LVMH Awarded USD32.4 Million in Contributory Copyright and Trademark Infringement Suit Against Web Hosters

In an important victory for intellectual property rights holders fighting online counterfeiters, a jury in the U.S. District Court for the Northern District of California found two web hosting businesses and their principal liable for contributory copyright and trademark infringement by reason of their hosting of websites selling counterfeit Louis Vuitton bags. Louis Vuitton Malletier SA ("LVMH") was awarded USD32.4 million in consequential and statutory damages. Significantly, Louis Vuitton Malletier SA v. Akanoc Solutions, Inc. et al (No. 07 Civ. 3952) is one of few cases (if not the only one) in which statutory damages have been awarded for contributory trademark infringement since the availability of statutory damages was added to the Lanham Act in 1996.

LVMH discovered that the Defendants were hosting websites selling counterfeit and infringing goods in late 2006, and sent the Defendants a number of notices requesting take-down, however, the websites either continued to operate unchanged, or were simply moved to new IP addresses. In August 2007, LVMH filed suit against the Defendants, alleging contributory and vicarious copyright and trademark infringement. The vicarious infringement claims were dismissed on summary judgment, however, the contributory infringement claims remained.

After trial, the jury found that 13 of the 15 trademarks and both of the copyrights enumerated in LVMH's complaint were infringed by Defendants customers. The jury also found that the Defendants acted willfully in contributing to their customer's direct infringement. LVMH was able to prove that the Defendants were aware of the counterfeit sales but did nothing. The jury awarded a total of USD31,500,000 in statutory damages for contributory trademark infringement against the three Defendants, and USD900,000 in statutory damages for contributory copyright infringement. The 1996 Lanham Act provides for statutory damages as an alternative to actual damages in civil counterfeiting litigation. Similar to statutory damages in copyright law, the Plaintiff is given the option to elect statutory damages when unable to prove actual damages.

The Louis Vuitton case differed factually from Tiffany v. eBay, a 2008 S.D.N.Y. case in which eBay was held not liable for facilitating the sale of counterfeit items on its website. In Tiffany, the district court found that eBay had taken significant measures to curtail and prevent counterfeit activities – for example, eBay had developed a fraud engine to check listings for counterfeits, and had developed a Verified Rights Owner program that rightsholders could use to police their trademarks and inform eBay through notice-and-takedown forms. In a separate case brought by LVMH against eBay in France, however, eBay was ordered last summer to pay over USD60 million in damages to LVMH in respect of the sale of counterfeits on its site.