The plan solves – replacing the ‘contemporary knowledge’ standard with ‘constructive knowledge’ for contributory trademark infringement induces platforms to proactively curtail infringing activities

Instead, Congress must enact legislation that more generally addresses the level of knowledge required for a finding of contributory infringement by any party that facilitates acts of counterfeiting and trademark infringement; it should not be limited to e-commerce platforms. The new legislation should overturn the Tiffany requirement (the de facto standard throughout the U.S.) whereby a service provider must have contemporary knowledge of which particular listings are infringing before contributory infringement can be found.418 Constructive knowledge of infringement should be sufficient to give rise to a duty to investigate and stop the infringing conduct.

In Luxottica Group, SPA v. Airport Mini Mall, LLC, the Eleventh Circuit recently affirmed a jury verdict finding defendants liable for contributory trademark infringement where they knowingly facilitated infringement by others. Luxottica and its subsidiary Oakley alleged that the defendants operated a shopping mall in Georgia containing approximately 130 booths leased to vendors, many of which sold counterfeit products including the plaintiff's sunglasses. 4 19 Despite three law enforcement raids, two letters from Luxottica, and a meeting with local police, the defendants took no steps to determine which tenants were selling counterfeit sunglasses or to evict the infringing tenants.420 The district court found the defendants liable for contributory infringement and awarded $1.9 million in damages, and the Eleventh Circuit affirmed. The court determined that contributory infringement could be found where "the defendant ([a]) supplies a product to the direct infringer whom it 'knows' is directly infringing (actual knowledge); or ([b]) supplies a 'product' to a direct infringer whom it 'has reason to know' is directly infringing (constructive knowledge)." 42 1

The Luxottica court explained that constructive knowledge can be demonstrated in several ways. Willful blindness is only one form of constructive knowledge for contributory trademark infringement.422 The defendants argued that under Tiffany, they could only be liable for contributory infringement if Luxottica provided them with notice of which particular vendors were selling counterfeit products, but the court disagreed. It found that Tiffany did not categorically shift the burden onto trademark owners to provide notice to defendants. 423 Instead, both "actual [and] constructive knowledge of the direct infringers' identities could arise from many sources, including steps the defendants could have taken to investigate . . infringement ... after being put on notice ... that [unidentified vendors] may have been selling counterfeit Luxottica products." 424 The court concluded the trial evidence was sufficient to prove the defendants had at least constructive knowledge of specific instances of infringement, since Luxottica's letters might have prompted a reasonable landlord to conduct at least a cursory inspection. 425 In addition, evidence of serious and widespread infringement (in this case, three law enforcement raids) made it far more likely defendants knew about the infringement. 426 Following Luxottica, even the Second Circuit has agreed that actual knowledge of a specific infringer is not required in all cases.427 A defendant may be willfully blind to particular transactions or to the identities of infringers, and a defendant may be liable for contributory infringement despite not knowing the identity of a specific vendor who was selling counterfeit goods.428

The Tiffany standard for contributory liability-requiring contemporary knowledge of which particular listings are infringing-improperly allows ecommerce platforms to insulate themselves from liability. Online marketplaces organize their operations in such a way as to avoid contemporary knowledge and then essentially suggest that they are too large to know which listings are infringing, all the while profiting from every sale by their sellers. 429 The burden is disproportionately placed on brand owners to continually screen platforms, seek out listings that are potentially counterfeit, and send takedown notices to the platforms. 430 It has been repeatedly described as a game of "whack-a-mole." 431 Further, by the time the infringing listings are removed, the items may have already been sold, and new listings may have appeared. That is out of touch with today's world. 432 It has led to a flood of counterfeit products, including counterfeit microelectronics, being sold on the internet, and the result is lost sales by original manufacturers, damage to brands, and threats to public health and safety.

The Lanham Act should be amended to specifically recognize contributory liability for anyone who knowingly facilitates direct infringement by a third party. That should include an online marketplace that "continues to supply its [service] to one whom it knows or has reason to know is engaging in trademark infringement." 33 "Reason to know" (i.e., constructive knowledge) of infringing activity should be context-dependent and could be demonstrated in multiple ways, including sample purchases that were identified as counterfeit, unusually large numbers of listings for an item, unexpectedly low prices, suspicious images, law enforcement raids, and other indicators. Requiring actual knowledge of specific infringing acts is not the correct standard. Imposing liability when an intermediary has constructive knowledge that infringing activity is occurring will redistribute the burden and force e-commerce platforms to bear partial responsibility for identifying and curtailing that activity. It could also encourage electronic parts manufacturers to pursue civil actions against online purchasing platforms hosting vendors of counterfeit parts.