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Case Numbers 10-15909/10-16015
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Louis Vuitton Malletier, S.A.,Cross-Appellant/Plaintiff
v.
Managed Solutions Group, Inc.Cross-Appellee/Defendant
____________________________________________
Akanoc Solutions, Inc. and Steve Chen,Appellants/Defendants
v.
Louis Vuitton Malletier, S.A.,Appellee/Plaintiff
Appeals from a Judgment of the United States District Court,Northern District of California, San Jose Division, Case No. 5:07-cv-03952 JW
Hon. James Ware, United States District Judge
PRINCIPAL AND RESPONSE BRIEF OF
CROSS-APPELLANT/APPELLEE/PLAINTIFF
J. Andrew Coombs (SBN 123881)Annie S. Wang (SBN 243027)
J. Andrew Coombs, A Professional Corporation517 East Wilson Avenue, Suite 202, Glendale, California 91206
Telephone: (818) 500-3200Attorneys for Plaintiff/Appellee/Cross-Appellant
Louis Vuitton Malletier, S.A.
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CORPORATE DISCLOSURE STATEMENT
Pursuant to Rule 26.1(a) of the Federal Rules of Appellate Procedure,
Appellee and Cross-Appellant Louis Vuitton Malletier, S.A. identifies LVMH
Mot Hennessy Louis Vuitton S.A. as its parent corporation.
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TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENT ........................................................... i
JURISDICTIONAL STATEMENT ............................................................................. 1
ISSUES PRESENTED FOR REVIEW ........................................................................ 1
STATEMENT OF THE CASE ..................................................................................... 2
STATEMENT OF FACTS ........................................................................................... 3
A.Louis Vuitton, Its Valuable Intellectual Property Rights and theHarm Caused By Counterfeiting and Piracy............................................ 3
B.Emergence of Defendants as Attempted Bulletproof Hosts ................ 71. Defendants Negligent Handling of Louis Vuittons Notices ................ 102. Defendants Manifold Means of Controls .............................................. 12
SUMMARY OF ARGUMENT .................................................................................. 16
ARGUMENT ON APPEAL
A.Defendants Refusal To Use Tools Available to Them To DisableAccess to Infringing Offers After Repeated Notices of Infringement
Makes Them Liable for Contributory Trademark Infringement ........ 211. The Standard of Review ......................................................................... 212. Abundant Evidence Proved Each Element of Contributory
Infringement ........................................................................................... 22
3. Defendants Had Control Over the Underlying Direct InfringementThrough a Variety of Tools .................................................................... 24
4. Uncontroverted Evidence of Numerous Written Notices TransmittedBefore and During the Litigation Amply Evidenced DefendantsActual Knowledge .................................................................................. 26
5. The District Court Did Not Abuse Its Discretion in Presenting theCase to the Jury ...................................................................................... 27
6. Intent is Not an Element of Contributory Trademark Infringement ...... 357. The Staple Article of Commerce Doctrine is Inapplicable .................... 38
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TABLE OF AUTHORITIES
CASES
A&M Records v. Napster, Inc. (Napster),239 F.3d 1004 (9th Cir. 2001) ........................................................... 23, 27, 29, 36-41
Academy of Motion Picture Arts & Sciences v. Creative House Promotions, Inc.,944 F.2d 1446, 1456 (9th Cir. 1991) ........................................................................ 33
Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079, 1087 (9th Cir. 2005) .................... 28
AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-54 (9th Cir. 1979) ........................ 33
Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 255,106 S. Ct. 2505; 91 L. Ed. 2d 202 (1986) ................................ 56
Arista Records LLC v. USENET.com,633 F. Supp. 2d 124, 158 (S.D.N.Y. 2009) ............................................................. 38
Bell v. Clackamas County, 341 F.3d 858, 865 (9th Cir. 2003) ................................... 21
Blanton v. Mobil Oil Corp., 721 F.2d 1207, 1216 (9th Cir. 1983) ............................. 44
Broadcast Music, Inc. v. Star Amusements, Inc.,44 F.3d 485, 487 (7th Cir. 1995)......................................................................... 44, 54
Brookfield Communs. v. W. Coast Entmt Corp.,174 F.3d 1036, 1056 (9th Cir. 1999) ....................................................................... 31
Cable/Home Communication Corp. Network Prods., Inc.,902 F.2d 829, 845, 846 n.29 (11th Cir. 1990) .................................................... 36, 40
Chalmers v. City of Los Angeles, 762 F.2d 753, 760 (9th Cir. 1985) ....................... 44
Columbia Pictures Industries Inc. v. Krypton Broadcasting of Birmingham, Inc.,259 F.3d 1186 (9th Cir. 2001) ............................................................................ 52, 54
The Comm. for Idahos High Desert, Inc. v. Yost,92 F.3d 814, 823 (9th Cir. 1996) ............................................................................ 48
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Crystal Semiconductor Corp. v. Tritech Microelectronics Intl,246 F.3d 1336, 1361 (Fed. Cir. 2001) ..................................................................... 43
Douglas v. Cunningham,294 U.S. 207, 210, 79 L. Ed. 862, 55 S. Ct. 365 (1935) .................................... 44, 54
Dream Games of Ariz., Inc. v. PC Onsite, 561 F.3d 983, 992 (9th Cir. 2009) ..... 51-52
F.W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228, 223 (1952) .................... 52
Fonovisa, Inc. v. Cherry Auction, Inc. (Fonovisa),76 F.3d 259 (9th Cir. 1996) ................................................... 22-23, 25, 27, 29, 41-42
Gilbrook v. City of Westminster, 177 F.3d 839, 847-48 (9th Cir. 1999) ....... 21, 55-56
Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir. 2001) ................................ 21
Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282, 1297 (9th Cir. 1984) ..................... 44
Hard Rock Caf Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143,1149 (7th Cir. 1992) ................................................................................................. 25
Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984) ........................ 52
Henry v. Lehman Commer. Paper, Inc., 471 F.3d 977, 1001 (9th Cir. 2006) ............. 45
Hewlett-Packard Co. v. Bausch & Lomb Inc.,909 F.2d 1464, 1469, 15 U.S.P.Q.2D (BNA) 1525, 1528 (Fed. Cir. 1990) ............ 43
In re Aimster Copyright Litigation, 334 F.3d 643, 650 (7th Cir. 2003). ..................... 37
International Union of Bricklayers & Allied Craftsman Local Union No. 20, AFL-CIO v. Martin Jaska, Inc., 752 F.2d 1401, 1404 (9th Cir. 1985) ............................. 63
Inwood Labs., Inc. v. Ives Labs. Inc., 456 U.S. 844, 854, 102 S. Ct. 2182, 72 L. Ed.2d 606 (1982) ......................................................................................... 22-23, 27, 35
Johnson v. Paradise Valley Unified Sch. Dist.,251 F.3d 1222, 1226 (9th Cir. 2001) ................................................................ 55-56
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Josephs v. Pacific Bell, 443 F.3d 1050, 1062 (9th Cir. 2006) .................................... 55
Karl Storz Endoscopy-Am., Inc. v. Surgical Techs., Inc.,285 F.3d 848, 854 (9th Cir. 2002) ............................................................................ 33
Kopczynski v. The Jacqueline, 742 F.2d 555, 560 (9th Cir. 1984) ............................ 63
L.A. News Serv. v. Reuters Television Intl,149 F.3d 987, 996 (9th Cir. 1998) ............................................................................ 51
Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817, 822 (9th Cir. 1980) ................. 33
Lindy Pen Co. v. Bic Pen Corp., 796 F.2d 254, 256-57 (9th Cir. 1986) .............. 31, 50
Lockheed Martin Corp. v. Network Solutions, Inc.,194 F.3d 980, 983 (9th Cir. 1999) ......................................................... 23, 25-26, 35
Los Angeles Memorial Coliseum Commn v. National Football League,726 F.2d 1381, 1398 (9th Cir. 1981) ................................................................. 22, 32
Los Angeles Memorial Coliseum Commn v. National Football League,791 F.2d 1356, 1360 (9th Cir. 1986) ........................................................... 22, 32, 44
Masson v. New Yorker Magazine, Inc., 85 F.3d 1394, 1397 (9th Cir. 1996) ............ 21
MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 934, 125 S. Ct. 2764, 162 L.Ed. 2d 781 (2005) (Grokster) ........................................................ 23, 27, 29,37-38
Novell, Inc. v. Unicom Sales, Inc., et al., No. C-03-2785 MMC, 2004 WL1839117, at *17 (N.D. Cal. Aug. 17, 2004) ............................................................ 48
Ostad v. Oregon Health Scis. Univ., 327 F.3d 876, 881 (9th Cir. 2003). .................. 21
