International Issues in Secondary Liability for Intellectual Property Rights Infringement

• Published date: 01 June 2008
• Date: 01 June 2008
• DOI: http://doi.org/10.1111/j.1744-1714.2008.00055.x
• Author: Lynda J. Oswald

International Issues in Secondary

Liability for Intellectual Property

Rights Infringement

Lynda J. Oswald

n

I. INTRODUCTION

Secondary liability is liability that is imposed upon a defendant who did not

directly commit the wrongdoing at issue, but whom the law nonetheless holds

responsible for the injuries caused.

1

Imposition of secondary liability has been

justif‌ied on both eff‌iciency grounds (i.e., as a mechanism to shift costs to those

in the best position to prevent future harm) and on moral grounds (i.e., those

who intend to bring about a harm should be held liable even if another party

was the direct cause of the harm incurred by the plaintiff).

2

International agreements currently do not address issues of second-

ary liability for infringement of intellectual property rights,

3

and interna-

tional consensus on this topic is limited at best, even among the major

r2008, Copyright the Author

Journal compilation r2008, Academy of Legal Studies in Business

247

American Business Law Journal

Volume 45, Issue 2, 247–282, Summer 2008

n

Professor of Business Law, Stephen M. Ross School of Business, University of Michigan. I

would like to thank the participants at the Global Challenges of Intellectual Property Rights

CIBER Conference at the University of Connecticut, held in May 2007, for their helpful

comments and feedback. An earlier version of this work will appear as a chapter in THE GLO-

BAL CHALLENGE OF INTELLECTUAL PROPERTY RIGHTS (Robert C. Bird & Subhash C. Jain eds.,

Edgar Elgar Publishing, Ltd., forthcoming 2008).

1

Mark Bartholomew & John Tehranian,The Secret Life of Legal Doctrine: The Divergent Evolution

of Secondary Liability in Trademark and Copyright Law,21B

ERKELEY TECH. L.J. 1363, 1366 (2006).

2

Id.

3

The exception is Footnote 10 of Article 39 of the World Trade Organization (WTO) Agree-

ment on Trade Related Aspects of Intellectual Property Rights (TRIPS), Marrakesh Agree-

ment Establishing the WorldTrade Organization, Annex 1C, Apr.15, 1994, 869 U.N.T.S. 299,

33 I.L.M. 1125, 1197, available at http://www.wto.org/english/docs_e/legal_e/27-trips.pdf, dis-

cussed infra note 69.

industrialized nations. The law has traditionally conceived of legal protec-

tion of patent and copyright interests as territorial in reach,

4

quaint as that

might sound today in a world of increasingly intertwined commercial ac-

tivity. As a result, global protection of intellectual property rights is subject

to a patchwork of national laws, overlaid with a layer of international

agreements.

5

Thus, absent a governing international agreement imposing

specif‌ic obligations, each nation is free to create its own rules and levels of

legal protection regarding intellectual property rights, and innovators

must seek protection of their copyrights, patents, trademarks, or trade se-

crets within the conf‌ines of the legal regimes of the jurisdictions in which

they operate.

6

National laws vary considerably regarding the availability

4

U.S. law has generally recognized the territorial limits of patent and copyright law. See, e.g.,

Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972) (‘‘Our patent system

makes no claim to extraterritorial effect . .. .’’); Quality King Distrib., Inc. v. L’Anza Research

Int’l, Inc., 523 U.S. 135, 154 (1998) (Ginsburg, J., concurring)(‘‘Copyright protection is ter-

ritorial. The rights granted by the United States Copyright Act extend no further than the

nation’s borders.’’) (citation omitted). U.S. trademark law, by contrast, has historically had an

extraterritorial application. See, e.g., Steele v. Bulova Watch Co., 344 U.S. 280, 286 (1952)

(‘‘‘Congress has the power to prevent unfair trade practices in foreign commerce by citizens of

the United States, although some of the acts are done outside the territorial limits of the

United States.’’’) (citation omitted). For a discussion of extraterritoriality principles in these

contexts, see Curtis A. Bradley, Extraterritorial Application of U.S. Intellectual PropertyL aw: Prin-

cipal Paper: Territorial Intellectual Property Rights in an Age of Globalism,37V

A.J.INT’LL. 505

(1997).

