Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc.
658 F.3d 936 (2011)
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Rule of Law:
Web hosts can be held liable for contributory copyright and trademark infringement if they have actual or constructive knowledge of infringing activities by their customers and possess direct control and reasonable means to stop the infringement but continue to provide services; however, statutory damages for such infringements are typically awarded per work or per mark, not multiplicatively per defendant when defendants are jointly and severally liable.
Facts:
- Louis Vuitton Malletier, S.A. ("Louis Vuitton") is the sole and exclusive United States distributor of its luxury merchandise, which bears its protected trademarks and copyrighted designs.
- In late 2006, Louis Vuitton discovered various websites selling goods believed to infringe its copyrights and trademarks.
- Upon further investigation, Louis Vuitton determined that these infringing websites were using IP addresses assigned to Managed Solutions Group, Inc. ("MSG") and Akanoc Solutions, Inc. ("Akanoc").
- MSG leased servers, bandwidth, and some IP addresses to Akanoc, which then operated these servers and leased server space, bandwidth, and IP addresses to its customers, some of whom were based in China and directly infringed Louis Vuitton's intellectual property.
- From 2006 to 2007, Louis Vuitton sent Defendants at least eighteen Notices of Infringement ("NOIs"), documenting widespread trademark and copyright infringement on numerous websites hosted by Defendants.
- Defendants provided no response to the NOIs, and the infringing websites continued to operate, utilizing servers and IP addresses owned by Defendants.
- Steven Chen managed both MSG and Akanoc, which were based in San Jose, California.
Procedural Posture:
- Louis Vuitton Malletier, S.A. sued Managed Solutions Group, Inc. ("MSG"), Akanoc Solutions, Inc., and Steven Chen (collectively "Defendants") in the United States District Court for the Northern District of California, alleging contributory copyright and trademark infringement.
- The case proceeded to trial, and a jury returned a verdict for Louis Vuitton, finding all three defendants liable for contributory infringement of thirteen trademarks and two copyrights, and that they acted willfully.
- The jury awarded $10,500,000 in statutory damages for willful contributory trademark infringement against each defendant and $300,000 in statutory damages for willful contributory copyright infringement against each defendant.
- After the verdict, Defendants moved for judgment as a matter of law, requesting the court to set aside the jury verdict.
- The district court granted the motion for judgment as a matter of law as to MSG, concluding there was no evidence that MSG sold domain names, operated the servers, or did anything more than own and lease hardware to Akanoc and Chen.
- The district court denied the motion for judgment as a matter of law as to Akanoc and Chen, awarded statutory damages against them, and entered a permanent injunction restricting them from similar conduct.
- Akanoc and Steven Chen appealed the denial of their post-trial motion for judgment as a matter of law and the jury verdict to the Ninth Circuit Court of Appeals, becoming Appellants.
- Louis Vuitton cross-appealed the district court’s order granting judgment as a matter of law in favor of MSG to the Ninth Circuit Court of Appeals, becoming the cross-appellant.
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Issue:
1. Does a web hosting provider have sufficient direct control over the means of infringement to be held liable for contributory trademark and copyright infringement if it has actual or constructive knowledge of its customers' infringing activities and the ability to withdraw services? 2. Are statutory damages for willful contributory trademark and copyright infringement to be calculated per defendant, or per infringed work/mark, when multiple defendants are found jointly and severally liable? 3. Did the district court err in granting judgment as a matter of law in favor of one defendant when there was no evidence that it operated the infringing servers or had the reasonable means to withdraw services?
Opinions:
Majority - Gould, Circuit Judge
1. Yes, a web hosting provider can be held liable for contributory trademark and copyright infringement if it has actual or constructive knowledge and direct control over the means of infringement. No, statutory damages for willful contributory trademark and copyright infringement are not calculated multiplicatively per defendant; rather, they are calculated per infringed work or mark, with jointly liable defendants sharing a single award. Yes, the district court correctly granted judgment as a matter of law for MSG, as there was no evidence that MSG itself operated the servers or had the reasonable means to withdraw services to the direct infringers. The court affirmed the district court's denial of judgment as a matter of law for Akanoc and Chen, finding they had direct control over the "master switch" that kept the infringing websites online. Websites are not ethereal and require physical servers and internet services, which Akanoc and Chen provided and controlled. This service constituted the "means of infringement," and Appellants' knowing failure to prevent infringing actions after receiving numerous NOIs established both actual or constructive knowledge and willfulness for both contributory trademark and copyright infringement. The provision of server space also satisfied the "material contribution" requirement for copyright infringement because it "substantially assists" direct infringement and is an "essential step in the infringement process." The court rejected Appellants' arguments that intent must be express, stating it can be imputed from knowing failure to act. The court affirmed the district court's decision to set aside the jury verdict against MSG, concluding there was no substantial evidence that MSG operated the servers or had reasonable means to withdraw services from the direct infringers. MSG's role was limited to owning and leasing assets to Akanoc, not actively managing the infringing services. However, the court vacated the damage awards. It found that statutory damages under both 17 U.S.C. § 504(c) (copyright) and 15 U.S.C. § 1117(c) (trademark) are awarded per infringed work or per counterfeit mark, not per defendant, when defendants are jointly and severally liable. The statutory language and legislative history for copyright damages clearly dictate a single award per work from either an individual infringer or jointly and severally liable defendants. Applying this logic to trademark statutory damages, the court held that the jury's multiplicative award against each defendant for the full statutory amount was an error, resulting in an excessive total award. Instead, Akanoc and Chen should be jointly and severally liable for single awards per infringement category.
Analysis:
This case significantly clarifies the scope of contributory liability for web hosting providers under both federal trademark and copyright law. It establishes that hosts with actual or constructive knowledge of infringement and direct control over the infrastructure enabling it cannot escape liability by ignoring repeated notices. The ruling reinforces the proactive duty of service providers to address known infringements when they possess the technical ability to do so. Furthermore, the decision provides crucial guidance on the proper calculation of statutory damages in intellectual property cases involving multiple, jointly and severally liable defendants, preventing disproportionate damage awards by affirming that statutory maximums apply per infringed work or mark, not multiplicatively per individual infringer. This standardization impacts future cases by promoting consistent application of damage caps and incentivizing early resolution or compliance by web hosts.