Payless Shoesource, Inc. v. Reebok Intl Ltd.,998 F.2d 985, 989-90 (Fed. Cir. 1993) .................................................................... 33
Peer Intl Corp. v. Pausa Records, Inc.,909 F.2d 1332, 1336 (9
thCir. 1990) .................................................................. 52, 54
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Perfect 10, Inc. v. Amazon.com, Inc.,508 F.3d 1146, 1171-72 (9th Cir. 2007) ................................................. 23, 29, 39-40
Perfect 10, Inc. v. Visa Intl Serv. Assn,494 F.3d 788, 807 (9th Cir. 2007) .......................................................... 23, 29, 40-41
Phillip Morris USA Inc. v. Shalabi,352 F. Supp. 2d 1067, 1073 (C.D. Cal. 2004) ......................................................... 31
Phillip Morris USA Inc. v. Felizardo, 2004 U.S. Dist. LEXIS 11154, at *18(S.D.N.Y. June 18, 2004) ........................................................................................ 31
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 120 S. Ct. 2097, 2110,147 L. Ed. 2d 105 (2000) ......................................................................................... 56
Religious Technology Center v. Netcom On-Line Communication Services, Inc.(Netcom), 907 F. Supp. 1361, 1374 (N.D. Cal. 1995)....................... 23, 36, 38-40
Sealy, Inc. v. Easy Living, Inc., 743 F.2d 1378, 1382 (9th Cir. 1984) ........................ 23
Superior Form Builders, Inc. v. Dan Chase Taxidermy Supply Co., 74 F.3d 488(4th Cir. 1996) ......................................................................................................... 52
Swinton v. Potomac Corp., 270 F.3d 794, 805 (9th Cir. 2001) ................................... 21
Tiffany Inc. v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010) ............................................... 28
Theme Promotions, Inc. v. News Am. Marketing FSI, 546 F.3d 991, 999 (9th Cir.2008) ........................................................................................................................ 55
Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1021 (9th Cir.1985) ........................................................................................................................ 48
United States v. Candelaria, 704 F.2d 1129, 1132 (9th Cir. 1983) ...................... 22, 32
United States v. Marabelles, 724 F.2d 1374, 1382-83 (9th Cir. 1984)....................... 22
STATUTES
15 U.S.C. 1117 .......................................................................................43, 46, 51, 53
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17 U.S.C. 504 .......................................................................................................... 51
28 U.S.C. 1291 ........................................................................................................... 1
RULES
Fed. R. App. P. 4(a)(3) .................................................................................................. 1
Fed. R. App. P. 28.1(e)(2)(A) ..................................................................................... 65
Fed. R. App. P. 32(a)(7) .............................................................................................. 65
Fed. R. Civ. P. 50(b) ..................................................................................................... 3
Fed. R. Civ. P. 59 .......................................................................................................... 3
Circuit Rule 28-2.6 ...................................................................................................... 65
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JURISDICTIONAL STATEMENT
On May 3, 2010, pursuant to Fed. R. App. P. 4(a)(3), Louis Vuitton
Malletier, S.A. timely filed its Notice of Cross Appeal of the award of Judgment as
a Matter of Law to Defendant Managed Solutions Group, Inc. for contributory
copyright and trademark infringement and to the corresponding Judgment
Awarding Statutory Damages and Permanent Injunction, both filed on March 19,
2010.1 This Court has jurisdiction over this appeal pursuant to 28 U.S.C. 1291.
ISSUES PRESENTED FOR REVIEW
1. Is an Internet Service Provider (ISP) that strives to be a bulletproof hostby refusing to remove or disable access to direct infringements properly held
accountable for continuing contributory infringement of trademarks and
copyrights where it has repeatedly been given notice of the underlying direct
infringements?
2. Was the jurys award of damages within the statutory scheme provided byCongress for contributory trademark counterfeiting and copyright
infringement proper?
3. Given the substantial evidence that Defendant, cross-appellee ManagedSolutions Group, Inc. (MSG) was liable for contributory infringement
1 Supplemental Excerpt of Record (SER) LV1-3.
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under both trademark and copyright claims, was it proper for the District
Court to reverse the jurys finding against MSG?
STATEMENT OF THE CASE
Louis Vuitton Malletier, S.A. (Louis Vuitton) filed suit on August 1, 2007,
after repeated unsuccessful efforts to have Defendants Akanoc Solutions, Inc.
(Akanoc), MSG and Steve Chens (Chen) (collectively Defendants) remove
websites selling counterfeit Louis Vuitton products from servers they owned and
operated.2 Discovery disputes concerning the existence and hosting of infringing
websites by Defendants were addressed by a court-ordered server inspection where
five of Defendants 1,500 servers were copied and examined by a forensic expert
on or about March 25, 2009.3
In December 2008, the District Court ruled that Louis Vuittons contributory
infringement claims raised disputed issues of fact, denying Defendants motion for
summary judgment, while granting Defendants motion for summary judgment as
to the claims for vicarious infringement.
In August, 2009, the jury trial proceeded before Judge James Ware. Louis
Vuitton moved for judgment as a matter of law at the close of all evidence as to all
2 SER LV452-491, 576-596, 614-625, 642-655.3 SER LV38-44.
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Defendants.4 The motion was made moot by the jury verdict finding liability and
assessing statutory damages against each Defendant.5
Louis Vuitton was thereafter granted injunctive relief.6 In response to
Defendants Rule 50(b) and 59 motions, the District Court set aside the jurys
verdict as to MSG on a ground never raised by Defendants. Appellants filed their
notice of appeal, and Louis Vuitton timely filed its notice of cross-appeal on the
issue of MSGs liability and damages.
STATEMENT OF FACTS
A.Louis Vuitton, Its Valuable Intellectual Property Rights and theHarm Caused By Counterfeiting and Piracy.
Louis Vuitton is a manufacturer and distributor of high quality, luxury
goods.7 As a result of its strict manufacturing standards, sourcing of specific raw
materials, unique designs and attention to detail, Louis Vuittons products are
highly valued and sought after by consumers and command a premium.8
Louis Vuitton began as a family business in 1854, primarily focused on
trunks and travel-related accessories.9 Today, it is a global fashion brand offering
not only its well-known lines of hand bags and luggage, but also clothing, shoes,
4 SER LV450:21-451:4.5 ER AKA00041-00054.6 ER AKA00001-00005.7 SER LV55:23-57:19.8 SER LV80:5-25, ER AKA00397:1-000398:9.9 SER LV55:23-56:6.
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jewelry and watches.10 Even though it has expanded tremendously, its
commitment to producing high quality product has endured. To ensure that its
exacting quality controls are maintained,11 Louis Vuitton manufactures its finished
products only in its own facilities employing highly skilled workers in France,
Spain, Switzerland and the United States.12 Similarly, Louis Vuitton distributes
and sells its products exclusively through owned and operated channels staffed
exclusively by Louis Vuitton personnel.13
As a result of these efforts to maintain the highest possible standards, Louis
Vuitton owns some of the most recognizable and valuable trademarks and
copyrights in the world.14 Louis Vuittons very success in creating its iconic
products has made it an attractive target for counterfeiters.15 Ironically, the
original monogram device was developed as an anti-counterfeiting measure in
1905.16 The story is no different today as the premium associated with Louis
Vuitton product serves as a magnet for counterfeiters who offer, distribute, market
10 SER LV56:7-57:19.11 SER LV70:10-71:8, 80:2-25, ER AKA00397:1-3.12 SER LV76:25-77:10.13 SER LV77:22-80:1.14 SER LV16:16-19:7, 968-1012.15 SER LV50:23-51:18.16 SER LV57:20-59:2.
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and sell poor quality knock-offs, often manufactured in sweat shops using harsh
chemicals and low-grade materials.17
To protect its intellectual property rights, preserve the integrity of its brand
and protect its customers, Louis Vuitton maintains a staff of enforcement
professionals employed around the globe with a sizeable budget dedicated to
fighting this insidious form of theft.18
Particularly with the emergence of the
Internet, this has become an enormous undertaking to which Louis Vuitton
dedicates substantial resources.19
The Internet has enabled counterfeiters to peddle their wares worldwide.
