Amending the Lanham Act to adopt the liability and safe harbor provision of the DMCA for trademark owners and create a limited duty to monitor protects trademark owners rights but encourages cooperation between brands and platforms

To better protect trademark owners’ rights from online infringements and to avoid placing undue duties or liabilities on ecommerce platforms, this Comment offers both a legislative and a judicial solution. Specifically, Congress could achieve the balance between trademark owner’s rights and e-commerce platforms’ liabilities by amending the Lanham Act to mirror the Digital Millennium Copyright Act. Alternatively, the Supreme Court could achieve the balance by adopting a relaxed approach to the Inwood test that deviates from Tiffany’s approach.

A. Congressional Action: Creating a DMCA-type Amendment to the Lanham Act

The most expedient and effective solution would be a Congressional amendment to the Lanham Act. Congress can find inspiration in amending the Lanham Act by looking at another area of intellectual property law: copyright. Courts can enforce secondary liability for direct copyright infringement through common law.124 Yet, courts have also faced similar challenges when they tried to apply the doctrine of secondary liability for copyright infringement in the online world.125 Fortunately for trademark owners, Congress provided some statutory guidance in 1998 when it enacted the Digital Millennium Copyright Act (“DMCA”).126

1. The Digital Millennium Copyright Act

The DMCA amended the Copyright Act to address the relationship between copyright and the internet. 127 Congress implemented the DMCA to “facilitate the robust development and world-wide expansion of electronic commerce, communications, research, development, and education in the digital age.”128 Title II of the DMCA creates a strong incentive for service providers to work with copyright owners to find and resolve copyright infringements that take place online.129 It also provides greater certainty to service providers about their potential liability for infringements that may occur on their platforms. Specifically, the DMCA created section 512 of the Copyright Act (“section 512”) and provided limitations on the secondary liability of and safe harbors for online service providers (“OSP”) for their users’ direct copyright infringement.130

In order to qualify for section 512’s safe harbor provisions, OSPs must meet two threshold requirements.131 First, the OSP must qualify as a “service provider.”132 Second, the OSP must adopt, reasonably implement, and inform users of the service provider policy that provides for the termination, in appropriate circumstances, of users who are repeat infringers.133 Section 512(c) generally provides that a service provider shall not be liable for monetary, injunctive, or other equitable relief for users’ infringement if it has no actual knowledge or is not aware of facts or circumstances from which infringing activity is apparent.134 However, if it has such knowledge or awareness, it must expeditiously remove—or disable access to—the infringing material.135 Additionally, the service provider cannot receive financial benefit from the directly infringing activity if it has the right and ability to control such activity.136

Finally, the service provider must also expeditiously remove, or disable access to, any potentially infringing material alleged by users pursuant to section 512(c)(3).137 It is important to note that section 512 does not impose any affirmative duty on service providers to police or track users for evidence of repeat infringement.138 The service provider falls outside of section 512 safe harbor if it fails to respond when it had knowledge of the infringing activity.139 By clearly delineating the responsibilities for both service providers and users, section 512 creates a balance between protecting copyright owners’ rights and promoting online technology developments.

2. Proposing a DMCA-Type Safe Harbor in the Lanham Act

Emulating the DMCA, Congress should adopt a safe harbor provision in the Lanham Act similar to section 512 of the Copyright Act. 140 The proposed statute would facilitate the development of trademarks in the internet age, incentivize service providers and trademark owners to cooperate in detecting and dealing with online trademark infringements, and provide clear guidelines for service providers to limit their liability.141

Similar to section 512, the proposed statute would impose certain threshold requirements for e-commerce platforms to qualify for the safe harbor exemptions. First, like section 512, the proposed statute would define e-commerce broadly. For example, it could define an “ecommerce platform” as “a website where third-party sellers and consumers can exchange goods and services.” This broad definition would include a wide variety of websites such as eBay, Amazon, Walmart, and others—and it would anticipate future websites as well. Second, same as section 512, it would require the e-commerce platform to adopt, reasonably implement, and inform users of a policy that provides for the termination of users who are repeat infringers.

After establishing threshold requirements, the proposed statute should provide that if an e-commerce platform has no actual knowledge or is not aware of facts and circumstances from which infringing activity is apparent, then it is not liable for monetary, injunctive, or other equitable relief for users’ direct trademark infringements. However, if the e-commerce has such knowledge or awareness, the proposed statute should require the platform to expeditiously remove, or disable access to, the infringing material. These requirements are similar to those in section 512.142 In contrast to section 512, the proposed statute would modify both the financial benefit requirement and the notice and takedown procedures outlined in section 512, and tailor them based on the purposes of trademark law.

To understand why the proposed statute should modify the financial benefit requirement, consider section 512’s relevant provision. Specifically, section 512 requires that if service providers have the right and ability to control direct infringing activities, then they cannot receive financial benefit from such activities.143 This requirement alone would disqualify most e-commerce platforms because they can control their users and generate revenue from each transaction that takes place on their platforms. It would also defeat the safe harbor provision’s purpose, rendering it ineffective. To understand why section 512’s financial benefit requirement would not work for e-commerce platforms, recall that an e-commerce platforms’ right and ability to control direct trademark infringement on its website is indisputable.144 Courts have found that financial benefit can be established even in the absence of any revenue, where the infringing acts enhance the draw of a venue.145 Courts have also acknowledged that e-commerce platforms receive revenue from every transaction, including those that involve infringing activities.146 Thus, the proposed statute would bridge this gap between the disqualifying nature of section 512’s financial benefit requirement and the reality of e-commerce platforms by either eliminating or relaxing the financial benefit requirement. For example, the proposed statute could relax this requirement by disqualifying ecommerce platforms only if they receive more financial benefit from directly infringing activities. As a result, the relaxation avoids putting undue burden on e-commerce platforms by taking into account that they profit from every single transaction.

