Key Takeaways

  • Contributory trademark infringement occurs when a party indirectly facilitates or enables trademark infringement by another party.
  • Liability can extend to landlords, online platforms, manufacturers, and service providers if they have knowledge of and materially contribute to infringement.
  • Two main forms of secondary liability are contributory infringement and vicarious infringement.
  • Courts assess knowledge, control, and material contribution when evaluating claims.
  • Case law such as Inwood Labs and Tiffany v. eBay has helped define standards for contributory infringement in both physical and digital contexts.
  • Businesses can minimize liability risk by monitoring vendors, responding to infringement notices, and implementing proactive trademark enforcement policies.

Secondary Trademark Infringement

Secondary trademark infringement, also known as indirect or contributory infringement, is the liability a party assumes when it doesn't actually take part in trademark infringing activities but contributes to infringement by other parties. Entities that are accused of secondary infringement may be held liable for their actions.

Secondary liability covers the following:

  • Trademarks
  • Copyrights
  • Patents

To claim secondary infringement, a plaintiff's case must meet the threshold requirement of direct infringement. There also has to be evidence that the accused party knew of the patent or trademark and that the party's actions would lead to infringement.

To prevent a patent holder from extending his or her rights beyond specific limits related to a product, the article being alleged has to be unsuitable for any commercial non-infringing use. Even if an article for sale is adapted for both lawful use and infringing use, it's not enough to show contributory infringement.

However, a party who knowingly causes, induces, or contributes to copyright infringement by another party, even if the first party doesn't participate in or commits these infringing actions, may still be held liable for secondary infringement if he or she had reasonable knowledge of actual infringement. 

The Lanham Act doesn't expressly impose liability for secondary infringement, but the U.S. Supreme Court expresses that such liability for infringement can be extended to reach beyond those parties who actually mislabel products with another entity's mark.

If a distributor or manufacturer purposely induces another party to infringe on a trademark or service mark or if the distributor continues to supply a product to one that it knows or believes is participating in infringement, then that distributor can be held responsible as a contributory party for harm or damages that result from their deceit.

Forms of Secondary Liability: Contributory vs. Vicarious Infringement

Secondary trademark infringement takes two primary forms: contributory infringement and vicarious infringement.

  • Contributory Infringement occurs when a party intentionally induces another to infringe a trademark or continues to supply goods or services despite knowing of ongoing infringement. This form is grounded in the Inwood Laboratories, Inc. v. Ives Laboratories, Inc. decision, which set a foundational legal standard for indirect liability.
  • Vicarious Infringement arises when a party has the right and ability to control the actions of the direct infringer and receives a direct financial benefit from the infringement. This concept is borrowed from agency principles and is more commonly associated with franchisor-franchisee or employer-employee relationships.

Understanding these distinctions is crucial for businesses and platforms that facilitate commerce but do not directly engage in sales of infringing goods.

Internet Platforms and Brick-and-Mortar Stores

The application of the Lanham Act can be interpreted differently in regards to secondary liability depending on whether the alleged infringement occurs in a brick-and-mortar marketplace or internet platform. The differences result from the nature of the mediums and what could likely happen or not happen in each particular medium.

In the case of a flea market's landlord, the court expects that a landlord could reasonably monitor the type of merchandise that's sold on his or her premises, but the same can't be expected of a domain name registrar on the internet. Registrars can't be reasonably expected to monitor the worldwide web.

In a brick-and-mortar location, whether it's a distributor store or flea market, the operator can easily see what's going on in the store. If someone sells infringing products there, the intellectual property holder can find the store and send a notice. The holder can easily track what the landlord actually does about the notice or complaint, if anything, or if the store owner chooses to ignore the acts of alleged infringement.

Actions, such as a seizure or raid done by law enforcement, can help the court confirm if the landlord had knowledge of the alleged infringement or not. The trademark holder will have more evidence under the requirement that a landlord knew or had reason to know about any alleged infringement activities. Monitoring these activities is harder to do on the internet.

Landmark Cases Shaping Contributory Infringement Trademark Law

Several important court decisions have clarified the scope of contributory infringement trademark liability:

  • Inwood Laboratories v. Ives Laboratories (1982): This case established the standard that a manufacturer or distributor may be liable if it intentionally induces another to infringe or continues to supply its product to someone it knows is infringing.
  • Tiffany (NJ) Inc. v. eBay, Inc. (2010): The Second Circuit held that eBay was not liable for contributory infringement because it lacked specific knowledge of individual infringing acts and took reasonable steps to combat counterfeit sales once notified.
  • Hard Rock Cafe Licensing Corp. v. Concession Services, Inc. (1992): Extended contributory liability to flea market operators who turned a blind eye to vendors selling counterfeit goods.

These cases demonstrate that courts will consider whether the accused party had actual or constructive knowledge of infringement and whether it took action to stop it.

Standards for Secondary Liability

Courts don't follow strict standards for secondary liability. As new business methods and new technologies continually develop, standards continue to change. Courts are grappling with how to apply these changing standards in the digital era. Websites aren't easy to monitor, and they can possibly carry a number of infringing products. On the web, it's not difficult to hide information.

Letters and notices can be sent to a specific website, but after that, the challenge becomes showing that the alleged infringer is willfully taking a blind eye to knowledge of the activities. Letters and notices sent aren't sufficient or persuasive enough to meet standards of proof of intent.

In some cases, a party might not be aware he or she is committing secondary infringement. However, once they're alerted to it, they must either stop any infringing actions or risk being sued. The nature of the internet makes it more difficult for trademark holders to pursue actions against online parties, but some major companies have had successful outcomes.

Preventing Contributory Infringement Trademark Liability

To reduce the risk of contributory infringement trademark claims, businesses should adopt proactive measures:

  • Implement Monitoring Programs: Regularly audit vendors, licensees, or users for unauthorized trademark use.
  • Respond to Infringement Notices Promptly: Investigate and take action upon receiving credible reports of infringement.
  • Establish Clear Policies: Include clauses in contracts that prohibit infringement and reserve the right to terminate relationships if violations occur.
  • Use Technological Tools: Online platforms should deploy automated systems to detect and flag counterfeit listings or unauthorized uses of trademarks.
  • Train Employees: Ensure relevant staff can recognize signs of potential infringement and understand reporting procedures.

Proactive compliance helps demonstrate good faith and may protect businesses from liability even if infringement occurs through third parties.

Frequently Asked Questions

1. What is contributory trademark infringement? It occurs when a party indirectly contributes to another’s trademark infringement, typically by providing goods or services with knowledge of the infringement.

2. How is contributory infringement different from vicarious infringement? Contributory infringement requires knowledge and material contribution, while vicarious infringement requires the ability to control the infringer and a direct financial benefit.

3. Can online platforms be held liable for contributory trademark infringement? Yes, if they have actual or constructive knowledge of infringement and fail to act. However, courts typically require a high level of proof for liability.

4. What defenses exist against contributory infringement claims? Common defenses include lack of knowledge, prompt action to prevent infringement, and policies in place to deter unauthorized trademark use.

5. How can businesses avoid contributory infringement liability? They should monitor partners, act on infringement notices, include protective contract clauses, and train staff on trademark compliance.

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