The websites that were the subject of Louis Vuittons numerous notices in this
action were virtual stores in which the infringers offered unauthorized low-
quality copies of a full range of Louis Vuittons legally protected products for
sale.20 In many cases, these stores offered products in several different classes of
goods, with infringement of numerous different trademarks in each of these
separate classes of goods.21 For the public to have access to these websites or
web stores, the services and facilities of a specific kind of ISP capable of
offering web-hosting capacity, like Defendants, was absolutely required to
17 SER LV57:21-58:10, 73:16-75:14, 80:2-25, ER AKA00397:1-00398:13.18 ER AKA00397:22-00398:9, 00398:14-25, SER LV81:1-8.19 SER LV51:7-18.20 See, for example, SER LV656-665, 674-725, 838, 864-866, 1048-1050.21 Id.; see also, for example, SER LV1089-1112.
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physically store the content and provide customer access.22 A single server can be
assigned numerous Internet Protocol (IP) addresses, and a single IP address can
host many infringing websites. 23
Seeking compliance from ISPs is one of the few cost-effective ways to
address prolific online infringement. Louis Vuitton regularly sends hundreds of
Digital Millennium Copyright Act (DMCA) compliance notices of infringement
(NOI) to web hosts, obtaining near 100% success in removal of the offending
content. 24 Such cooperation occurs even where legitimate ISPs do not stand in a
direct relationship with the underlying infringers.25
Defendants were the one notable exception: they chose to ignore every one
of Louis Vuittons numerous notices in an attempt to shield their customers from
Louis Vuittons legitimate claims of infringement by acting as bulletproof hosts.
22 SER LV1113.23 IP addresses are numeric addresses assigned by regional internet registries and,in the case of the United States based ISPs, by the American Registry for InternetNumbers (ARIN). ER AKA00263:4-14. Website content is usually accessedusing domain names. The domain name system administered by the Internet
Corporation for Assigned Names and Numbers is responsible for registeringdomain names and insuring that Internet inquiries based on the domain namesystem are routed to the correct IP address. Defendants received a delegation ofseveral thousand IP addresses from ARIN. SER LV247:23-25; ER AKA00263:4-18.24 SER LV104:4-14.25 SER LV104:15-106:11.
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B.Emergence of Defendants as Attempted Bulletproof Hosts.Akanoc and MSG are ISPs, specifically web hosts, located in San Jose and
Fremont, California.26 Chen is their actively participating owner and general
manager.27 Although Chen testified that MSG merely owned the hardware and
leased it to Akanoc, the evidence demonstrated that MSG maintained separate
email accounts to handle abuse complaints, including NOI, in the same fashion as
the abuse email accounts owned by Akanoc.28 The IP addresses assigned to MSG
did not reflect any delegation or sub-assignment to Akanoc (or any other alleged
customers) although the delegation of those addresses by ARIN required
publication of such information.29 There was no written inter-company
agreement.30 The compensation paid by Akanoc for this alleged lease agreement
was vague and uncorroborated.31 Defendants each had a specific and necessary
role to the unlawful infringement.
Defendants offered their counterfeiting customers: (i) server capacity on
which to store the infringing content, (ii) Internet access through assignment of an
IP address at which the content could be accessed, (iii) Internet routing that
ensured that queries for content hosted on Defendants servers are routed to the
26 SER LV331:11-17, 332:4-12, 336:9-12, 1183-1191; ER AKA00261:17-21.27 ER AKA00359:3-20, 00364:3-10; SER LV262:10-15.28 SER LV199:1-8, 303:4-8, 307:16-308:5.29 SER LV388:3-389:4, 604-610 at 5(b).30 ER AKA00365:25-00366:2.31 ER AKA00365:25-00366:10.
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correct location of that content, (iv) bandwidth through which traffic could travel
to and from the websites hosted on Defendants servers, (v) close proximity to the
Internet backbone in their highly specialized facility, 32 and (vi) most valuably,
shelter from abuse complaints.
Companies that operate such server farms have a critical and large-scale
impact when those systems are used for counterfeiting and piracy. Illustrating the
point, the court-ordered inspection of just five (5) of Defendants 1,500 servers
uncovered literally thousands of infringing websites.33 In the instant case,
Defendants fulfilled the crucial role of host.
Despite repeated efforts by Louis Vuitton, Defendants continued to provide
counterfeiters with the means through which they offered their illegal merchandise
with impunity.34 The result of Defendants undisturbed business practices was that
the same infringing websites operated by the same handful of customers remained
undisturbed on Defendants servers for years.35 It is not surprising that some of the
32 SER LV332:20-25, ER AKA00259:19-25, LV333:1-334:25, ER AKA00261:1-00262:19; see also SER LV1041-1042.33 SER LV325:11-18, 446:24-447:25, 1121-1137, 1143-1163.34 See footnote 2; SER LV492-495, 496-575, 611-612, 626-639, 1014-1030, 1032-1040, 1114-1116, 1121-1137, 1143-1182; ER AKA 00788-00807.35 SER LV379:15-382:6, 384:23-385:1 (bag925.com), 407:11-408:1, 408:9-409:12, 446:24-447:25, 1121-1137, 1180-1181.
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worst recidivist offenders were hosted on servers leased to Defendants best
customers.36
Between the fall of 2006 and the spring of 2007, Louis Vuitton transmitted
no fewer than eighteen (18) NOI to Defendants about websites dedicated to the
offer for sale of counterfeit merchandise.37 These NOI concerning publicly
accessible websites were transmitted to Defendants by both email and registered
mail.38 None of these NOI resulted in the removal or disabling of access to the
infringing content on servers owned by Defendants and located on IP addresses
assigned to them.
Louis Vuitton had to make significant efforts to locate Defendants in order
to send them these NOI.39 Before the lawsuit Defendants had no registered agent
with the United States Copyright Office for the receipt of NOI.40 Defendants failed
to post accurate and/or current contact information on their website even up to the
date of the trial;41 and failed to update addresses in the ARIN WHOIS which they
were contractually required to update upon sub-delegating responsibility for any of
the IP address allocation to their customers.42 Aggravating the difficulty in
36 SER LV299:3-19, 371:12-374:11, 397:2-401:17.37 See footnote 2; SER LV165:15-166:1.38 Id.; SER LV95:20-97:1, 98:14-99:11.39 SER LV127:2-128:24, 137:11-138:8, 169:4-22.40 SER LV362:19-363:22.41 SER LV384:2-14, 1181.42 SER LV388:3-389:4, 604-610 at 5(b), 1182.
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contacting the correct Defendant was the tendency for websites to jump between
MSGs and Akanocs IP address allocations.43 Defendants did not contradict Louis
Vuittons evidence that the NOI were sent, received and ignored. Their sole
defense was a mysterious email server crash about the time litigation was filed
for which the Defendants had no backup.44
Defendants own woefully deficient practices allowed their servers to
become a safe-haven for a multitude of illegal activities.
1. Defendants Negligent Handling of Louis Vuittons Notices.From at least fall 2006 to spring 2007, Defendants handled hard copy
NOI, including those forwarded by Louis Vuitton, by placing them unopened on an
unmanned desk.45 Even one NOI sent to Chens residence, and received by him,
was taken to the office and added to the pile of abandoned mail.46 Defendants took
no action.
As to Defendants manner of dealing with NOI by email, the alleged
computer crash makes it impossible to tell what, if anything, Defendants did
43 SER LV143:3-14, 153:14-19, 345:5-20; see, for example, SER LV779-782.44 SER LV274:15-276:4. In one case, an email by Chen showed Defendantsknowledge of at least one infringing website identified in the Complaint, their
response (or lack thereof) to notices about those websites and Defendantscomplicity with their underlying customers. SER LV376:11-378:11, see also SERLV1031.45 Chen testified that mail was delivered to upstairs and then sit on a deskthatwas the time that a lot of mail was not even being opened, nobody really paidattention to it SER LV279:14-281:22, 282:18-283:3, 305:12-23.46 SER LV284:19-286:13.
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with respect to Louis Vuittons emailed NOI.47 Their standard operating procedure
for email NOI, however, was not much more effective than the treatment they
accorded the abandoned hard copy NOI. Accordingly, in either event, websites
that were the subject of Louis Vuittons notices continued to be hosted on
Defendants servers.48
The corporate Defendants had only one employee between them, Juliana
Luk (Luk), responsible for handling all abuse complaints, including NOI, for
both corporate Defendants.49 Luk was part-time and located in another city.50 She
received no training.51 Her only specified task was to forward complaints to
Defendants customers.52 Any follow-up notices of continued misconduct were
almost always treated the same way as initial complaints. 53 Amazingly, the only
record Luk had of complaints received was what she could remember in her
brain.54 Occasionally, and irregularly, Luk called upon Chen for help. There was
no system governing the division of responsibility and the assignment of abuse
complaints between them. Nothing other than the unbolding feature built into
the Defendants email program indicated that a particular piece of mail had been
47 SER LV274:15-276:4.48 See footnote 34.49 SER LV196:15-24, 197:20-198:4.50 SER LV195:12-17, 196:15-24.51 SER LV195:10-11.52 SER LV197:11-19, 254:9-13.53 SER LV201:7-15, 207:12-208:14, 223:10-224:16, 225:22-25.54 SER LV208:12-14.
