Hosts Hit With $32 Million Infringement Verdict

A California jury has ruled that two web hosting companies and their operator must pay retailer Louis Vuitton more than $32 million in damages related to trademark infringement by their hosting customers. The verdict against Akanoc Solutions, Managed Solutions Group and Steven Chen has raise concern over at TechDirt, which notes that web hosts and ISPs have been protected by "safe harbor" status under the DMCA, insulating them from liability for most illegal content uploaded by their customers.

TechDirt's Michael Masnick writes that in the Louis Vuitton case, the jury appears to have embraced a higher standard for the web host, making it accountable for not shutting off problematic accounts after the retailer notified it of possible trademark infringement.

"Acted Willfully"
The jury ruling, which is posted online at Scribd, indicates that the jury found that the defendants "knew or should have known" of the infringements" and "acted willfully" in contributing to them. The defendants argued in court filings that Louis Vuitton's investigators relied on online forums to improperly characterize their reputations, tarring them as "bulletproof" hosts that market their ability to shield customers from legal hazard. They stated that the investigators' characterizations were based on online reaction to another hosting provider with a similar name.

"This is a bad end result no matter how you look at it," Masnick writes. "If you do any sort of web hosting, your liability just went up by a tremendous amount, and you may now be expected to proactively police all your customers' websites for anything that might possibly be seen as trademark infringement. It's safe to say that this is not what Congress intended - given the nature of the safe harbors it set up in the DMCA and the CDA. Hopefully, either a higher court will toss this out and/or Congress will finally get its act together and extend safe harbor protection to trademarks as well."

The Hosts' Burden?
In an earlier analysis of the case, Eric Goldman of the Technology and Marketing Law Blog examined the  "plaintiff-favorable" rulings that laid the groundwork for last week's verdict.

"The web host cannot determine if the goods being sold are actually counterfeit," Goldman writes. "Nevertheless, the court says a jury could find the web host had actual knowledge of the infringement due to a series of defendant emails and demands from the plaintiff. From my review, it appeared that the referenced emails involve the web host relaying the plaintiff’s takedown notices to the hosted customers, so I'm not sure how these emails could evidence knowledge of the counterfeiting."

Standard disclaimer: I am not a lawyer. But it seems that the Vuitton verdict is bound to focus additional attention on how hosting companies process and respond to complaints about problem content.