Secondary Liability And Remedies Outline

24. Secondary Liability and Remedies

Secondary Liability/ Indirect Infringement

MML 384-94, 723-48, 811-23, 1044-54; 35 U.S.C. § 271(b)-(c); 17 U.S.C. § 512,(c)

• Mostly would be better to sue the infringer, but direct liability may be difficult to monitor, expensive, may be suing customers, brings uncertainty

• For: can only fully protect creator if there is liability, incentive to create

• Against: Society benefits may exceed someone’s right to go after indirect liability

  • Unclear on when does it stop, what are the limits and boundaries of indirect liability

  • May deter good things, e.g. new technologies

Patent P.384-94

• Previously aiding and abetting 1952 Act splits into 2 types:

• (a) Contributory Infringement

  • 35 USC §271(c)

    • “Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.”

      • (1) component

      • (2) materiality

      • (3) knowledge requirement

      • (4) uses for component

  • C.R. Bard, Inc. v. Advanced Cardiovascular Systems, Inc. (Fed. Cir. 1900)

    • Facts: P argues that D’s medical system is adapted for use by a surgeon in a surgery in a manner that infringes its patented medical treatment therefore D is a contributory infringer + actively induces infringement of P’s patent

      • Patentee didn’t sue direct infringer are a group of doctors, but the manufacturing company, as it is easier and look better + statutory exemption that sergeants cannot be used for employing certain medical methods.

    • Rule: 35 USC s.271(c) liable as a contributory infringer if:

      1. sells a component of a patented machine,

      2. constituting a material part of the invention,

      3. knowing it would be adapted for use in an infringement, and

         • limit liability to prevent a lot of third party to be directly liable

         • some may not have constructive knowledge

      4. no substantial non-infringing use

         • also, if there are no other real use for it, infer intent

    • Issue: whether the ACS catheter has no use except through practice of the patented method

    • Held: multiple ways to use substantial non-infringing uses for the ACS catheter D not liable for contributory infringement reversed summary judgment finding ACS a contributory infringer under § 271

(b) (Active) Inducement

• 35 USC §271(b) “Whoever actively induces infringement of a patent shall be liable as an infringer.” S.271(b) Elements:

  1. Intent (can be circumstantial), and

  2. Providing instructions (or otherwise aiding)

• Global-Tech Appliances, Inc. v. SEB S.A (Supreme Court 2011)

  • Facts: SEP patented its deep fryer in the US Pentalpha developed for and sold to Sunbeam a deep fryer (by copying the SEB) in HK Sunbeam resold in the US SEB sued. Pentalpha argues it has no actual knowledge of infringement to “induce”

  • Held: Tightened intent requirement:

    • Willful blindness is sufficient

      1. D must subjectively believe that there is a high probability that a fact exists and

      2. D must take deliberate actions to avoid learning of that fact

    • S.271(b) requires knowledge that the induced acts constitute patent infringement

    • Deliberate indifference to a known risk that a patent exists is not appropriate standard under s.271(b)

    • Willful blindness is just as culpable as actual knowledge

  • S.271(b) Elements:

    1. Intent (can be circumstantial), and

       • Intent that there is a specific patent (not just specific intent to do the actions)

       • Willful blindness would suffice:

         • Sufficient evidence showing knowledge of patent itself + infringing it

         • D objective believe that there might be an infringement + deliberate action to avoid learning that fact

         • Knowing it exists + chance that there might be a patent

       • contributory infringer knew that he was causing another person to engage in something was both patented and infringing

       • "willful blindness: defendant

         • (1) "subjectively believe[s] that there is a high probability" that a patent exists and that the defendant's acts infringe that patent; and

         • (2) "take[s] deliberate actions to avoid learning" about those facts.

