Internet service providers (ISPs) were liable for willful contributory trademark infringement for providing hosting services to websites that allegedly sold counterfeit goods bearing marks owned by luxury goods distributor Louis Vuitton Malletier (Vuitton), the federal district court in San Jose, California has ruled. A jury's award of $10.5 million in statutory damages was allowed to stand, and the ISPs were permanently enjoined from further contributory infringement.

Likelihood of Confusion

The underlying conduct of the operators of the websites hosted on the ISPs' servers was likely to cause consumer confusion, the court said. The websites advertised, offered for sale, and sold a variety of counterfeit goods imitating Vuitton's products. The counterfeit products were advertised and sold as "replicas" of Vuitton's products.

Although the evidence was insufficient to establish that the owner of the computer equipment hosting the sites had sufficient knowledge of the underlying misconduct to be liable for contributory trademark infringement, the evidence showed that the ISP defendants knew of the direct infringement occurring on websites hosted on their servers. The ISPs were in a position to directly control and monitor the instrumentality (the servers) used by the third party direct infringers, according to the court.

Statutory Damages

The jury's statutory damages award was within the statutory maximum. The Lanham Act provided that statutory damages for willful trademark infringement may be awarded at a rate of up to $1 million per counterfeit mark per type of goods or services sold, offered for sale, or distributed. The award was not so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable, the court determined.

Injunctive Relief

Vuitton was entitled to a permanent injunction barring the ISPs from hosting websites that sold counterfeit Vuitton goods. Vuitton would suffer irreparable harm in the absence of injunctive relief; the presence of counterfeit products in the market would dilute the exclusivity of Vuitton's products in a manner that could not easily be compensated with monetary damages.

Granting the injunction would merely require the ISPs to enforce their own terms-of-use policies and come into compliance with federal statutes that a jury had found that the ISPs violated, the court said. Denying an injunction would create a situation in which Vuitton could only enforce its intellectual property rights by seeking statutory damages. Thus, the balance of hardships weighed in favor of granting the injunction. The injunction would serve the public interest.

Louis Vuitton Malletier, S.A., ND Cal., ¶61,591.