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opened. Based on nothing more than that an email was so identified as having
been read, Luk assumed that that particular piece of correspondence, once
unbolded, had actually been handled.55 Defendants manner of keeping track of
complaints was inadequate, not to say non-existent.
Chen was also of the view that intellectual property infringement reports
were in the nature of private business disputes that should be resolved between the
rights owners and the direct infringers and concerning which Defendants had no
responsibility whatsoever. 56 Examination at trial revealed that Chen was
contemptuous of Louis Vuittons claim and, even on the stand, asserted the
infringement notices were in the nature of private business disputes implying
they were no concern of Defendants.57
Nevertheless, there were never any challenges or responses to Louis
Vuitton,58 while Defendants made sure to promptly act in response to complaints
received from other companies, namely, eBay and Microsoft.59
2. Defendants Manifold Means of Control.Were Defendants inclined to address Louis Vuittons NOI, Defendants
had an arsenal of tools with which to control the abuse and to secure the removal
55 SER LV210:23-211:9.56 ER AKA00303:15-00305:1.57 Id.; SER LV376:11-378:11, see also SER LV1031 (stupid LV, instead of suitape168 they suit us).58 SER LV413:2-9.59 SER LV201:16-25, 202:7-203:2, 230:17-231:15.
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of the infringing content. Defendants chose not to apply any of them. Defendants
had the technical means: since Defendants had physical control over the server,
they could, for example, manually unplug the servers power supply or
otherwise mechanically prevent its operation. In addition, Defendants had the
logical means: Defendants had control over the routers and over software
routing Internet traffic to a specified server; thus, Defendants could have disabled
an IP address so that an Internet user would not resolve a domain name query to
content hosted on the server for example.60 Most importantly, Defendants had the
contractual means: Defendants own policy, expressly set forth in their contracts
with their customers, clearly evidences that they had the ability and the right to do
something to stop the abuse.61
Defendants Terms of Service specifically provided for a regimen
of progressively more stringent penalties for customers who failed to remove
illegal content from their websites.62 In response to NOI, Defendants were entitled
to do the following if a customer failed to take action within a relatively short
time after being notified of the NOI: (i) temporarily unplug the server on which
the infringing content was located, (ii) impose a monetary penalty; (iii) suspend the
60 SER LV437:4-438:15.61 ER AKA00526-00531.62 Id.
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customers account, or (vi) terminate the contract with the customer in response to
repeated violations.63
At no time did Defendants invoke any of the provisions of their Terms
of Service against their infringing customers, except for the occasional and very
brief unplugging of servers.64 Despite abundant evidence of repeated
infringement, Defendants rarely penalized anyone, and never terminated any of
their customers.65
Since Defendants conduct signaled that infringers did not have to fear
any of the more severe measures, the unplugging predictably had no deterrent
effect on the counterfeiters operating the websites infringing on LVs rights: The
infringing content that was the subject of LVs notices to Defendants continued to
reappear on Defendants servers without subjecting the infringers to the more
severe measures contemplated by Defendants Terms of Service. 66 Often the
infringing content was assigned to the same customer and sometimes on the same
server as the content complained of in LVs original notice. 67
63 Id.64 ER AKA00360:5-00361:15; SER LV328:2-8, 358:1-360:23, 371:12-374:11,
397:2-401:17; ER AKA00526-00531.65 ER AKA00360:5-00361:15; SER LV328:2-8; 371:12-374:11, 397:2-401:17,430:5-431:6.66 See footnotes 34, 64, and 65; SER LV379:5-382:6.67 For example, Louis Vuitton transmitted a notice in July 2008. Approximately100 sites were hosted at one IP address and, given the volume, Chen elected todispense with notice and simply temporarily unplug the server. SER LV407:11-
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Defendants asserted that their customers were merely resellers
themselves.68 Although this characterization is without significance to Defendants
liability, the record was to the contrary. Chen testified he did not know what their
customers did and that the customers could in fact be the operators of the
websites.69 Defendants claimed that their customers were engaged in other non-
infringing uses or that scores of legitimate users were adversely affected;
however, Defendants claimed ignorance on this same issue when it served them,70
and it was clear that each IP address was assigned only to one customer at a time71
so that only the offending customer would be affected. The fact is, contrasted with
abundant evidence of illegal activity using Defendants goods and services, there
was no evidence adduced at trial of any legitimate use being made of those same
goods and services.
Expert testimony, offered by both sides, confirmed that even the mere
handful of servers inspected by Louis Vuitton contained evidence of hundreds of
408:1. Although this might be thought to evidence greater responsiveness, 45 ofthose websites were up, operating and located at the same IP address in February,2009. SER LV408:9-409:12. While the server was again temporarily unplugged,
Defendants never took any of the other steps to enforce their own Terms of Serviceas a result of this recurring conduct. ER AKA00360:5-00361:15; SER LV373:24-374:11; 399:18-401:17.68 Opening Brief, p. 4.69 SER LV372:19-373:1, 385:24-386:2470 Id.71 SER LV422:7-10.
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websites offering counterfeit Louis Vuitton merchandise.72 According to
Defendants own expert, several of these websites, which were the subject of prior
notices from Louis Vuitton, were active months after Louis Vuittons
notifications.73 Out of hundreds of websites reviewed by Louis Vuittons
investigator, all websites hosted by Defendants were engaged in some form of
counterfeiting or piracy.74
Accordingly, the jury correctly awarded nearly the maximum in statutory
damages for Defendants willful actions.75
SUMMARY OF ARGUMENT
The central question on this appeal is whether an ISP, seeking to offer
bulletproof hosting services to online infringers, can structure its business in
such a way as to avoid liability for known, persistent and widespread direct
infringement enabled by its servers, routers, bandwidth and IP addresses, despite
repeated notices of such infringing activity. The jury said no, finding evidence
that led not only to findings of contributory infringement, but findings of willful
infringement by Defendants.
Louis Vuitton provided uncontroverted evidence of its valuable intellectual
property rights and of the widespread counterfeiting on Defendants servers. The
72 See footnote 33.73 SER LV446:24-447:25, 1121-1137.74 SER LV246:1-10.75 ER AKA00041-00054.
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proliferation of online counterfeiting that successfully capitalizes on the relative
anonymity offered by the Internet and global reach of those online offers pose
significant challenges requiring extensive efforts to curtail abuse. Those efforts
include the transmission of notices conforming to those specified by the DMCA to
ISPs world-wide. Almost uniformly, these notices result in removal of the
infringing content.
Not so in Defendants case. Louis Vuitton demonstrated repeated efforts to
secure cooperation from Defendants through numerous NOI, both in email and by
hard copy, none of which had any impact on the infringing activity that was the
subject of those NOI. Louis Vuitton demonstrated those NOI were intentionally
ignored by the Defendants and, even when express delivery notifications were sent
to Chens home, they were taken to the office and left unattended with other
unopened, abandoned correspondence.
Louis Vuitton showed that the Defendants had at their disposal a panoply of
tools they could have used to address Louis Vuittons notices, tools that stemmed
from their physical control of the server (including physically disconnecting or
unplugging the server), from their logical control over the software routing
Internet traffic to and from the servers on which the infringing content was located
(including programming the router to null route IP addresses or disabling IP
addresses), and contractual remedies stemming from the rights Defendants
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enjoyed to enforce their Terms of Service by notifying their customers, fining
their customers and, ultimately, suspending or terminating repeat customers.
Defendants made no use of the remedies at their disposal in response to NOI
transmitted to them before litigation was filed by Louis Vuitton and no use of the
more meaningful tools, either before or after the litigation was filed.
This uncontradicted evidence demonstrated the underlying infringement, the
NOI provided to Defendants and the control Defendants had over the means of
infringement. The fact that the infringing conduct continued unabated even after
the litigation was filed, even until the time of trial, combined with the sheer
quantity of infringing activity, led the jury to assess substantial statutory damages
at or near the statutory limits for willful infringement. The magnitude, persistence
and brazenness of the underlying infringements and Defendants own deliberate
conduct when confronted with LVs repeated NOI amply support an award of the
magnitude permitted by statute, awarded by the jury, confirmed by the District
Court and entitled to great deference in this Court.