    2. Providing instructions (or otherwise aiding)

  • S.271(c) explicitly tell knowledge requirement active inducement and

  • contributory infringement was together should read them the same

• Rubrics cube case: method and instructing people would count

• But must be active: not just to publish info about patent, or failure to prevent

Copyright P.723-48

Legislative history of indirect copyright liability

• Pre 1976 Act

  • May 31, 1790 Act §6 “Any person or persons who shall print or publish any manuscript, without the consent and approbation of the author or proprietor thereof . . . shall be liable to suffer and pay to the said author or proprietor all damages occasioned by such injury.”

    • 19^th century: Court introduced “tort” “joint tort feasors” “joint liabilities”

  • 1909 Act §1 “Any person entitled thereto… shall have exclusive right: (a) to print.. the copyright work”; §101 “If any person shall infringe the copyright in any work protected.. such person shall liable: (a) to an injunction”

• Early 20^th century: Copyright liability: copyright infringement is a tort court look to general principles of tort liability in determining the scope of indirect copyright liability

  1. Respondeat Superior: Employers liable for infringing acts of their employees (even without express authority or even against orders)

  2. Vicarious Liability: Liability extended to those who profit from infringing activity where an enterprise has the right and ability to prevent infringement. 2 elements: (1) third party right and ability to supervise; and (2) direct financial interest

  3. Contributory liability: one who, with knowledge of the infringing activity, induces, causes or materially contributes may be held liable as a contributory infringer

• 1976 Act:

  • § 106 “the owner of copyright… has exclusive right to do and to authorise any of the following: (1) to reproduce the work”

    • Use of the phrase “to authorise” is intended to avoid any questions as to the liability of contributory infringers

  • § 501 “anyone who violates any of the exclusive rights of the copyright owner… is an infringer of the copyright”

    • A well-established principle of copyright law is that a person who violates any of the exclusive rights… is an infringer, including persons who can be considered related or vicarious infringers

  • 1976 affirmed 2 types of liabilities:

  1. Vicarious liability

     1. Right and ability to supervise the infringing activity

     2. Holds a direct financial interest in infringement

     3. No need for actual knowledge

     4. Not just an employee/employer relationship

  2. Contributory Infringement

     1. Knowledge of infringing activity (knowledge of specific instances of infringement)

     2. Induces causes or materially contributes to direct infringing acts

Contributory Infringement: P.727

• Sony Coporation of America v Universal City Studio, Inc. (Supreme Court 1984)

  • Facts: a group of movie studios sued the maker of video cassette recorders (VCRs) for contributory copyright infringement because consumers bought VCRs and used them to tape movies and other programming broadcast by TV stations.

    • Prof: since end users of VCR are infringers, difficult to sue

  • Held: for D reversed CA’s judgement

    • One who supplies the way to accomplish an infringing activity and encourages that activity through advertisement is not liable for copyright infringement.

      • If product capable for non-infringing uses, not liable even if it is widely used for infringing uses

    • Court must balance the encouraging and rewarding of authors to create new works with the public good

    • The only contact is between D and VTR users, at the moment of sale

      • no precedent for imposing vicarious liability on the theory that D sold VTRs with constructive knowledge that its customers might use the equipment to make Unauthorised copies of copyrighted material

      • selling copying equipment doesn’t constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes, or actually, is merely capable of substantial non-infringing uses

      • A large portion of the public’s use of VTRs does not implicate copyright; and time-shifting (most common use) constitutes a fair use

    • Not court’s job to apply laws that have not yet been written

  • Dissent: majority is deferring to congressional action in face of major technological advancements court is evading hard issues when they arise in the area of copyright law

    • Test for indirect liability for copyright infringement: based on whether the primary use of technology is infringing.

    • Which D would have prevailed, given majority’s determination that the predominant use of VTRs (time-shifting) constituted fair use.

