Dish Network v. Siddiqi: Vicarious Trademark Infringement
A Man, A Plan, a Telemarketing Scam
Vicarious trademark infringement cases such as the recently decided Dish Network[1] are much less common than the contributory liability variety. Courts frequently reject vicarious trademark infringement claims because the plaintiffs fail to plead and prove them. The vicarious liability standard,[2] whether based on joint-tortfeasor theory or agency theory, is simply more difficult to meet[3] than the standard for contributory infringement.[4]
The essential difference between the two forms of secondary liability lies in the nature of the relationship between the defendant and the direct infringer. In a contributory liability case, courts focus on whether the defendant knew of the wrongful activities of the direct infringer.[5] However, when they consider liability for vicarious trademark infringement, they probe further: A defendant’s “[m]ere knowledge of the primary actor’s wrongful conduct”[6] will not suffice. The plaintiff must plead and prove a business relationship[7] between the defendant and the direct infringer, whether conceptualized as a partnership, joint ownership, or agency relationship. There is no such burdensome requirement for making out a claim for contributory liability, which explains why more secondary infringement claims are advanced on that theory.
In Dish Network, however, there was no such question. The business relationship between the defendant and the direct infringers was made clear in their coordinated scheme to defraud the plaintiff’s customers and share in the proceeds. The defendant had “partnered”[8] with the direct infringers, fake callers located in Pakistan who held themselves out as the plaintiff’s agents and used the plaintiff’s marks to deceive its customers into paying for “upgrades” to their pay-television service. Once the subscribers elected to pay for the sham upgrades, the callers directed their payments to the defendant, who authorized the callers to use his business and address information. Thus, working in tandem, the callers initiated the customers’ payments and the defendant processed them.
Virtually every aspect of the business relationship between the defendant and the callers supported the court’s vicarious liability ruling in Dish Network. Vicarious trademark infringement, the court correctly recited, “requires a finding that the defendant and the infringer have an apparent or actual partnership, have authority to bind one another in transactions with third parties or exercise joint ownership or control over the infringing product.”[9] Here, “the defendant and the callers partnered to facilitate the infringement”:[10]
First, defendant and the callers agreed to conduct the upgrade scheme that infringed plaintiff’s exclusive right to use the DISH marks in commerce. The callers were authorized to use defendant’s Global business names, his rented P.O. Box, and his home address, to convince plaintiff’s subscribers to pay for the upgrade con. Defendant and the callers further agreed to split plaintiff’s subscribers’ payments, and the callers relied on defendant to pay them their share of the bounty.[11]
The court also found that the element of “joint ownership or control” was satisfied insofar as “the defendant and the callers each exercised control over the scheme:”[12]
The success of the upgrade ploy depended on both the callers’ direct infringement of the DISH marks and defendant’s payment processing services. The callers notified defendant of expected payments, and defendant notified the callers when he received them. The callers were responsible for initiating the payments, and defendant was responsible for processing the payments. Each of these components was integral to the operation.[13]
Taken together, the arrangement
between the defendant and the direct infringers and their respective roles in
the infringing telemarketing scam presented a textbook-case business
relationship contemplated under the joint-tortfeasor theory of vicarious
trademark infringement.
[1]In Dish Network, 2019 WL 5781945 (S.D.N.Y. Nov. 6, 2019), the court considered the plaintiff’s unopposed motion for partial summary judgment on claims of both contributory and vicarious trademark infringement. It granted the motion as to both claims.
