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Guiding Secondary Liability In U.S. Trademark Infringement Within E-Commerce

Secondary responsibility is a legal concept in the United States that covers various types of trademark infringement cases. Essentially, it means that damages cannot solely be based on the defendant's use of the plaintiff's logos. Instead of directly suing the party committing the trademark infringement, the trademark owner may choose to file a secondary liability lawsuit.

In cases of secondary infringement, the trademark owner seeks compensation from a third party whose actions contribute to repeated wrongdoing by multiple main infringers. This allows the trademark owner to address multiple instances of infringement in a single legal proceeding, potentially making the legal process more efficient.

This article specifically examines the legal framework of secondary liability in the context of e-commerce in the United States. It delves into how the law addresses situations where a third party facilitates or encourages trademark infringement by multiple individuals. By exploring the nuances of secondary liability in the realm of e-commerce, the paper aims to shed light on the legal mechanisms that trademark owners can leverage to protect their rights in an increasingly digital marketplace.

Secondary Liability Standard

The standard for secondary trademark infringement in the United States is outlined with clarity in the case of Inwood v. Ives Laboratories, Inc., 456 U.S. 844 (1982). According to this legal precedent, if a producer or seller is aware that their actions contribute to trademark infringement, or if they knowingly sell their goods to someone suspected or reasonably believed to be infringing on a trademark, they bear joint responsibility for any resulting damages. This principle establishes a participant-based liability framework.

Under the Inwood test, claimants have two avenues to establish secondary liability: international inducement or the ongoing supply of goods with actual or constructive knowledge of the infringement. In simpler terms, if a producer or seller knowingly contributes to trademark infringement or sells to someone reasonably suspected of infringing, they are jointly liable for resulting damages.

The Inwood standard serves as a guideline for holding parties accountable in cases of secondary trademark infringement, emphasizing the importance of awareness and intention in determining liability. This legal framework aims to ensure fairness and accountability in trademark infringement cases within the United States legal system.

When Applied In Auction Sites
If Inwood standard is applied to the online world, it will determine eBay's secondary liability for listing illegal products for sale on their online sites, and Tiffany was the first to file a complaint in the US. The court, in this case, noted that eBay was unable to know the Tiffany merchandise was counterfeit because it never saw or checked the items, and that a vast percentage of the Tiffany jewelry selling on its website was aware that some of the Tiffany products sold on its website might be fake.

Tiffany was not found intentionally blind by the court as eBay did not disregard the facts presented, although this may give potential courts leeway to take a different approach in cases where a respondent with a less viable business plan makes a smaller attempt to deter infringement.

Applied To Search Engines

The alleged secondary responsibility of search engines for infringements perpetrated by marketers to which they have marketed keywords attached to the trademarks of others has received less attention from United States courts. Since most US courts regarded those cases as a primary violation, this was upheld.

The only basis on which trademark owners in the European Union may hold search engines liable under trademark law is a secondary liability. Furthermore, suing the search engine has the same strategic advantages as suing eBay for secondary liability from the standpoint of trademark holders.

Search engines, like eBay, have created rules in which they would delete ads under certain cases if the copyright owner notifies them. In the secondary liability regime, the complainant occasionally wins against search engines. The most prominent case was the Fourth Circuit's reversal of the dismissal of the secondary and principal violation claims against Google. in Rosetta Stone Ltd. V. Google, Inc.

The new case law has resulted in a warning and takedown process that search engines will use to shield themselves from lawsuits, similar to how auction sites do, but broader liberalization of search engine policies is impossible unless advertisers are exclusively liable for keyword advertising.

Present Scenario In The e-Commerce Market

Large and small companies have benefited from e-commerce by being able to attract a far larger user base than ever before, but this never-ending internet auction has sadly opened the door for counterfeit and pirated merchandise. Products that were previously only available for purchase at flea markets or out of the trunks of vehicles are now available for purchase on websites of hundreds of millions of users. Counterfeiting activities that were once restricted to specific regions will now sell their illicit products all over the world.

It's no wonder, then, that foreign counterfeiting rose by 154% between 2005 and 2016, according to the Organisation for Economic Cooperation and Development (OECD). The worldwide demand for counterfeit goods is now worth more than a half-trillion dollars, according to the OECD, which accounts for more than 3 percent of all global trade.

The bulk of enforcement proceedings to date have been directed at the most extreme trademark infringers, such as those that make and sell counterfeit goods. Federal authorities, on the other hand, have demonstrated increased interest in prosecuting contributory trademark infringement involving online e-commerce sites. "Secondary Trademark Infringement Liability in the E-Commerce Setting," according to a public notice issued in the Federal Register by the United States Patent and Trademark Office.

