November 03, 2011 Articles

Contributory Trademark Infringement: An Issue for Web Hosts

Some web hosts are being held liable for assisting businesses in the sale of counterfeit goods

by James Billings-Kang

The Internet has spawned a vast, continually growing landscape of interconnectivity that links a multitude of entities and builds relationships on a global scale. Embedded in this interconnectivity is the possible extension of liability on one entity as a result of the actions of another. Perhaps one new trend is holding web hosts liable for assisting e-commerce businesses in the sale of counterfeit goods. For instance, a federal jury in South Carolina recently ordered a web host to pay 27 times more than the actual trademark infringer who had used the web host's server in its sale of counterfeit goods. Roger Cleveland Golf Co., Inc. v. Prince, 2010 WL 5019260 (D. S.C. Dec. 3, 2010). At issue in Cleveland Golf was trademark infringement by counterfeiting—a problem that has catapulted to new levels since the advent of the Internet. In fact, according to one estimate, counterfeiting equates to a $600 billion-a-year global industry. Ambrose Clancy, "Faking It: Nothing Phony About Profits in the Knockoff Business," Long Island Business News, July 2, 2009.

Roger Cleveland Golf
Christopher Prince hired Bright Builders to develop a website for his golf club-counterfeiting business that was "your one stop shop for the best COPIED and ORIGINAL golf equipment on the internet." Over the course of the website's development, Bright Builders engineered search engine optimization into the site—essentially "embedding keywords, such as Plaintiff's federally registered trademarks, into metadata within [Prince's] websites." Roger Cleveland Golf v. Prince, 2010 WL 5019260 at *2 (D.S.C. Dec. 3, 2010). Additionally, Bright Builders mentored Prince, even providing him with a Help Team and, at times, coaching him about the website's development and advising him on how to run his business and what vendors to work with.

Upon discovering that the golf clubs sold on Prince's website——were counterfeits of its own clubs, the plaintiff, Roger Cleveland Golf, initially sued only Prince. The plaintiff contended that Prince had violated the Lanham Act and South Carolina's Unfair Trade Practices Act. Further investigation led Roger Cleveland Golf to add Bright Builders as a codefendant for its assistance with the website, thereby claiming that Bright Builders was contributorily liable for the trademark infringement, among other claims.

The court denied Bright Builders' motion for summary judgment, with the jury ultimately finding Bright Builders liable for willfully committing contributory trademark infringement and awarding $770,750 to Roger Cleveland in damages, while Prince was hit with a relatively minimal $28,250 damage award.

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