  • Prof: both patent law is designed to protect incentive of the owner, and to stop others from using the creation in another way (similar to Copyright law that doesn’t want to prevent dissemination of creative work)

• Napster’s Peer-to-peer network technology case [P.734]:

  • Facts: Napster centrally kept an index of users user send query to Napster Napster send location of the song request song from Peer to Peer requestor gets copy of song from its peer Records sued Napster for contributory infringement

  • Held for P: D’s direct knowledge of copyright infringement by users of its software and its ability to control such activities through the index of file names maintained on its central servers created a responsibility to remove links to infringing content and engage in efforts to police its network Napster went into bankruptcy

  • Prof: How is it different from Sony? Napster designed the software + continue to interact with user to aid infringement

• Later, people developed a Super node Model:

MGM Studios Inc. v. Grokster, Ltd. (Supreme Court 2005)

• Facts: Only maintain structure of all users logged on when user ask for a song, would go to all online users peer-to-peer connections without involving a centralized index of songs:

• Issue: under what circumstances the distributor of a product capable of both lawful and unlawful use is liable for acts of copyright infringement by third parties using the product

• Held: one who distributes a device with the object of promoting its use to infringe copyright, shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties

  • Sony applied: no liability for marketing a product that is “capable of substantial non-infringing use”

    • “Mere knowledge of infringing potential would not be enough for liability, nor would ordinary acts incident to product distribution, such as offering customers technical support.”

  • BUT: if with intent to induce (promoting infringement)

    • Intent: promoting infringement (intent to induce) as shown by clear expression or other affirmative steps taken to foster infringement.

    • Only purposeful, culpable expression and conduct

    • There is active inducement (passive inducement is not enough)

    • Profiting, staggering degree of infringement 100M download

    • Sony: won’t impute intent of infringement, but still liable if intent is found somewhere else (actively inducing infringement) (like in Patent law)

• Unresolved issue: what is “substantial” non-infringing case

  • Overwhelming infringement

  • No reasonable prospect of substantial non-infringing use likely to develop over time

  • Anecdotal evidence of non-infringing use

  • “capable” of substantial or commercially significant non-infringing uses

Copyright: Online Service Provider Safe Harbors P.811-23

• Who is the responsible actor? Liable for infringement

  • Clear lability: user

  • Grey area: networking server provider

  • No liability: scanner company, computer company

• Bases for liability

  • Direct liability

  • Indirect liability

    • Contributory

      • Knowledge of infringing activity

      • Induce, causes, or materially contributes to direct infringing activity of another

    • Vicarious

      • Right and ability to control direct infringer’s acts

      • Receives a direct (or possibly indirect) financial benefit from the infringer

• Digital Millennium Copyright Act (DMCA): Safe Harbor

  • If someone tries to decrypt liable under new provision

  • 17 USC s. 512

    • Safe harbor from liability for:

      1. Transmitting material

      2. System caching

      3. Storing material

      4. Linking

    • Eligibility

      • Adopt, implement, and inform subscribers of termination policy for repeat infringers

      • Adopt standard technical measures used by copyright owners to identify and protect copyrighted works

    • But subject to subpoena to identify infringement

  • Some suggest 3D printing invention (lower cost to copy patent) may do the same to patent law

• Viacom Int’l, Inc. v. YouTube (2d Cir. 2012)

  • Facts: P sued YouTube for direct and secondary copyright infringement based on the public performance, display and reproduction of 79,000 videos on YouTube’s website

    • P argued D was not entitled to safe harbor protection under DMCA for airing the clips as D was aware or chose a blind eye to the fact that these clips infringed P’s copyrights

  • Held for D: YouTube is qualified for DMCA Case send back to DC (which found no specific knowledge D won)

    1. DMCA § 512 safe harbor requires knowledge or awareness of specific infringing activity

       1. the provider that gains knowledge or awareness of infringing activity retains safe-harbor protection if it “acts expeditiously to remove, or disable access to, the material

       2. actual knowledge = subjective belief

       3. facts/ circumstances = objective reasonable standard

    2. common law willful blindness doctrine may be used to show knowledge or awareness of specific instances of infringement under the DMCA

       1. whether the DMCA abrogates the common law doctrine of willful blindness, which equates willful blindness with knowledge

       2. willful blindness is where the person is aware of a high probability of the fact in dispute and consciously avoids confirming that fact.

