IP/TECH UPDATE: When Web Hosting Leads to “Contributory” Trademark and Copyright Infringement

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In a decision issued on September 9, 2011, the Ninth Circuit Court of Appeals explained how web hosting – leasing server space, bandwidth, and Internet Protocol addresses to customers with websites – can sometimes result in liability for “contributing” to the website owner’s trademark and copyright infringement.

Well known luxury fashion company Louis Vuitton Malletier, S.A. owns many trademarks and copyrights protecting its brand and reputation. While policing its intellectual property, Louis Vuitton discovered websites based in China selling counterfeit “Louis Vuitton” products. Those websites used IP addresses assigned to Managed Solutions Group (MSG). MSG leased servers, bandwidth, and IP addresses to Akanoc Solutions, Inc., an entity managed by Steven Chen. Akanoc, in turn, leased the server space, bandwidth, and IP addresses to its customers who operated the infringing websites. Louis Vuitton sent 18 Notices of Infringement demanding the removal of the infringing content from the servers, but received no response.

Louis Vuitton sued MSG, Akanoc, and Chen for contributory trademark and copyright infringement. The jury returned a verdict for Louis Vuitton, holding all defendants liable for “willful” contributory infringement of 13 trademarks and 2 copyrights, and awarding over $32 million in statutory damages. In post-trial motions, the district court discarded the jury verdict only against MSG, holding that MSG did not sell domain names or operate the servers – it only owned and leased the hardware operated by Akanoc and Chen. Both sides appealed.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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