October 2011 Issue

Civil Cases

Louis Vuitton Malletier S.A. v. Akanoc Solutions, Inc.,
2011 WL 4014320 (9th Cir. Sept. 9, 2011)

ABSTRACT
Plaintiff Louis Vuitton Malletier S.A. (“Vuitton”) sells luxury goods under the famous LV mark.  Defendant Akanoc Solutions, Inc. (“Akanoc”) provided web-hosting services to websites selling counterfeit LV goods.  Despite numerous notices of infringement sent by Vuitton placing Akanoc on notice of the counterfeit websites and requesting their removal from Akanoc’s hosting service, Akanoc neither responded nor removed the infringing content.  Vuitton sued Akanoc for contributory trademark and copyright infringement.  The jury found Akanoc liable for contributory trademark counterfeiting and infringement, and awarded damages of $10,500,000 each against the web-hosting company and two other defendants.  On appeal, the Ninth Circuit affirmed the finding of contributory counterfeiting and infringement against the hosting company.

CASE SUMMARY

FACTS
Vuitton sells luxury goods under the mark LV.  Akanoc provided web-hosting services.  From 2006 to 2007, Vuitton sent eighteen notices of infringement to Akanoc documenting trademark and copyright infringement on websites hosted by Akanoc that sold counterfeit LV goods and demanding that Akanoc remove the infringing content.  Akanoc neither responded to these notices nor removed the infringing content.  Vuitton sued for contributory trademark infringement/counterfeiting and copyright infringement.  The jury returned a verdict for Vuitton, holding Akanoc liable for willful contributory trademark and copyright infringement.  The jury awarded $10,500,000 for contributory trademark infringement/counterfeiting against each of the defendants for a total of $31,500,000.  The district court denied Akanoc’s motion to set aside the jury verdict and Akanoc appealed.

ANALYSIS
The Ninth Circuit affirmed the jury’s finding of liability, holding that Akanoc “continued to supply its services to one who it knew, or had reason to know, was engaging in trademark infringement.”  Akanoc also had “direct control and monitoring of the instrumentality used by a third party to infringe” Vuitton’s marks.  Akanoc argued that the jury instructions failed to differentiate between Akanoc’s web-hosting services on the one hand and the websites operated by Akanoc’s customers that were the “means of infringement” on the other hand.  The Ninth Circuit, however, agreed with the district court that Akanoc “physically host[ed] websites on [its] servers and route[d] internet traffic to and from those websites,” the Internet equivalent of “leasing real estate.”  According to the Ninth Circuit, Akanoc had control over the “services and servers” provided to its customers, and had “direct control” over the “master switch” that “kept the websites online and available.”

Akanoc also argued that the jury instructions were erroneous because its contribution to the infringement had to be “intentional” to be actionable.  The Ninth Circuit disagreed, holding that Vuitton had to prove only that Akanoc “provided [its] services with actual or constructive knowledge that the users of their services were engaging in trademark infringement.”  In short, there was no requirement of an “express finding of intent.”  Turning to damages, Akanoc argued that 15 U.S.C. § 1117(c) does not authorize statutory damages for counterfeiting against contributory infringers because it requires defendants to actually “use . . . [the] counterfeit mark.”  The Ninth Circuit disagreed, holding that Section 1117(c) expressly applies to any cases “involving the use of a counterfeit mark” (emphasis added).  In calculating damages, the jury awarded $10,500,000 in statutory damages per defendant for the infringement of thirteen of Vuitton’s trademarks for a total of $31,500,000 in damages.  The Ninth Circuit, however, vacated the judgment, finding “no legal basis for multiplying the award by the number of defendants.”  According to the court, Section 1117(c) “entitles a plaintiff to an award, not multiple awards.”  Accordingly, the Ninth Circuit remanded the case to the district court with instructions to award total damages in the amount of $10,500,000 for contributory trademark damages.

CONCLUSION
This decision is of interest because it is one of the few decisions holding an online-services provider liable for contributory trademark counterfeiting and infringement.  This decision should cause web-hosting companies to implement a system for responding to legitimate objections of trademark owners.