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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."
If the landlord knew his property was being used to make drugs and did nothing about it, potentially yes, he would be at risk from prosecution.
This is being widely discussed in the hosting industry. The full jury ruling is online, and there's additional analysis and discussion at the Web Host Industry Review, TechDirt and Data Center Knowledge.
They would have to prove you knew (which for convincing fakes would be incredibly hard to do).
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?
Ignorance is still a valid defence, however if you RTFA you will see the web hosts were informed they were hosting websites selling illegal goods and did nothing to remedy this. The sellers made money selling dodgy goods, the web hosts made money directly from the illegal activity and enabled it to continue.
You need to dig a bit (it's mentioned in the seventh paragraph of the linked article, with a more detailed discussion on the second page), but basically the ISP in question failed to take action to shut down the hosted sites despite repeated takedown notices from Louis Vuitton. The only real precedent that this sets if you ask me is a very positive one in that if your "abuse@" email is a blackhole then you had better have extremely good liability cover and/or be very hard to reach to avoid being served with lawsuits.
UNIX? They're not even circumcised! Savages!
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.
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.
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If true, then they got it coming their way. You do not willingly ignore that one of your customer do illegal activity when it has been reported to you.In addition
Under existing precedent (outside of the Internet realm) a plaintiff seeking to prove contributory trademark infringement needs to prove that a defendant intentionally and knowingly enabled another to infringe a trademark, Johnson said. In this case, the jury appears to have been convinced by the evidence presented by Louis Vuitton that the Web hosting companies had clear knowledge of the infringing activity, he said.
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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!
It wasn't "they should have know", it was "they were informed and ignored the warnings". Big difference.
"... or is it more a sort of handbag, really?"
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.
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.
Excellent. Now I can sue Qwest and AT&T when telemarketers call me to sell fradulent items. After all, they are also "aiding" in this criminal enterprise...
What's good for the goose is good for the gander.
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 DMCA Copyright safe harbor protection has something similar to this. The problem is that no (or very few) of the webhosts follow through on the 2nd part, in that most web hosts don't give an opportunity for their clients to sign an affidavit of legitimacy.
When I ran a very small web hosting company a few years ago, i'd occasionally receive a DMCA takedown notice (all of them via email, typically from an anonymous email service...hotmail, gmail, etc). My response to those was to send a reply asking the alleged content owner to provide a signed statement where they swore, under penalty of perjury, that the content they were asking to be removed was in fact their own copyright. I also required their full name, address, and real-world contact information. I gave them my mailing address and my fax number to provide the requested signed documents.
Not ONE of them ever followed through with the requested information. I received about 15-20 of them over the 4 years I did hosting. I only ever received one reply to my request for more information, and that was an email saying that they would get back to me.
This is a Renter's issue. If I lease out an office space to people whom I know are dealing cocaine, I get put in prison too unless I notify authorities and cooperate with the investigation. The host being penalized for knowingly hosting a website dealing illegally in IP is analogous. What's the hubbub about? Seems reasonable to me.
No one suggested the host had to take-down the site, the host probably should have notified the IP holder and worked with authorities. It's not the host's responsibility to kick his leasees out of his office space, in fact the host has a legal obligation to not interfere with a leasee's space unless invited in during the terms of the lease. The IP holder has no authority to demand a takedown, only a judge does, but you can cooperate to get to the bottom of the issue instead of being an antisocial asshat that ignores everyone. A simple call a lawyer "I've been notified that a website I host is dealing in illegal items and I'm calling to cooperate with any investigations currently underway or that you will initiate." Not so hard.
If you receive a takedown notice, take it to a lawyer and say you want to cooperate but need to validate the notice, have your lawyer contact the author of the takedown to say you're cooperating but need more information such as patent information or copyright filings. A takedown notice is not a judicial document, you need a judge for that, and if you initiate the judicial process through cooperation no judge will fine you excessively if you unwittingly facilitated the activity. Don't get so paranoid. It's like the internet is filled with twelve year-olds that put MP3s up on their Geocities page to look like a 'cool' technogangsta and don't know what their rights are or how to be a good responsible citizen.
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.
Can we please stop making reference to the Digital Millenium Copyright Act in this discussion? The case in point concerns trademark infringement. The DMCA does not apply to this.
And for all those who say, "oh, but what if I get a phony notice," how hard is it to verify that someone is a licensed Louis Vuitton distributor? I'd agree that simply looking at the site may not be sufficient to determine whether the hosting client is engaged in trademark infringement, but the site's owner should at least be able to demonstrate that he or she is a licensed distributor.
I'm on Vuitton's side in this one.
Loius Vuitiion (or whatever the hell his name is), makes an over-priced, uber-expensive handbag, and then complains when knock-offs come around? Isn't that capitalism? I also notice that this dude and his bag of lawyers sue or jail everyone selling the stuff.
But not the guys making the stuff.
Because his handbags come out of the same Chinese factory as the knock-offs. That's why most people will never notice that they *are* knock-offs. During daylight hours, the factory produces legitimate "on the books" merchandise, and then the night shift takes over, making the exact same stuff, but "off the books", which are then sold cheap, and shipped off to the rest of the world.
Legitimate copyright holder screams bloody murder, and sues and jails everyone, except the factory, who have already made their profit by selling the knock-offs to the distribution channel. And the guy can't sue or jail the factory in China, because during the day, they make his "real" merchandise.
The Chinese have figured out capitalism pretty well for a communist country. They've got capitalsim down better than the USA, that's for sure.
If telephones are outlawed, then only outlaws will have telephones.
Did Defendants prove by a preponderance of evidence that they are service provides [sic] who acted in a manner that entitles Defendants to the "safe harbor" provisions of the Digital Millennium Copyright Act?
the jury answered "no" for all three parties, including the service provider. They considered the DMCA and rejected that defense.
It looks to me like this is a lot of people getting upset over nothing; to the best I can tell (without access to other court documents), the host blatantly ignored DMCA-like steps to mitigate the situation, acted willfully to support the copyright infringers, and got financial compensation for doing so. Justice was served.