If you’ve read my article in The Trademark Reporter, you’re aware of my obsession with intermediate liability cases. We discuss at length the Akanoc decision in which three defendants, including a California web hosting company, was hit with $32 million plus in damages, for not taking down websites devoted to selling counterfeit goods.
The Ninth Cricuit has now reviewed Akanoc and affirmed its holding on intermediate liability. I emailed West Coast cyber-star lawyer Ian Ballon, and asked him what he thought of the decision, especially its emphasis that defendant exercised control over the infringement because it exercised control of a ‘master switch’ over the servers (See discussion beginning at p. 17248 below). Ian responded:
The Ninth Circuit has been fixated on servers since its adoption of the server test in Perfect 10 v Amazon.com. While servers may be relevant under copyright law (ie, was there a distribution, reproduction, etc?) I am not sure the same concept applies under the Lanham Act, which is focused on use in commerce (not use on servers). I am not sure this is the best test either for trademark owners or service providers. On the one hand, it would not be difficult for an infringer to use offshore servers to limit its risk of liability. On the other hand, a legitimate service provider cannot reasonably be expected to know what its customers are doing simply because a piece of hardware is under its control. The real issue should be whether the service provider is responsive when it has knowledge of infringement, which here seems not to have been the case.
Thank you to Ian. Here’s a prediction: fewer off-shore counterfeiters using California web-hosting companies.
Prof Goldman blogs the case here.