This record, the overwhelming weight of case law and the Congressional
intent codified in the DMCA demonstrate that all Defendants were properly held
accountable by the jury. The Defendants position would create an open-ended
safe harbor for a variety of illegal conduct, not limited to product counterfeiting: it
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would allow ISPs to structure their enterprises in such a way as to facilitate illegal
conduct while simultaneously avoiding liability for the illegal conduct so enabled.
Instead of arguing the merits, or accurately describing the record, Appellants
embark on unrelated or irrelevant lines of argument in the Opening Brief. Many
issues asserted in the Appellants Opening Brief are entirely outside the scope of
this appeal. These include (i) vicarious liability, which did not go to trial, (ii)
intentional inducement, which was not alleged, (iii) direct control and monitoring,
since Defendants provided both goods and services, (iv) constructive knowledge,
since there was sufficient actual notice, (v) content filtering, since Defendants had
a variety of tools to address infringement, (vi) constitutional scrutiny, since
statutory damages are not vulnerable to such scrutiny, (vii) actual damage
instructions and standards, since Louis Vuitton elected statutory damages, and
(viii) joint and several liability as among the Defendants, since Defendants waived
their objection on this issue.
The record shows that the Defendants had ample actual notice (in addition to
constructive notice) and had ample means of control over the means of
infringement, none of which were ever effectively used by them all of which
supports the jurys verdict and the Courts judgment of liability. Given
Defendants repeated failures to act, combined with the enormity of the
infringements using Defendants goods and services, the jurys award of
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substantial statutory damages against each Defendant was appropriate. There was
ample evidence to support the jurys finding of liability as against MSG. MSG had
its own servers and infringing websites, its own email addresses for abuse, and
MSG was consistently referred to by Defendants and their counsel as an ISP. In
ruling upon the Defendants post-trial motions, the District Court apparently
concluded that Chens testimony that MSG owned the assets and Akanoc operated
the business was sufficient to exonerate MSG. This finding was contradicted by
the record of how Defendants businesses operated and ignored the active
involvement of each of the ISP defendants. The Court should not have substituted
its judgment about Chens testimony on this point for that of the jury.
Moreover, even if MSG only owned the relevant means of infringement,
the control that it enjoyed by virtue of that ownership is sufficient control for
purposes of contributory liability. MSG still had responsibility over its alleged
lessee (Akanoc) to do what was required and failed to do it. For these reasons,
MSG is properly held accountable.
The jury correctly found all Defendants independently responsible for their
acts of contributory infringement and the jurys decision regarding MSG should be
reinstated under the applicable standards of review and to prevent manifest
injustice.
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ARGUMENT ON APPEAL
A.Defendants Refusal to Use Tools Available To Them To DisableAccess to Infringing Offers After Repeated Notices of Infringement
Makes Them Liable for Contributory Trademark Infringement.
1. The Standard of Review.The jury verdict was amply supported by the record, outlined above, by
applicable case law and by the District Courts carefully crafted jury instructions.
The Court can overturn the jurys verdict only if there is no legally
sufficient basis for a reasonable jury to find in favor of Louis Vuitton. Bell v.
Clackamas County, 341 F.3d 858, 865 (9th Cir. 2003) (emphasis added).76 When
the error is said to arise from the formulation of the instructions, the instructions
are to be considered as a whole and an abuse of discretion standard is applied to
determine if they are misleading or inadequate. Guebara v. Allstate Ins. Co., 237
F.3d 987, 992 (9th Cir. 2001) citingMasson v. New Yorker Magazine, Inc., 85
F.3d 1394, 1397 (9th Cir. 1996). The harmless error standard applied in civil cases
is less stringent than that applied in the criminal context. See Swinton v.
Potomac Corp., 270 F.3d 794, 805 (9th Cir. 2001).
76 We review the denial of a motion for a judgment as a matter of law de novo.Ostad v. Oregon Health Scis. Univ., 327 F.3d 876, 881 (9th Cir. 2003). We viewthe evidence in the light most favorable to the party in whose favor the juryreturned a verdict and draw all reasonable inferences in its favor. Id.; Gilbrook v.City of Westminster, 177 F.3d 839, 847-48 (9th Cir. 1999).
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Moreover, [a] trial judge is given substantial latitude in tailoring the
instructions so long as they fairly and adequately cover the issues presented when
evaluated in the context of the whole trial. Los Angeles Memorial Coliseum
Commn v. National Football League, 791 F.2d 1356, 1360 (9th Cir. 1984) citing
United States v. Marabelles, 724 F.2d 1374, 1382-83 (9th Cir. 1984). A party is
not entitled to an instruction on its theory of the case if that theory lacks support
either in law or in the record. Los Angeles Memorial Coliseum Commn, 791
F.2d at 1360 citing e.g., Los Angeles Memorial Coliseum Commn v. National
Football League, 726 F.2d 1381, 1398 (9th Cir. 1981); United States v. Candelaria,
704 F.2d 1129, 1132 (9th Cir. 1983).
2. Abundant Evidence Proved Each Element of ContributoryTrademark Infringement.
There was abundant evidence proving each element of contributory
trademark infringement and upon which the Court instructed the jury.
Contributory trademark infringement exists where a service provider (1)
intentionally induces another to infringe a trademarkor (2) continues to supply a
product to one whom it knows or has reason to know is engaging in trademark
infringement (emphasis added). Inwood Labs., Inc. v. Ives Labs. Inc. (Inwood),
456 U.S. 844, 854, 102 S. Ct. 2182, 72 L. Ed. 2d 606 (1982) (manufacturer of
generic drugs found not liable for inducing pharmacists to mislabel their generic
product); see also Fonovisa, Inc. v. Cherry Auction, Inc. (Fonovisa), 76 F.3d
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259, 264-265 (9th Cir. 1996) (applying Inwood test for contributory trademark
infringement); Lockheed Martin Corp. v. Network Solutions, Inc. (Lockheed),
194 F.3d 980, 983 (9th Cir. 1999) (consider the extent of control exercised by the
defendant over the third partys means of infringement.);see also Sealy, Inc. v.
Easy Living, Inc., 743 F.2d 1378, 1382 (9th Cir. 1984) (knowing or having reason
to know the materials supplied will be used to infringe a trademark, is contributory
trademark infringement) (disapproved on other grounds). The requirements of the
claim are, therefore, two-fold: (i) knowledge and (ii) continuing to supply goods or
services used to infringe. Lockheed, 194 F.3d at 984.
The verdict is consistent with this Courts precedents finding liability where
defendants had sufficient control over the means of infringement. Indeed, the
Court has upheld claims involving an electronic file sharing system on a central
server, A&M Records v. Napster, Inc. (Napster), 239 F.3d 1004, 1021 (9th Cir.
2001), free software not on a central server, MGM Studios Inc. v. Grokster,
Ltd.(Grokster), 545 U.S. 913, 919 (2005), and an electronic bulletin board,
Perfect 10, Inc. v. Amazon.com, Inc. (Amazon), 508 F.3d 1146, 1171-72 (9th
Cir. 2007) citing Religious Technology Center v. Netcom On-Line Communication
Services, Inc. (Netcom), 907 F. Supp. 1361, 1374 (N.D. Cal. 1995).
Even in Perfect 10, Inc. v. Visa Intl Serv. Assn (Visa), 494 F.3d 788,
807 (9th Cir. 2007), where liability was not found, this Court specifically
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contrasted Visa, reasoning that Visa did not maintain the servers on which
infringing websites resided and implying that such involvement would result in a
finding of liability. Id. at 800 (emphasis added). In contrast, Defendants not only
maintained the servers on which infringing websites resided and provided access to
the Internet for content on those servers, they shielded the infringers from any
interruption of their illegal businesses by providing a bulletproof hosting
environment.
3. Defendants Had Control Over the Underlying DirectInfringement Through A Variety of Tools.
Liability for contributory trademark infringement arising from the provision
of services requires an evaluation of the Defendants control over the
instrumentality or over the third partys means of infringement.77 The evidence
showed Defendants had extensive control over their goods and services that were
critical to an Internet-based counterfeiting operation.
Defendants hosted the infringing content on their servers in their specialized
facility and protected their infringing customers by providing a bulletproof
shield against take-down notices, despite prior notices and a multitude of unused
but available tools to stop the infringement and exercise control over their systems
77 Such analysis is, accordingly, unnecessary, to the extent that Defendantsprovided a package of goods and services, not services alone, as implied by theirown assertion that the staple article of commerce doctrine applies, addressedbelow.