    3. A service provider has the “right and ability to control” infringing activity under DMCA § 512(c)(1)(B), whether or not an item-specific knowledge of infringing activity exists

       1. Any service provider that has item-specific knowledge of infringing activity and so obtains financial benefit would already be excluded from the safe harbor under § 512(c)(1)(A) for having specific knowledge of infringing material and failing to effect expeditious removal.

  • S.512(c)(1)

    • S.512(c)(1)(A) Knowledge: specific infringing activity + willful blindness

    • S.512(c)(1)(B) financial benefit + right and ability to control infringing activity

    • S.512(c)(1) “by reason of storage” at direction of user

      • P argue: storage happens by direction of YouTube as it is transcoding to another format

      • Court: still automatic + not under direction of YouTube send back to DC

  • Uploader have to agree not to upload unless owner/ had permission

  • DMCA: Copyright holder to give notice to provider take down material if they feel it is a good claim D would still avoid lability video uploader can notify YouTube if he thinks it is not infringing

  • Need knowledge that there is a specific infringing activity

    • 2 types of knowledge

      1. Actual knowledge: subjective knowledge of specific

      2. Red flag knowledge: objective knowledge of specific infringement

  • YouTube has knowledge of infringement, but not specific knowledge qualified for DMCA

  • No affirmative duty to monitor (would be contrary to DMCA), c.f. willful blindness to particular technology

• Online service provider – take down material if it decides that it is infringing

• More burden on copyright owner to protect – easier for them to find, request online service provider to take infringing material down

• End users may be affected: videos being taken down, while not infringing (since YouTube wants to prevent liability)

  • But case law held that YouTube has to investigate fair use

• Copyright borrowed a lot from Patent Law

Trademark P.1044-1054

• Tiffany Inc. v. eBay Inc. (2d Cir. 2010)

  • Facts: P sued eBay for trademark infringement for allowing its users to sell counterfeit. Tiffany surveyed and bought jewelry on eBay and found 75% were fakes though fraud survey, still show fakes were sold. eBay earn money from the sales, earned $4.1M from the items named “Tiffany’s” + customers of eBay complained goods are fake

    • eBay have verified owners who they trust, implemented flag engines that may lead to good being taken down

  • Held: Service provider liability for contributory trademark infringement requires a showing of intentional incentive to infringe or “knows or should have known” of the direct infringement and a continued providing of the service to the infringer.

    • DC was correct in finding that: P’s argument that D knew/ should have known of the counterfeit sales thus directly infringed upon its mark for failing to identify and remove illegitimate goods fails

    • Inwood assesses liability for contributory infringement on service provider if it

      • (1) intentionally encourages the infringement; or

      • (2) knows or has reason to know of infringement and continues to supply its service to the offending party.

    1. P argues D had generalized knowledge of infringement

       • Court: too broad, require knowledge of individual infringements

       • Just because D know a % is counterfeit general knowledge is not enough, need specific seems to adopt safe harbor in Copyright

       • Here, D only had general knowledge

    2. P argue willful blindness but court held that D did not shield itself/ ignore the issue

    3. P also argue dilution but court held D did not use P’s mark to associate it with its own product, but to identify P’s product on its site remand as to false advertising

• Discussion:

  • If P won, online merchants would be prohibited from lawful use of trademark on their sites because of the fear of liability for contributory trademark infringement

    • D’s existing safeguards and rapid response to notifications of counterfeit products gave it a significant advantage in this case but not many online retailers are so responsive

  • Amazon adopted similar systems

Summary – Secondary Liability

Patent law

• Contributory infringement occurs when someone sells or offers to sell a component of a patented invention, which is material to the invention, actually knowing that it is used in patent infringement, unless it is a staple article of commerce suitable for substantial non-infringing use. (§ 271(c), C.R. Bard)

• Active inducement = intent + providing instructions (or otherwise abetting) (§ 271(b))

  • Intent requires knowledge of the patent and that you are infringing it, but this can be met too by willful blindness (Global-Tech)

