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Web Hosts Hit With $32 Million Judgment For Content
mikesd81 tips news that a California jury has found two web hosting companies liable for "contributing to trademark and copyright infringement" after hosting web sites that sold counterfeit Louis Vuitton items. Both companies are owned by the same man, Steven Chen, and are being ordered to pay $32 million in fines. A similar judgment for $61 million went against eBay last year for facilitating the sale of counterfeit Louis Vuitton merchandise.
"The US District Court for the Northern District of California is expected to issue a permanent injunction banning the internet service providers from hosting Web sites that selling fake Louis Vuitton goods in the future, the company said. Attorneys for the luxury goods maker said in a statement that the case is the first successful application on the internet of the theory of contributory liability for trademark infringement. Under this theory, companies that know, or should know, that they are enabling illegal activities have an obligation to remedy the situation. Entities that fail to do so, as Louis Vuitton alleged in this case, can be held legally responsible for contributing to the illegal activities."
So...if I sell Cisco gear, and it turns out that I wind up with counterfeit Cisco gear, they could argue that because I know what real Cisco gear looks like I should be able to identify any counterfeit Cisco gear. Then Cisco can come in and slap me for some unholy sum for "should have known". I wonder how much they lose in sales due to cheap counterfit equipment. I mean, arguably, someone buying a cheap counterfit is not likely to pay the full price for a real one, so it is pretty difficult to call all of it lost sales. So...now there is an active disincentive to protect your goods from counterfit. Instead of worrying about counterfit, they can just go sue the shit out of anyone selling counterfit to people who probably wouldn't have purchased an original anyways. Thus turning a bunch of non-sales into revenue. This is just fucking brilliant.
The only change I can believe in is what I find in my couch cushions.
This isn't the store, it's the not even the relevant "mall". It's the REIT that holds the mall.
If you are not co-located with the offending physical store presence, how are you supposed to know it's counterfeit?
A Pirate and a Puritan look the same on a balance sheet.
Hosts are under no obligation to actively investigate their content. In this case the hosts were informed about illegal content and took no action against it. This wasn't a case of them not spotting 1 website out of 1000 doing illegal activity, it was a case of them knowing about the activity but not caring.
How long until we see a mass movement of hosting facilities to other states and countries? This is really scary. I don't mind the fact that hosting facilities are now liable a lot more than before, but the court just _forced_ hosting providers to become judges of who is in breach or not of copyright. No sane hosting provider will ever protect its customer from for instance the laywers of MS. Practically any content you have can, one way or the other, be twisted into a copyright infringement by a clever lawyer. You can be shut down at any time without any chance to protect yourself. Yikes!
There needs to be a new law that operates similar to the DMCA safe harbor and take-down notice system works for copyrights. If Louis Vitton thinks that someone is selling a fake Louis Vitton bag on, say, eBay, they would send eBay a take down notice alleging (under penalty of perjury) trademark/trade dress infringement. eBay then takes down the auction when notified (and in doing so is given safe harbor from any infringement connected with the auction). And just like the DMCA take-down notice system, if the take-down is baseless (i.e. no violation has taken place), the item can be re-listed (or the information can be re-posted or whatever). And just like the DMCA, when you file a counter claim, you are alleging (under penalty of perjury) that no violation has taken place.
sites get protection from being sued for allowing items/content/etc that violate someones IP to be listed/sold/posted/etc
Companies who's IP is being violated have a simple way to get infringing content/auctions/etc taken down (but only if its actually infringing)
And those who are selling legitimate items that DON'T violate someone else's IP (such as a genuine Louis Vitton bag) are free to go on selling without the risk of having their legit auction pulled.
They further said that Chen and his companies had been informed of the activity by Louis Vuitton but still refused to implement a policy for removing the offending sites, which was their responsibility.
So, I'm an ISP, and I host someone who runs a second-hand store. They sell legitimate "Louis Vuitton" crap, but at prices well below retail.
Louis Vuitton "informs" me that the material is counterfeit. I'm supposed to verify this how?
Since when did ISPs become the gatekeeper of what is and isn't legal?
Frequently, sites that are doing nothing wrong whatsoever are targeted by threatening their provider or at least making bogus IP claims to the provider. Shall we make the rule take down first, ask questions later? How will that play when a whistle blower's site is taken down for IP violations when Badco claims that the fact that they're dirty cheating scum is their valuable IP?
If I tell your bank that you're a fraud artist, shall they freeze your account and in the process destroy your business? Should they have any duty whatsoever to determine where the money comes from? If banks were held liable for every illegal transaction they unwittingly contribute to, they'd have been out of business a long time ago.
