means that if you know, or should have known, that your business is facilitating an illegal activity the failure to take action can make you legally liable.
Several important lessons can be drawn from this case:
1. Toothless policies are useless. To be effective, policies must be enforced. If you don’t know how to enforce them, get some help. Make the effort to find a way.
2. Ignoring a problem and playing ostrich by putting your head in the sand only makes your backside a bigger target. In this case the price tag on the target was $32.4 million — $31.5 for contributory trademark infringement and $900,000 for contributory copyright infringement.