Copyright law

• Vicarious liability = right and ability to supervise the infringing activity + direct financial interest in the infringement

• Contributory infringement = knowledge of infringing activity + induces, causes, or materially contributes to direct infringing activity of another

• There’s no contributory infringement for a device manufacturer “if the product is widely used for legitimate, unobjectionable purposes. It need merely be capable of substantial non-infringing uses.” (Sony)

  • Split on what constitutes “substantial”: capable of substantial or commercially significant non-infringing uses/anecdotal evidence v. no reasonable prospect of substantial non-infringing use likely to develop over time/overwhelming infringement (Grokster)

• One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. (Grokster)

  • Not rising to the level of inducement: mere knowledge of infringing potential or of actual infringing uses, ordinary acts incident to product distribution

  • Sufficient: purposeful, culpable expression and conduct

• The DMCA also establishes safe harbors that provide immunity from infringement liability under certain circumstances for a “service provider.” (§ 512)

  • To be disqualified from the safe harbor under§ 512(c)(1)(A) requires knowledge or awareness of specific infringing activity. (Viacom)

    • Willful blindness can count, so long as it’s not understood as an affirmative duty to monitor. (Viacom)

  • To be disqualified from the safe harbor under§ 512(c)(1)(B)’s right and ability to control infringing activity requires more than the ability to remove or block access to materials on a service provider’s website. (Viacom)

    • It requires exerting substantial influence on users’ activities. (Viacom)

  • The § 512(c) safe harbor extends to software functions performed for the purpose of facilitating access to user-stored materials. (Viacom)

Trademark law

• Contributory TM infringement is actionable for inducement of infringement or when a party continues to supply its product to one whom it knows or has reason to know is engaging in TM infringement (Tiffany)

  • This knowledge must be with regard to specific instances of infringement. (Tiffany)

25. Remedies

MML 432-48, 449-57, 830-33, 834-40, 1104-21

35 U.S.C. §§ 283, 284; 17 U.S.C. §§ 502(a), 504; 15 U.S.C. §§ 1116(a), 1117(a)

Injunctions; Damages; Attorney Fees

Liability rules: person who violate is liable for damages (monetary measure of harm caused to P)

Property rules: rightsholder prevent violation, often through injunctive relief

• Property over liability: court cannot compensate adequately through liability rule, difficult for the court to decide on the amount

• Liability over property: successful P given a lot of leverage may allow P to withhold permission rather then using it to bargain for license

Patent Law P.432-57

(1) Injunctions

• Patent Act § 283: “The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable”

  • Discretionary; but in practice, denial of injunction was unlikely unless extreme circumstances before eBay

• Rationale for a property rule: Patent infringement is difficult for courts to do valuation

  • More efficient, quick and cheap for rightsholder to consider negotiating a license with the infringer to set her own price for the injury

  • BUT: may give too much leverage to patentee

• Permanent vs. Preliminary

• eBay, Inc. v. MercExchange, LLC (Supreme Court 2006)

  • Facts: eBay operates a website that allows private sellers to list goods to sell, Respondent holds a business method patent for an electronic market designed to facilitate the sale of goods between private individuals by establishing a central authority to promote trust among participants parties failed to negotiate for a license M filed patent infringement jury found patent was valid + eBay infringed that patent M sought for permanent injunction denied injunction

  • Held: Not to grant an injunction relief easily/ on a matter of course

    • P seeking a permanent injunction must satisfy a 4-factor test by demonstrating:

      • (1) that P has suffered an irreparable injury;

      • (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;

      • (3) that, considering the balance of hardships between P and D, a remedy in equity is warranted;

      • (4) that the public interest would not be disserved by a permanent injunction

  • Equity: Granting/ denying permanent injunctive relief is an act of equitable discretion reviewable on appeal for abuse of discretion

    • CA erred in articulating a categoric rule that a permanent injunction will issue once...

Buy the full version of these notes or essay plans and more in our Intellectual Property (IP) Law Outlines.