It seems to me that law enforcement and the courts are the ones who are supposed to decide when someone is committing a crime. Then the court should produce a takedown order. Naturally, an ISP ignoring a valid court order would be a very different matter, but until this went to court, all they had was a few letters purporting to be from a foreign company alleging trademark infringement.
If you read the entire article, you would have noticed that the hosting company was notified on several occasions and did not comply with the requests. To me, that is a blatant violation of any number of rules, and I have no sympathy for them.
I am no fan of the DMCA, or any of the related think of the children laws, but in this case, the hosting provider screwed up.
On the other hand, I can also see LV going after people selling legit LV products below the cost that LV thinks those products should be sold at... That would be abuse of the laws, but I doubt it would stop them.
I came, I conquered, I coredumped
The manufacturer, who can speak authoritatively about the bags...
You making the same incorrect assumption that the judge did in this case. Manufacturer has no idea if bags are fake until they buy and test them.
Low price alone does not mean that merchandise is fake. Some items might have been bought on clearance at outlets (which already have pretty good discounts), while others could have been "taken" out of back door in the factory (which alone does not make product a "fake").
On eBay, of instance, luxury manufacturers try to control prices of their products by sending take down notices to everyone who tries to undercut their retail prices. First Sale Doctrine does not seem to apply to people with deep pockets.
The hosting company was approached by the manufacturer of said bags.
The hosting company received emails CLAIMING to be from the manufacturer. They most likely also received a few dozen emails from "Egg Bank", "Bank of America", "Your Bank", and even "support@their-own-domain" that day. Not to mention a few dozen barristers informing them of untold riches that have been willed to them. They may have even received a grant notification from Bill Gates.
I've received personal visits from repo-men claiming that someone I've never heard of lived in my house and had a car I've never seen parked somewhere. Considering that I've lived here since it was built, I doubt their claims but they were quite sincere in their belief.
Using your example, the bank would, or should ask you questions about the alleged fraud. When they find out you're a kook, they hang up on you.
And what if I'm a really convincing kook or a really unconvincing legitimate complainant? Are they doomed to a multi-million dollar loss if they guess wrong? Are you doomed to a loss if they guess wrong?
Neither the bank nor the ISP are empowered to perform criminal investigation, so there's only so much they can do. All they know for a fact is that some guy on the phone says you're a fraud and you say you're not.
Not all that much. ISPs are still not courts legally empowered to decide matters of law for 3rd party disputes. Registered mail with a working reply address would have verified that the complainant was actually Vuitton but wouldn't have verified the correctness of their claim. Their fame doesn't make them infallible.
I might have had a bit more sympathy for the jury's decision but still wouldn't fully agree.
My feelings would be quite different if Vuitton had sued the OWNERS of the website (the ISP's client) and a resulting court ordered take-down had been ignored by the ISP, or at least if Vuitton had then furnished an authenticatable judgment that the client was in fact infringing, but that's nothing like what happened.
The Hitchhiker's Guide To The Galaxy has a few things to say on the subject of Hand Bags. . .
"A handbag, it says, is the most massively useful thing an intergalactic hitchhiker can have. [Insert witty Adams-isms about the usefulness of hand bags here.] [. . .] thus leading to The Great Counterfeit Hand Bag Crisis of the early twenty-first century. The judges, lawyers and general rif-raf of the legal profession as it happened all had wives who were partial to their expensive accessories and none too pleased to see cheap knock-offs of their own fashionable handbags being carried about by simply EVERY other woman on the street. As such, the wives exerted their collective will toward the task of making their husbands entirely miserable until something was done about this altogether offensive state of affairs. Now, as is well recognized that the collective might of any large group of truly unhappy women is approximately equal in its force upon a planetary culture as a prolonged, large-scale military engagement, it was not long before the crime of hand bag counterfeiting was elevated to the very top of the list of humanity's most heinous mis-doings, right up there with the really bad stuff, --like listening to music without a license, and forcing children to make handbags and other fashion accessories in musty sweat-shops. Indeed, handbag counterfeiting and listening to music without a license were swiftly and severely punished leading to the establishment of a planet-wide police state. And while sweat-shop labor received somewhat less attention, it was nonetheless strongly frowned upon; people would shuffle while looking at their shoes and utter things like, "Oh, yes, well that's simply terrible, that is! Simple terrible." Indeed, it was considered altogether so terrible that it was often considered wise to simply not mention it at all, particularly when attending those swank gatherings where the finest handbags were on display."
-FL