Secondary Trademark Infringement Claim Snares Web Hoster

As new as it is, secondary trademark infringement became a popular lay press topic when Google escaped the court’s wrath while it punished advertisers who used another’s trademark as part of their Google AdWords campaign.  Another Internet business, Bright Builders, wasn’t so lucky, and it appears counterfeit goods tend to inflame the cockles of jury members’ hearts more than just using another’s name.

A key to a finding of contributory liability is viewing enough evidence to prove sufficient knowledge of the activity. In Roger Cleveland Golf Company, Inc. v. Prince, it was clear Prince sold counterfeit golf clubs. (Perhaps his domain name was the first clue.) Cleveland sued to stop them (and won a $28,250 damage award in the process). However, deeper pockets existed with Bright Builders, who provided Web hosting and Internet marketing services to online retailers, and who had Prince as a client.

Prince’s argument in filing for dismissal in Summary Judgment was it “simply cannot be true” that by hosting Prince’s site it could be found liable for infringement. That much probably was true, but here the court found had to know of the illegal activity:

  1. Prince paid Bright Builders $10,000 for how-to-do-it “mentoring” with respect to
  2. The Bright Builders’ representative encouraged Prince’s efforts
  3. Bright Builders built the Prince Web sites (since taken down), which, the court stated, “Bright Builders knew or should have known were meant to sell counterfeit golf equipment.”
On March 14, 2011, the US District Court for the District of South Carolina published the jury verdict, awarding Roger Cleveland Golf Company $770,750 from Bright Builders, the secondary infringer.

The message to valuators performing due diligence and IP litigators alike is it pays to look around for who knew and who enabled infringement activity. For more details on secondary trademark infringement, revisit this blog entry.