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and procedures.78 Appellants agree in their Opening Brief that what they supplied
were servers and web-hosting services.79 The infringing websites could not have
operated but for the servers and services provided by Defendants. The trial court
correctly instructed the jury on the specific assistance and contribution to
infringement made by Defendants.
Even Fonovisa, relied upon by Appellants, demonstrates the underlying
fallacy of Defendants argument that Defendants lack sufficient control over those
websites: according to Appellants formulation of the applicable principles, the
shops and stalls selling counterfeit wares are the means of infringement and the
swap meet itself is too far removed from control over those means to be held liable
a conclusion utterly at odds with the result in Fonovisa. The District Courts
description of the means of infringement was entirely consistent with governing
law in this Circuit.
Appellants attempt to align this case with Lockheed fails, since this case is
fundamentally different. As in Hard Rock Caf Licensing Corp. v. Concession
Services, Inc., 955 F.2d 1143 (7th Cir. 1992) and Fonovisa (both cases upon which
Appellants admit Lockheed relied), Defendants had control over the site and
facilities of infringement, specifically physical control over their servers where the
infringing material resided and was protected, and traffic was routed to and from
78 See footnotes 32, 34, 66.79 Opening Brief, p. 26 (i.e., Internet servers and web-hosting services).
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those servers by Defendants.80 Defendants contribution was even more sustained
and cannot be compared to the service at issue in Lockheed that involved merely
the translation of domain names into IP addresses.81
4. Uncontroverted Evidence of Numerous Written NoticesTransmitted Before and During the Litigation Amply Evidenced
Defendants Actual Knowledge.
Louis Vuitton adduced uncontroverted evidence of eighteen (18) separate
NOI transmitted to Defendants before the Complaint was filed, including multiple
follow-up notices.82 Louis Vuitton adduced evidence of additional NOI served
upon Defendants after the litigation was served and the fact of these NOI was also
uncontroverted as shown by Defendants own evidence.83 These NOI provided
the Defendants with actual knowledge, but the systematic hosting and evidence of
hundreds of websites also evidences constructive knowledge.
In keeping with Defendants bulletproof package of goods and services,
many of the sites that were the subject of these NOI continued to be hosted on
Defendants servers after service of these NOI; in some cases, they were hosted on
Defendants servers even at the time of trial.84 Not only did the content remain in
storage on Defendants servers, it was accessible to the public through the
80 See footnote 32; see also SER LV422:15-19.81 See alsoER AKA00115:14-AKA00116:5.82 See footnote 2.83 ER AKA00788-00807.84 See footnote 66.
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bulletproof package of goods and services supplied by Defendants the digital
storage, routing services, IP addresses and bandwidth all of which was
impervious to abuse notices transmitted in accordance with industry standards,
governing law and Defendants own Terms of Service even pending their
defense of this action.85
Abundant settled authority, beginning with Inwood and continuing with
Fonovisa, Napster and Grokster, cited above, makes clear that the actual notice
provided by Louis Vuitton combined with the Defendants ongoing contribution to
the underlying direct infringement support the jurys finding of liability and the
Courts Judgment.
5. The District Court Did Not Abuse Its Discretion in Presenting theCase to the Jury.
The Court appropriately described the issues and asked the jury to decide
whether Defendants were liable for contributory trademark infringement based
upon settled principles articulated in the cases outlined above. Regardless whether
reviewed for abuse of discretion or de novo, the District Court correctly instructed
the jury on the elements of contributory infringement.
Appellants object to the District Courts jury instructions for suggesting that
the jury look to the degree of control Defendants exercised over their servers or
85 Id.
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services.86 Regardless whether reviewed for abuse of discretion or de novo, the
District Court correctly instructed the jury on the elements of contributory
infringement. Appellants suggest that Defendants lacked control over the means of
infringement, despite their control over their bulletproof servers, IP addresses,
routers and Internet bandwidth. This impermissibly narrows the scope of potential
contributory infringement claims. The instructions correctly allowed the jury to
make its determination whether Defendants, who operated a sophisticated server
environment, resistant to actual NOI, were liable for contributory infringement.
Appellants strive to salvage their argument that they had insufficient control
by reference to non-binding, irrelevant and inapplicable authority, including: (i) an
Australian decision that has no persuasive value because it interpreted language
from an Australian statute not present here and applies its inapplicable statutory
language to a decentralized peer-to-peer technology (BitTorrent) materially
different from the facts of this case, (ii) standards for vicarious infringement, even
though no vicarious claims were tried,87 (iii) Tiffany Inc. v. eBay, Inc., 600 F.3d 93
(2d Cir. 2010), a case that did not involve, as this one did, defendants that
dedicated minimal resources, took no effective action and failed to disable
86 Appellants complain about the Courts presentation of the facts, an instructionwhich is reviewed for an abuse of discretion rather than de novo. See Altera Corp.v. Clear Logic, Inc., 424 F.3d 1079, 1087 (9th Cir. 2005).87 Opening Brief, pp. 17-18.
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infringing content about which they had been given undisputed actual notice,88 and
(iv) citations of cases about payment processing services, since payment
processing services typically engage in isolated transactions, materially different
from the sustained involvement of Defendants as hosts of infringing websites.
The outcome of this case reflects the purpose of derivative liability as
observed by the U.S. Supreme Court: When a widely shared service or product is
used to commit infringement, it may be impossible to enforce rights in the
protected work effectively against all direct infringers, the only practical
alternative being to go against the distributor of the copying device for secondary
liability on a theory of contributory or vicarious infringement. Grokster, 545 U.S.
at 929-930. The Ninth Circuit also recognized that services or products that
facilitate access to websites throughout the world can significantly magnify the
effects of infringing conduct and that in certain instances, seeking compliance
from providers may be the only meaningful way for copyright holders to protect
their rights. Amazon, 508 F.3d at 1172. As this Court noted in Visa, maintaining
the servers upon which the infringing websites reside is precisely the type of
control envisaged by this Courts earlier authority in Napster and Fonovisa. Here,
the District Court properly instructed the jury as a result of which the jury arrived
at a decision wholly consistent with that earlier authority.
88 See footnotes 34 and 66.
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Even if the jury instruction had been incorrect, the error would have been
harmless in light of Defendants intentional acts and omissions to keep the
infringing websites up and running despite an arsenal of physical, logical and
contractual tools at their disposal.89 Even if the infringing websites themselves
had been the means of infringement as Defendants assert, they were not the only
means of infringement. The Defendants servers, routers, bandwidth and IP
addresses were also means by which the infringement was allowed to occur and to
persist and over all of which Defendants had control.
Defendants continued to supply the infringing websites to users on the
Internet by refusing to take them down and keep them down despite numerous
specific NOI from Louis Vuitton.90 Defendants servers and services were the sole
reason infringing websites were left accessible and undisturbed to continue their
infringements using Defendants goods and services, despite numerous lawful
complaints. Even under the de novo standard cited by Appellants, the same
outcome would follow and Appellants appeal should be denied. The jury was
correctly instructed in light of the facts of the case.
Appellants also take issue with the Courts lack of instruction on the
definition of counterfeit mark, even though it was uncontested that the infringing
89 See footnote 64. Defendants arguments on lack of control are inconsistentwith the record.90 See footnotes 34 and 66.
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product was counterfeit.91 In the instant case, Defendants hosted and protected
websites engaged in the offer for sale, importation, distribution and sale of
counterfeit Louis Vuitton merchandise.92 The entire purpose of the knock-offs is
to look like the real thing. The law presumes confusion where counterfeit product
is involved and it was not necessary for the jury to engage in a more
comprehensive likelihood of confusion analysis.
Controlling authority is clear that the use of virtually identical knock-off
marks in the same class of goods or services as the registered infringed-upon mark
creates a presumption of confusion. Brookfield Communs. v. W. Coast Entmt
Corp., 174 F.3d 1036, 1056 (9th Cir. 1999) (In light of the virtual identity of
marks, if they were used with identical products or services likelihood of confusion
would follow as a matter of course.); seeLindy Pen Co. v. Bic Pen Corp., 796
F.2d 254, 256-57 (9th Cir. 1986) (reversing a district courts finding of no
likelihood of confusion even though the six other likelihood of confusion factors
all weighed against a finding of likelihood of confusion); Phillip Morris USA Inc.
v. Shalabi, 352 F. Supp. 2d 1067, 1073 (C.D. Cal. 2004) citing Phillip Morris USA
Inc. v. Felizardo, 2004 U.S. Dist. LEXIS 11154, at *18 (S.D.N.Y. June 18, 2004)
91 Opening Brief, pp. 32-34.92 See footnotes 34 and 66; SER LV325:11-18, 328:2-8, 371:12-374:11, 397:2-401:17, 430:5-431:6, 446:24-447:25.