[2]The Supreme Court has not articulated a single standard for vicarious liability for trademark infringement as it has done for contributory liability under Inwood Labs. Banff Ltd. v. Limited, Inc., 869 F. Supp. 1103, 1111 (S.D.N.Y. 1994) (noting that Second Circuit had not yet considered it), citing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844 (1982). Rather, vicarious liability case law has evolved in the federal courts under two standards. The first and more frequently cited test for vicarious trademark infringement is based on the concept that “a joint tortfeasor may bear vicarious liability for trademark infringement by another.” Hard Rock Café Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1150 (7th Cir. 1992), citing David Berg, 884 F.2d at 311.This “requires a finding that the defendant and the infringer have an apparent or actual partnership, have authority to bind one another in transactions with third parties or exercise joint ownership or control over the infringing product.”Hard Rock Cafe, 955 F.2d at 1150 (reciting standard but declining to extend vicarious liability where facts did not fit joint tortfeasor model). See also Perfect 10, Inc. v. Visa Int’l Service Ass’n, 494 F.3d 788, 807 (9th Cir. 2007) (reciting standard but declining to extend vicarious liability); Gucci America, Inc. v. Frontline Processing Corp., 721 F. Supp. 2d 228, 247 (S.D.N.Y. 2010) (same); SB Designs v. Reebok Int’l, Ltd., 338 F. Supp. 2d 904, 909 (N.D. Ill. 2004) (reciting standard but declining to extend vicarious liability where plaintiff failed to allege evidence of business relationship between defendant and direct infringer); Fonovisa, Inc. v. Cherry Auction, Inc. 847 F. Supp. 1492, 1499 (E.D. Cal. 1994) (reciting standard but declining to extend vicarious liability where plaintiff failed to allege evidence of business relationship between defendant and direct infringers), rev’d and remanded on other grounds, 76 F.3d 259 (9th Cir. 1996).
The second theory of vicarious liability for trademark infringement utilizes essentially the same principles but applies the paradigm of agency. See Fare Deals, Ltd. v. World Choice Travel.com, Inc., 180 F. Supp. 2d 678, 684 (D.Md. 2001) (“a cause of action under the Lanham Act may lie vicariously against a principal”) citing AT&T, 42 F.3d at 1434 (applying agency principles to trademark infringement). Agency is defined as “the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.” Fare Deals, 180 F. Supp. 2d at 685, citing the Restatement (Second) of Agency §1 (1958); 1-800 Contacts v. Lens.com, 755 F. Supp. 2d 1151, 1183 (D. Utah 2010), aff’d in part and rev’d in part, 2013 WL 3665627 (10th Cir. Jul.16, 2013). As illustrated in the cases discussed in Chapter 11 of the Main Volume of Secondary Trademark Infringement, “[t]he creation of an agency relationship ultimately turns on the parties’ intentions as demonstrated either by express agreement or by inference from their actions.” Fare Deals, 180 F. Supp. 2d at 685 (citation omitted).
[3]Plaintiffs have urged the courts to substitute the less burdensome vicarious copyright liability standard, but they have repeatedly signaled their unwillingness to do so. See Hard Rock Café Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1150 (7th Cir. 1992) (rejecting vicarious copyright standard in trademark context). See also, Am. Tel. & Tel. Co. v. Winback and Conserve Program, Inc., 42 F.3d 1421, 1440– 41 (3rd Cir. 1994) (AT&T) (rejecting copyright standard for vicarious liability in trademark context); Clearline Techs. Ltd. v. Cooper B-Line, Inc., 871 F. Supp. 2d 607, 614–15 (S.D. Tex. 2012) (noting that courts do not recognize liability in the trademark context based on ability to supervise in combination with a financial interest). The relationship between the vicarious copyright and vicarious trademark infringement standards is discussed further in Chapter 5 of Secondary Trademark Infringement.
[4] The Supreme Court set forth the two-part test for analyzing contributory trademark infringement claims in Inwood Laboratories, Inc. v. Ives Laboratories, Inc. It states:
if a manufacturer or distributor [1] intentionally induces another to infringe a trademark, or if it [2] continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.
456 U.S. 844, 854 (1982).
[5] For a full discussion of the knowledge requirement for contributory liability, see Secondary Trademark Infringement, Ch.3.V.A.1.
[6] Dish Network, 2019 WL 5781945 at *6, citing TRB Acquisitions LLC v. Seduka, LLC, 2016 WL 2865098 at *3 (S.D N.Y. 2016).
[7] “Vicarious liability in the trademark context,” one court has observed, is “essentially the same as in the tort context: the plaintiff seeks to impose liability based on the defendant’s relationship with a third party tortfeasor.” Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144, 165 (4th Cir.2012).
[8]Dish Network, 2019 WL 5781945 at *6.
[9]Id. Note that the court at this point also introduced the standard for establishing an agency relationship, ruling that that had been met as well.
[10]Id.
[11]Id.
[12] Id. at *7.
[13] Id.
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