Companies hosting web sites and providing search engine optimization (SEO) services generally enjoy safe harbor protection from copyright infringement under the Digital Millennium Copyright Act and protection from liability for information provided by third parties under Section 230 of the Communications Decency Act, but does that protection extend to protection from contributory trademark infringement liability? Courts increasingly have answered that question in the negative.
Let's examine one such instance. Christopher Prince operated several websites, one of which was called "copycatclubs.com". Through these websites (all of which resolved to a single online store), Mr. Prince sold golf equipment, accessories and apparel. The online store was described as a "wholesaler" that was a "...one stop shop for the best copied and original golf equipment on the internet". A shopper working for Roger Cleveland Golf Company, Inc. (Cleveland) ordered several clubs described as "Cleveland" clubs from the online store. The shopper received the order and the clubs were branded as "Cleveland" clubs. Cleveland determined that the clubs were counterfeit and brought suit against Mr. Prince and some of his affiliates. During discovery, it was determined that Mr. Prince employed Bright Builders, Inc., a web site designer and SEO consultant to create and support the web sites and the business model. Cleveland amended its complaint to include Bright Builders as a defendant and allege that Bright Builders had contributorily infringed Cleveland's trademarks.
Bright Builders moved for summary judgment with a one and one-half page motion with no supporting citations or reference to the record as is required by court rules. The gist of Bright Builders' defense was that it was merely a "web hosting entity" and was not "...aware that Mr. Prince was engaged in illegal activities...". Cleveland strongly disputed this and cited evidence in the record that Bright Builders created the website, assured Prince that he would make at least $300 a month from the online store, took $10,000 to provide coaching and mentoring services, provided a Project Advisor and had discussions with Prince about developing copycatclubs.com. In fact, the Court said that the name (copycatclubs) should have alerted Bright Builders to possible infringement (even though copying is not necessarily illegal). Bright Builders did not bother to reply to Cleveland's response.
Perhaps due in no small part to the nonchalant manner in which Bright Builders approached the lawsuit and the pleadings, the Court found that there was a genuine issue of material fact as to whether Bright Builders participated in Prince's business to such an extent that Bright Builders could be held liable for trademark infringement and denied the motion for summary judgment. This was in December of 2010 and the case proceeded to trial. On March 10, 2011 the jury found infringement by both Prince and Bright Builders and returned a much larger verdict against Bright Builders (the secondary infringer) than it did against Prince (the actual infringer).
So, here we are again in the Lessons Learned Department. What steps should website developers and SEO consultants take (or not take) to minimize their exposure to a verdict for secondary liability?
Consider these principles:
1. If the developer exerts sufficient control over the website and knows or had reason to know of infringement, the developer must not fail to take appropriate actions. The developer does not have to reasonably anticipate that infringement will occur and generalized knowledge is not sufficient to impute knowledge of any and all instances of infringing activity.
2. Demand letters and other notices from potential plaintiffs are not sufficient to establish a duty to act but when the developer has knowledge of specific infringing activities, it must not fail to take action to eliminate the infringing activities or it must cease to provide services to the infringer.
3. The website hoster should have programs designed to detect possibilities of infringement and not fail to take defined steps to eliminate it when specifically found.
4. Do not be "willfully blind" to infringement. This means refusing to investigate when you fear the results of the investigation. White heart and empty head is no defense. Principles 1 through 4 above are discussed in great length and detail in Tiffany et al v. EBAY, Inc. 576 F. Supp. 463 (2008).
5. You must not fail to do a better job of documenting your activities and responding to court pleadings than Bright Builders did. While this might not be the developer's responsibility, the developer should be sure that it engages legal counsel knowledgeable in the area and that takes the potential liability seriously.
Therefore, the next time you are engaged to develop a website to sell Gucci bags and Louboutin shoes, do your due diligence to see if they are the real thing or you may end up taking a bigger hit than the actual culprit. That's not optimization of any kind.