Additionally, to understand why the proposed statute should modify the notice and takedown procedures, first consider section 512’s relevant provision. In particular, section 512 outlines a detailed notice and takedown procedure which would also be implemented by the proposed statute.147 This provision allows users to file notifications to allege potential infringing materials148 and requires service providers to take down those materials if user notifications comply with certain requirements. 149 These provisions provide a uniform notice and takedown procedure for all copyright owners and internet service providers, promoting efficiency since both copyright owners and service providers know their relative rights and responsibilities. Additionally, to prevent wrongful takedowns, section 512 also provides a counter notification system, which requires the service provider to restore any suspended materials if the user’s counter notification complies with certain requirements.150 The proposed statute would imitate section 512’s procedures and requirements for trademark owners to file notifications. This process should proceed as follows: (1) e-commerce platforms must timely takedown the alleged infringing posts following a trademark owner’s notification filing, and (2) ecommerce platforms must also implement a counter notification system to prevent wrongful takedowns. For the first step, the requirements for trademark owners to file a notification could stay the same as section 512 because the purpose is to simply notify the e-commerce platforms. For the second step, like section 512, the proposed statute would require that if e-commerce platforms receive a valid counter notification accompanied by a statement under the penalty of perjury from a seller on their platforms stating that a post on an e-commerce platform was wrongfully removed, then the e-commerce platform must revive the post unless the trademark owner files an infringement action seeking a restraining court order against the posts.

Referring back to section 512 once more, after receiving a counter notification, section 512 allows up to fourteen business days for copyright users to decide whether to file an action.151 Section 512 also requires the posts to remain taken down provided there is an ongoing court action.152 In other words, potentially innocent posts that do not infringe others’ copyright remain offline for at least fourteen business days following any notification made pursuant to section 512(c)(3).153 In contrast to section 512, this time period is too long in the context of trademarks and e-commerce because unlike copyrighted materials, the sale of goods or services is usually time-sensitive. Online consumers often purchase goods or services within a short period of time,154 and if innocent posts bearing legitimate trademarks are taken down for fourteen business days, consumers will likely purchase the goods or services from another seller. Therefore, even if the posts were eventually replaced on the e-commerce platform, the seller would likely have already incurred substantial economic harm.

Unlike section 512, the proposed statute would require trademark owners to decide whether to file an action within a shorter period of time after receiving a proper counter notification and require an ecommerce platform to revive the posts if a trademark owner does not pursue an action. Requiring reposting within five business days or less is ideal since it will not impose a great burden on e-commerce platforms after they receive a proper counter-notification. Also, five business days would be plenty of time for trademark owners to decide whether to pursue action because they would know whether their trademarks are being used illegally without their approval. The shorter period of response time will minimize the harm to innocent posts by incentivizing the e-commerce platforms and trademark owners to act quickly and responsibly.

3. Additional Safe Harbor Provisions Beyond the DMCA

Adopting similar elements as those in section 512 would create a functional safe harbor for e-commerce platforms. Most of the burden would still fall on trademark owners to constantly inspect various ecommerce platforms. To alleviate this heavy burden and to better protect trademark owners’ rights, this Comment also proposes adding a limited duty to police for e-commerce platforms in the new safe harbor provisions.

This proposed limited duty would require e-commerce platforms to monitor their websites for counterfeits and could be implemented by an automated screening of each post before its publication. 155 If the automated monitoring system detects a suspicious post, then the platform would need to flag or temporarily freeze the post. Then, the platform would have to determine whether the post is indeed selling counterfeits or infringing others’ trademarks,156 and, if it is, the platform must delete the post and investigate the seller.157 Repeated infringers’ accounts should be suspended or deleted; however, the sellers should be allowed to challenge the platform’s decision by filing an appeal with the platform. Additionally, the proposed statute should provide platforms with immunity if they conduct a bona fide determination accompanied by proper documentation. Granting immunity would serve as an incentive for platforms to carry out their limited duty to police and establishes a clear limit on the platforms’ liability.

Finally, the proposed statute should require the rigorousness and complexity of the automated system to be proportionate to the size or revenue of each e-commerce platform. In other words, e-commerce platforms with more transactions or revenue should implement a more rigorous automated monitoring system. To determine whether the ecommerce platform complies with its limited duty to police potential listings that constitute trademark infringements, the proposed statute would instruct the courts to decide on a case-by-case basis. While the proposed statute could provide some factors for the courts to consider based on the technological details of automated monitoring systems, though these considerations are beyond the scope of this Comment.158

As explained above, the proposed statute would provide both preventative and reactive components in combating counterfeits sold through e-commerce platforms. Although no automated monitoring system could detect all infringing posts, together with the trademark version of the DMCA, the proposed statute would provide an effective standard for e-commerce platforms to avoid contributory trademark infringement. Additionally, the proposed statute would advance the development of trademarks during the internet age and promote cooperation between e-commerce platforms and trademark owners in detecting and dealing with online trademark infringements.