Description- A secondary liability arises when a party in power and direct control or having knowledge of the alleged infringement aids/ induces it to continue.
A trademark infringement arises when the registered mark is used/ sold without the consent of the original owner of the registered mark. Secondary liability in trademark infringement is a common law tort principle wherein the third party becomes liable when they in anyway become a part of the infringement, or induces or aids or materially contribute towards the infringing acts. It can be considered as an extension to the competition law. The article analyses how the third party becomes involved in infringement cases and becomes liable for the same.
First let’s understand what is meant by secondary liability. There are essentially two types of secondary liability; vicarious liability and contributory negligence. Vicarious liability is imposed for the inaction or failure on part of others. There must be a special relation between the two such as employer- employee or master- servant relationship. Section 114 of Trademarks Act indirectly mentions about the same. So, when one has the power to control the actions of the other and the third party receives direct financial benefit from such infringement, vicarious liability comes into picture. Contributory negligence on the other hand arises when one abets, solicits or aids the infringement. For example, if a manufacturer intentionally aids the seller to infringe a trademark, it amounts to contributory negligence. When the defendant knows about the infringement and materially contributes to it, then contributory negligence comes into picture. The landmark judgment that dealt with secondary liability in trademark case is that of Inwood Laboratories v. Ives Laboratories.1 In this case the above said control/ power and knowledge rules were laid down.
Case laws –
In L’Oreal v. eBay International AG , the court granted injunction in favor of L’Oreal by observing that even though eBay didn’t sell the former’s products as if it owned it but the intermediary used it to advertise on eBay. Advertising is not an issue but such act can cause confusion to a rational man as to whether L’Oreal products are sold by eBay or by any other third party.
In Tiffany (NJ) v. eBay Inc. the court observed that eBay’s actions and use of the mark ‘Tiffany’ was lawful and that it was not liable as an operator for any trademark infringement.
In Louis Vuitton Malletier S.A, v. Akanoc Solutions , the court held the defendant liable for contributory negligence as it had knowledge of trademark infringement of the proprietor Louis and could have terminated the websites but didn’t do so. As a result the injunction was passed in favor of the plaintiffs and imposed a total cost of 31,500,000 dollars.
In Kalem Co. v. Harper Brothers , the Supreme Court held that secondary liability doctrine can also be applied in copyright infringement cases.
The doctrine of secondary liability arises on the defendant even if he has not directly committed the tort. When he had the knowledge and power to restrain the act he should have acted accordingly.
More recently, the secondary liability from manufacturer- distributer relation has expanded beyond what was laid down in the Inwood’s case and now we can see more of a cyber space related issues emerging. The first ever case to deal with online secondary liability was the landmark case of Lockheed Martin Corp v. Network Solutions. , wherein the plaintiff sued the domain names registrar for selling rights to domain names such as Skunkworks.com or Skunkwrks.com when the plaintiff had already registered the name ‘SKUNK WORKS. However, the court observed that applying the Inwood case here would be inappropriate and the domain name alone does not amount to infringement.
The court in Fare Deals Ltd v. World Choice Travel, expressly required the plaintiff to prove both the control/ power over monitoring the activities and also knowledge about such infringing activities.
To constitute the secondary liability, it is necessary to prove either contributory negligence or vicarious liability. In some cases courts have asked to prove both as in Fare deals case. Internet Service Providers (ISP) are also not an exception. They also can be held liable for contributory negligence.
Secondary liability seems to be one of the interesting areas in the field of law, which has still got room for more creative expansion along with the advancement in technology and market spaces. In India, there are little to no cases when it comes to secondary liability in trademark infringement. However, regarding ISP there are separate rules and regulations in place. With the ever growing e- commerce in India, it would be only a matter of time that judiciary has to deal with such issues.