Current standards for contributory liability apply an inconsistent standard of knowledge to ecommerce providers

There Is No Clear Standard Governing Requisite Knowledge for Application of Contributory Liability for Trademark Infringement in the E-Commerce Setting

Under the current law, no clear standard exists to hold third parties liable for contributory liability. Contributory trademark infringement is a judicially created doctrine that arises from common law tort principles; there are no Lanham Act provisions governing its applicability. See J. Thomas McCarthy, 4 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 25:17 (5th ed. 2018). The case law addressing contributory trademark infringement liability in the e-commerce context is very limited. While there are certain guiding principles regarding application of contributory liability in the e-commerce context, important elements regarding its application remain unclear.

The Supreme Court has not comprehensively addressed the doctrine of contributory liability for trademark infringement, including counterfeiting, in nearly 40 years. In that case, Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982), the Court held that manufacturers and distributors who “intentionally induce[] another to infringe a trademark, or [who] continue[] to supply its product to one whom it knows or has reason to know is engaging in trademark infringement[,]” are contributorily liable. Id. at 854. This standard establishes two separate prongs for contributory liability—the first for intentional inducement of direct infringement, and the second for continuing to supply a product that allows or facilitates the direct infringer’s activity when one knows or has reason to know of such activity. See McCarthy, supra, § 25:18. Following the Supreme Court’s decision in Inwood, district courts have consistently extended its framework beyond manufacturers and distributors, including to service providers. When applying the framework to service providers, courts have generally required an additional showing of direct control over the direct infringer’s means of infringement before finding that liability attaches. Lockheed Martin Corp. v. Network Sols., Inc., 194 F.3d 980, 984 (9th Cir. 1999); see also Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1148 (7th Cir. 1992) (distinguishing liability for a temporary help service who knows of infringing conduct but may not be liable and a landlord who would be liable under common law tort principles).3

Courts have also generally accepted that the Inwood framework, along with the additional requirement to show control, has expanded to online service providers as well.4 There remains an open question, however, regarding what level of knowledge suffices to find contributory liability under Inwood’s second prong—meaning that while the standard sets out liability for one who “knows or has reason to know” of direct infringement, it is not clear what level of mental culpability is required for it to be determined that one has met that standard. For instance, it is not clear what factors beyond actual knowledge of particular infringing conduct are sufficient to establish knowledge under this prong (such as knowledge of past wrongdoing by particular sellers). Indeed, courts have struggled to articulate a consistent, generally applicable principle to evaluate Inwood’s knowledge requirement both in the e-commerce setting and elsewhere.5 The lack of a uniform approach in applying this second prong is particularly important in an e-commerce setting because the nature of e-commerce platforms is such that, absent an egregious situation, they are unlikely to intentionally induce infringement under the first prong; thus, if they were going to have liability at all, they would be found liable under the second “reason to know” prong.