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(in cases involving counterfeit marks, it is unnecessary to perform the step-by-
step examination . . . because counterfeit marks are inherently confusing.).
Louis Vuitton introduced voluminous exhibits evidencing the offer and sale
of knock-off merchandise the entire object of which was to mimic authentic Louis
Vuitton merchandise as closely as possible. Defendants provided no evidence to
the contrary.
Defendants were not entitled to any instruction on the definition of a
counterfeit mark, especially when they did not dispute that the infringing marks
were counterfeit. A party is not entitled to an instruction on its theory of the case
if that theory lacks support either in law or in the record. Los Angeles Memorial
Coliseum Commn, 791 F.2d at 1360 citing e.g., Los Angeles Memorial Coliseum
Commn, 726 F.2d at 1398; Candelaria, 704 F.2d at 1132. It was clear in the trial
record that the fake products and offers did not originate from Louis Vuitton.
Appellants are silent on the uncontroverted similarity between Louis Vuittons
trademarks and the knock-offs offered on websites using Defendants servers. It
was obvious that the knock-offs offered on sites hosted by Defendants were likely
to confuse. Appellants cannot now claim error for the District Courts decision not
to instruct on inappropriate non-issues.
Even if the District Court erred in not instructing on the definition of a
counterfeit mark, the error was harmless as the jury was able to find likelihood of
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confusion under alternate analyses. In addition to the presumption described
above, the jury was instructed on the Sleekcraft factors which were largely
satisfied through the jurys own visual comparison.93 The jury was not required to
rely on any presumption of a likelihood of confusion alone. The Court did instruct
the jury on the Sleekcraft factors,94 and the jury was well equipped to make the
finding of likelihood of confusion based on its own observation.95
Given the
almost identical nature of the copies and the authentic goods, the jurys finding
93AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979) (In
determining likelihood of confusion the following factors must be balanced: (1)strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4)evidence of actual confusion; (5) marketing channels used; (6) type of goods anddegree of care consumers are likely to exercise in purchasing them; (7) intent ofthe defendant in selecting the mark; and (8) likelihood that the parties will expandtheir product lines.) Given the nature of counterfeit product, several of thesefactors weigh strongly in favor of confusion, not limited to (1), (2), (3), (5) and (6)
most of which are also satisfied through visual comparison of the counterfeitgoods with authentic merchandise.94 ER AKA00075-00076.95 Karl Storz Endoscopy-Am., Inc., 285 F.3d 848, 854 (9th Cir. 2002). Thoughunnecessary in light of the uncontested and obvious copying at issue here, a jurydetermination based on observation is clearly contemplated by Sleekcraft, 599 F.2dat 348-49. The law in the Ninth Circuit is clear that post-purchase confusion,i.e., confusion on the part of someone other than the purchaser who, for example,simply sees the item after it has been purchased, can establish the requiredlikelihood of confusion under the Lanham Act. Karl Storz Endoscopy-Am., Inc.,
285 F.3d at 854 citing Academy of Motion Picture Arts & Sciences v. CreativeHouse Promotions, Inc., 944 F.2d 1446, 1456 (9th Cir. 1991); Levi Strauss & Co. v.Blue Bell, Inc., 632 F.2d 817, 822 (9th Cir. 1980). Confusion of non-purchasersobserving the infringing item is no less injurious to the trademarkowners reputation than confusion on the part of the purchaser at the time of sale.Karl Storz Endoscopy-Am., Inc., 285 F.3d at 854 citingPayless Shoesource, Inc. v.Reebok Intl Ltd., 998 F.2d 985, 989-90 (Fed. Cir. 1993).
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was soundly supported by the evidence. The error raised by Appellants simply did
not exist or was harmless at best.
Defendants assertion that the record does not evidence the use of certain
trademarks in specified classes of goods does a disservice to the hard work of the
jury. It is based on an inaccurate and incomplete review of the record. Several
questions raised during deliberations demonstrate the jury carefully combed the
record to confirm infringement of the numerous uncontroverted marks introduced
into evidence. ER AKA00055-00067. Defendants contention that specified
trademarks were not used in specified classes is contradicted by a review of the
record as careful as that done by the jury: For example, (1) see SER LV673, 798
for examples of counterfeit uses of the mark registered as number 275,345 in
handbags; (2) SER LV1112 for an example of mark numbered 1,770,131 in
headgear; (3) SER LV860, 863, 878-879 for examples of mark 1,990,760 in
watches. Examples of other uses the Defendants could not locate but the jury
could are cited in the margin.96
Applying the settled law of the Ninth Circuit, and applying it to the business
of Internet web-hosting, the Court correctly instructed the jury and the jury arrived
at an appropriate result amply supported by the record.
96 Other Exhibits which evidence use in specific classes overlooked by theDefendants include SER LV661, 754, 789, 797, 798, 805, 851, 859, 863, 865, 954,1084-1112 .
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6. Intent is Not an Element of Contributory TrademarkInfringement.
Appellants claim that the Court should have instructed the jury on intent, in
addition to the well-settled elements described in the cases cited above. In doing
so, Appellants confuse distinct legal claims governing secondary liability. Louis
Vuitton asserted no claim based on contribution by inducement. Liability for
inducement requires a finding of intent. Liability based on contribution to the
underlying direct infringement requires only notice. Thus, Appellants arguments
about intent are irrelevant and properly disregarded.97
Inducement is a distinct legal claim. As noted above, Inwood clearly and
unambiguously used the word or to separate the two bases for contributory
trademark infringement, with only inducement requiring intent. Inwood, 456 U.S.
at 854.
Further, the Court did not require the contributory infringer to supply its
service to the direct infringer but to one who is engaging in trademark
infringement. Id.; see also Lockheed, 194 F.3d at 983 (Contributory
infringement occurs when the defendant supplies a product to a third party with
actual or constructive knowledge that the product is being used to infringe the
97 Moreover, in view of the jurys separate finding of willfulness in findingheightened statutory damages under both Trademark Act and Copyright Act, anyerror in instructing on intent was clearly harmless insofar as such intent was foundby the jury in awarding statutory damages.
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service mark.).98 Here, whether or not one accepts Defendants vague,
amorphous and contradictory evidence about the alleged intermediate resellers,
Defendants were, nonetheless, providing the means by which the direct infringers
were able to access the global marketplace offered up by the Internet.
Appellants then cite contributory copyright infringement cases, further
confusing the issue,99
arguing that [e]very appellate decision finding contributory
liability in an online context has found intent by the defendant to contribute to
infringement.100
This is wrong. In Napster, for example, this Court noted that knowledge, not
intent, was required for contributory liability. 239 F.3d at 1020 (Contributory
liability requires that the secondary infringer know or have reason to know of
direct infringement) (citing Cable/Home Communication Corp. Network
Prods., Inc. (Cable/Home), 902 F.2d 829, 845 & 846 n.29 (11th Cir. 1990);
Netcom, 907 F. Supp. at 1373-74 (framing the issue as whether Netcom knew or
should have known of the infringing activities).
Like Napster, Defendants had actual knowledge; they were given repeated
notice of numerous websites, many of which were available long after notification
98 These cases clearly show there is no requirement of a direct relationshipbetween the contributory infringer and the underlying direct infringer, and the factsof this case illustrate why it would be wrong to do so. Defendants cannot purportto create an imaginary middleman to avoid liability.99 Opening Brief, pp. 23-24.100 Opening Brief, p. 23.
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by Louis Vuitton, and in some instances, still accessible at the time of trial.101
Napster does not support Appellants arguments.
Aimster is equally unhelpful because it did not impose a requirement of
intent but instead endorsed the sufficiency of willful blindness to satisfy
constructive knowledge required for liability. 102 In re Aimster Copyright
Litigation, 334 F.3d 643, 650 (7th
Cir. 2003). Here, the evidence was that
Defendants were more than willfully blind, and certainly not less so.
Appellants reliance on Grokster is also unfounded, since Grokster
specifically noted that it did not address liability under all contributory theories but
only under the plaintiffs inducement claim, which is irrelevant here. Grokster,
545 U.S. at 934. There was, therefore, no error as the jury was correctly instructed
on the requirement of knowledge, which was proved at trial.
