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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."
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!
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.
However if, Cisco informed you that you were selling fakes and you continued selling what you knew to be fakes, are you seriously suggesting you shouldn't then be liable for selling counterfeit goods?
A lot of companies claim a lot of things that don't turn out to be true. Sometimes it's an honest mistake, sometimes it's an outright lie. If the RIAA claims that reselling used media is illegal, do you necessarily believe it? They once claimed that a downloadable file, usher.mp3 was a copyright violation and demanded that it be taken down. Turns out that Professor Usher took exception to their claim of copyright over his recorded lecture. Should his free speech have been effectively denied on the RIAA's say so?
Supposedly, in matters of law, the COURTS are supposed to decide who is telling the truth, not businesses. In a world where the law is sane, Vuitton would have taken the actual owner of the website to court, the court would decide if there was a trademark violation, and then would issue a take-down order to the ISP if it found that there was cause.
What the ISP knew is that someone claiming to represent Vuitton claimed that their customer was selling counterfeit goods and that it was a trademark violation. It did not know if that person actually represented Vuitton, if the goods were counterfeit or if that was a trademark violation. In this case, those claims turned out to be true. It could have as easily been a competing website that wanted to sweep the competition away. That's the sort of thing that courts are supposed to decide.
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.