The notification requests input from intellectual property rights holders, online third-party marketplaces, and other third-party online intermediaries, as well as other private sector stakeholders, on the application of common patent infringement doctrines to the e-commerce world. The USPTO is looking for feedback on how to apply contributory and/or vicarious trademark breach liability (secondary infringement liability) to e-commerce.

Following a study on counterfeiting issued by the US Department of Homeland Security, the USPTO requested public feedback earlier in 2020. In some cases, online companies have escaped legal liability for contributory trademark infringement, according to the report, which calls for further research into whether more aggressive contributory and/or vicarious trademark compliance against e-commerce platforms is needed. The assumption that a new administration will take office on January 20, 2021, is the X-factor in this federal push for expanded contributory trademark infringement responsibility.

The Current State Of Contributory Trademark Infringement & E-Commerce

Under new regulations, manufacturers are unable to pursue contributory trademark infringement claims against third-party internet retailers. Third-party vendors are advertising imitation goods on these e-commerce pages, which trademark owners will not be able to prove. Manufacturers of licensed products are currently responsible for police online websites and investigate infringements on those respective pages.

Federal lawmakers passed the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act in March to address the flood of fraudulent goods available for purchase online. Many fraudulent product vendors are located outside of the United States, as the SHOP SAFE Act's authors correctly point out, leaving them exempt from criminal and civil liability in the United States.

Furthermore, forcing e-commerce platforms to delete counterfeit goods or prohibiting counterfeit sellers from selling them hasn't proven to be very successful, as counterfeit sellers merely pass the items to other accounts, just like the legendary Hydra, which cuts down one online counterfeit account and raises two more to take its position.

The SHOP SAFE Act would mandate online e-commerce sites to comply with the following requirements:
  1. Verify the third-party vendor's identity, primary place of business, and contact information (using government ID or other reliable documentation); from which they will be delivered.
  2. Ascertain the third-party retailers are only using photos that have been permitted to use and that precisely represent the items for sale.
  3. Sellers should be required to check and testify to the validity of their products.
  4. Sellers should be required to sign a pledge agreeing not to deal with or endorse counterfeit products. Any issues arising from the presence of a third-party vendor on the site must be resolved in US courts.
  5. Display the third-party seller's identity, contact details, and primary place of operation, as well as the products' country of origin and produce, and the location. Check products for unauthorized trademarks and delete any listings that seem to be using counterfeit logos as soon as possible.
  6. Third-party merchants' accounts will be terminated whether they have distributed or advertised counterfeit goods three times or more.
  7. Work to ensure that retailers who have been barred under these conditions from reappearing under a new alias; and
  8. When required, provide intelligence on counterfeit dealers to law enforcement authorities.

The SHOP SAFE Act, on the other hand, is trapped in the Judiciary Committee of the House of Representatives, and it's uncertain if the Act will be revisited by Congress in 2021. It's also worth noting that several e-commerce sites have implemented strict measures to detect and remove counterfeit goods. For example, Poshmark has these guidelines for internet retailers to help them stop posting trademark-infringing items because if the site decides an item is counterfeit, it can reject orders and refund customers.

Counterfeit product sales on the internet are still a problem for many producers. To ensure that their grievances are considered by federal decision-makers, the concerned parties should consider responding to the USPTO's request for comment (with legal advice).

  1. Wright, C. S. (2000). Actual versus legal control: Reading vicarious liabilty for copyright infringement into the Digital Millennium Copyright Act of 1998. Washington Law Review, 75, 1005.
  2. Dinwoodie, G. B. (2014, September 11). Secondary liability for online trademark infringement: the international landscape. Columbia Journal of Law & the Arts
  3. Klemchuk, D. M. (2021, March 31). Secondary Liability for trademark infringement | Klemchuk PLLC | Intellectual property Law Firm. Klemchuk PLLC.
  4. Stephen, K., & Stephen, K. (2021, September 10). Combating Counterfeit Goods in the Age of E-Commerce | The Regulatory Review. The Regulatory Review.
  5. Annapoorna. (2023, January 3). US trademark Registration: All you need to know. Cleartax.
  6. S.S. Rana & Co. (2023b, June 14). Trademarks in United States of America (USA) - S.S. Rana & Co. S.S. Rana & Co.

Award Winning Article Is Written By: Ms.Aditi Mohapatra
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