101 See footnote 66.102 We also reject Aimsters argument that because the Court said in Sony that
mere constructive knowledge of infringing uses is not enough for contributoryinfringement, and the encryption feature of Aimsters service prevented Deep fromknowing what songs were being copied by the users of his system, he lacked theknowledge of infringing uses that liability for contributory infringement requires.Willful blindness is knowledge, in copyright law (where indeed it may be enoughthat the defendant shouldhave known of the direct infringement). In re AimsterCopyright Litigation, 334 F.3d at 650 (internal citations omitted).
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7. The Staple Article of Commerce Doctrine is Inapplicable.Appellants confusion of distinct theories of liability is compounded by their
assertions based on the staple article of commerce doctrine.103 This doctrine
requires intent only when knowledge is absent, e.g. where one sells an item with
substantial lawful as well as unlawful uses. It has never been applied in the
trademark context. Even if the doctrine were to apply to contributory trademark
infringement claims, it would not be applicable here, since Defendants had actual
knowledge of the infringing acts of their customers.104
The staple article of commerce doctrine protects only against imputing
culpable knowledge or intent to a defendant who merely distributes a product or
provides a service that is capable of substantial non-infringing use. Grokster, 545
U.S. at 934-935.
Where evidence of actual knowledge exists, the staple article of commerce
safe harbor does not shield a defendant. Id.; see also Napster, supra, 239 F.3d at
1021) (citing Netcom, 907 F. Supp. at 1374 (N.D. Cal. 1995); Arista Records LLC
v. USENET.com, 633 F. Supp. 2d 124, 158 (S.D.N.Y. 2009) (The Court need not
resolve this apparently difficult question, as it has already been determined that
Sonys staple article of commerce doctrine does not provide Defendants
immunity, as they maintain an ongoing relationship with their users.).
103 Opening Brief, p.24.104 See footnote 34.
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This Court has also expressly rejected application of the doctrine to cases
involving the ongoing provision of services. Napster, 239 F.3d at 1021.
Appellants supply a package of goods and services that demonstrates ongoing
involvement consistent with the reasoning of this Court in Napster. Because of the
nature of their businesses and the overwhelming evidence of constructive and
actual knowledge, the staple article of commerce doctrine is inapplicable.
B.The Facts Evidencing Defendants Contributory TrademarkInfringement Support the Jurys Finding of Liability for
Contributory Copyright Infringement.
This Court has consistently found contributory copyright liability on facts
similar to those present here. Liability is appropriate if a computer system
operatorhas actual knowledge that specific infringing material is available using
its system, and can take simple measures to prevent further damage to copyrighted
works, yet continues to provide access to infringing works. Amazon, 508 F.3d at
1172 (citations omitted); see also Napster, 239 F.3d at 1021 (9th Cir. 2001) (in the
context of a provider of Internet access or services, if a computer system operator
learns of specific infringing material available on his system and fails to purge
such material from the system, the operator knows of and contributes to direct
infringement, finding liability for knowledge, assistance and failure to block
access to infringing content); see also Netcom, 907 F. Supp. at 1374 (finding
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electronic bulletin board operator contributorily liable for failing to delete an
infringing post).
The applicable standard correctly applied by the District Court is that a
defendant may be liable for contributory copyright infringement if it knew of the
infringing activity and induced, caused, or materially contributed to the infringing
conduct of another. Amazon., 508 F.3d at 1171. To satisfy the first element,
knowledge, a contributory infringer must possess actual or constructive knowledge
of the direct infringement. Napster, 239 F.3d at 1020 (Contributory liability
requires that the secondary infringer know or have reason to know of direct
infringement.) (citing Cable/Home, 902 F.2d at 845 & 846 n.29); Netcom, 907 F.
Supp. at 1373-74 (framing issues as whether Netcom knew or should have known
of the infringing activities). The trial court instructed on both knowledge and
material contribution.
On its face, there was no error on the instruction of knowledge. The Ninth
Circuit Model Civil Jury Instruction includes the knew or should have known
language pursuant to well-established case law.105 The District Courts instruction
explicitly included the knew or should have known standard.106
105 Ninth Circuit Manual of Model Jury Instructions, Instruction No. 17.21Derivative Liability - Contributory Infringement.106 ER AKA00079:16-18.
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The District Court correctly framed the instruction on the material
contribution to describe the Defendants goods and services consistent with the
examples from controlling authority and common sense.107 The finding of liability
based on Defendants business of knowingly providing server capacity to
customers engaged in infringing activity is consistent with the Ninth Circuits
finding of liability in the case of one who knowingly provides the site and
facilities for the underlying infringement. Visa, 494 F.3d at 798-99. Thus, it
upheld liability in Fonovisa, 76 F.3d at 264, where the flea market proprietor
provided the environment for sales to thrive. Likewise, in Napster, 239 F.3d at
1022, Napster was found to have materially contributed to users direct
infringement by providing site and facilities for that infringement. As for Visa
itself, this Court noted that (unlike Defendants here) Visadid not maintain the
servers on which infringing websites reside. 494 F.3d at 800. Instead, it merely
provided transaction-by-transaction payment processing services. Id. Here,
Defendants did maintain the servers and the trial courts instructions were tailored
to those facts.
The jurys separate affirmative findings on the elements for contributory
copyright liability satisfy the applicable law. Based on the evidence, the jury
found that the websites used Defendants goods and services to infringe and were
107 ER AKA00079:11-22.
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allowed to continue doing so despite notice. A negative answer would have
exonerated Defendants, but the jury answered affirmatively. The instructions
appropriately reflected the circumstances of this case, and a contrary verdict was
possible if the jury had believed the Defendants presentation. They simply did
not.
C.The Jurys Award of Statutory Damages Within the Range Specifiedby Statute Are Appropriate and the Amounts Are Entitled to Great
Deference.
Statutory damages are properly awarded for claims of contributory
trademark infringement and contributory copyright infringement. The jury was
properly instructed on the potential ranges of statutory damages and the
considerations that apply to assessing them. As a contributory infringer, each of
the Defendants is jointly and severally liable with each of the underlying direct
infringers whose conduct they each enabled. The jury was appropriately instructed
and asked to render a verdict substantially in the form proposed by Defendants.
They found the Defendants conduct willful and rendered a verdict well within
congressionally mandated limits. Those awards should not now be disturbed on
appeal.
1. Defendants Are Jointly and Severally Liable for Damages with theUnderlying Direct Infringers.
A defendant who is contributorily liable is jointly and severally liable for the
damages awarded for any underlying infringement. Fonovisa, 76 F.3d at 264
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(contributory liability is founded in common law tort and a contributory infringer
is jointly and severally liable with the prime tortfeasor); Crystal Semiconductor
Corp. v. Tritech Microelectronics Intl, 246 F.3d 1336, 1361 (Fed. Cir. 2001)
(contributory patent infringement) citing Hewlett-Packard Co. v. Bausch & Lomb
Inc., 909 F.2d 1464, 1469, 15 U.S.P.Q.2D (BNA) 1525, 1528 (Fed. Cir. 1990).
Under the Lanham Act, a wronged plaintiff is entitled to disgorgement of the
defendants profits and collection of any damages sustained by the plaintiff as well
as the costs of the action. 15 U.S.C. 1117(a). Alternatively, [i]n a case
involving the use of a counterfeit markin connection with the sale, offering for
sale, or distribution of goods or services, the plaintiff may electto recover,
instead of actual damages and profits under subsection (a), an award of statutory
damages for any such use in connection with the sale, offering for sale, or
distribution of goods or services. 15 U.S.C. 1117(c). Louis Vuitton elected
statutory damages.
The jury found Defendants liable for contributory trademark infringement,
and Louis Vuitton elected to pursue statutory damages for its claims. Thus,
Defendants are jointly and severally liable for the direct infringement with the
underlying infringers. Appellants assertions that the requisites for an award of
statutory damages were not proved are unconvincing and contrary to controlling
authority and basic principles of contributory liability.
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2. The Jurys Assessment as to Each Defendant was supported bythe Record and Is Entitled to Great Deference.
[A] jurys award of damages is entitled to great deference. Henry v.
Lehman Commer. Paper, Inc., 471 F.3d 977, 1001 (9th Cir. 2006). The applicable
standard when reviewing an award of statutory damageswithin the allowed range
is even more deferential than abuse of discretion. Broadcast Music, Inc. v. Star
Amusements, Inc., 44 F.3d 485, 487 (7th Cir. 1995). The employment of the
statutory yardstick, within set limits, is committed solely to the court which hears
th