5

See Peter K. Yu, The Use of the Past in Intellectual Property Jurisprudence: Currents and Crosscur-

rents in the International Intellectual Property Regime,38LOY. L.A. L. REV.323, 435 (2004) (‘‘In-

tellectual property laws are territorial by nature. The creation of a work or an invention does not

lead to an international intellectual property right, but rather a bundle of intellectual property

rights in many different countries.’’). As scholars have noted, however, both the advent of the

Internet and the growth in international norms and agreements on intellectual property rights are

challenging this traditional notion of territoriality. See, e.g., Graeme W. Austin, Valuing Domestic

Self-Determination in International Intellectual Property Jurisprudence,77C

HI.-KENT L. REV. 1155,

1156 (2002); Timothy Holbrook, Territoriality Waning? Patent Infringement for Offering in the

United States to Sell an Invention Abroad, 37 U.C. DAVIS L. REV. 701 (2004). See also Soc’y of

Composers, Authors & Music Publishers of Can. v. Canadian Ass’n of Internet Providers,[2004] 2

S.C.R. 427, z2 (Can.) (‘‘The Internet . . . presents a particular challenge to national copyright

laws, which are typically territorial in nature.’’). According to the Canadian Supreme Court,

Parliamenthas the power to enact extraterritoriallaws, but has chosen not to in the copyright area.

Id.z54, 56 (‘‘Copyright law respects the territorial principle, ref‌lecting the implementation of a

‘‘web of internationaltreaties’’ based on the principle of national treatment.’’) (citation omitted).

6

See JOHN R. THOMAS,INTELLECTUAL PROPERTY AND THE FREE TRADE AGREEMENTS:INNOVATION

POLICY ISSUES, CRS REPORT FOR CONGRESS, p. CRS-5 (updated Jan. 17, 2007), http://www.

ipmall.info/hosted_resources/crs/RL33205-0701173.pdf.

248 Vol. 45 / American Business Law Journal

and extent of secondary liability, with the United States tending to be more

liberal with the imposition of such liability than most of its major trading

partners. This lack of uniformity in secondary liability rules in the inter-

national arena makes the evaluation of infringement liability in that setting

uncertain and makes it diff‌icult for businesses to effectively plan interna-

tional intellectual property strategies.

The U.S. Supreme Court’s recent decision in MGM v. Grokster,

7

which

has implications for the extent and scope of secondary liability for both the

patent and copyright law f‌ields under U.S. laws,

8

highlights the uncer-

tainty over international standards for secondary liability. The role of sec-

ondary liability for copyright infringement in the international arena was

debated in the amici curiae briefs in Grokster

9

and has been a topic of some

interest among U.S. commentators post-Grokster as well.

10

That discussion,

both domestically and internationally, seems to have shifted in focus and

narrowed considerably in scope. Instead of discussing the full panoply of

situations in which secondary liability for intellectual property infringe-

ment can occur and the range of considerations that might affect imposi-

tion of such liability, such as notions of knowledge, intent, authorization,

and control, the debate has settled on the imposition of secondary liability

in the digital arena and, more particularly, on secondary liability in the

peer-to-peer f‌ile-sharing environment. However, while it is true that

Grokster itself was a f‌ile-sharing case, the U.S. Supreme Court’s decision

has broader implications for imposition of secondary liability for intellec-

tual property infringement generally; consideration of those broader im-

plications is seemingly being ignored in present discourse.

7

545 U.S. 913 (2005).

8

See generally Lynda J. Oswald, The Intent Element of ‘‘Inducement to Infringe’’ Under Patent Law:

Ref‌lections on Grokster,13MICH.TELECOMM.&TECH.L.REV. 225 (2006) (discussing effect of

Grokster’s inducement standard for copyright law on patent law).

9

See infra Part III.A (discussing the amici briefs).

10

See, e.g., Graeme W.Austin, Importing KazaaFExporting Grokster,22SANTACLARA COMPUTER &

HIGH TECH. L.J. 577 (2006); Bartholomew & Tehranian, supra note 1; Center for Democracy &

Technology, Interpreting Grokster: Limits on the Scope of Secondary Liability for Copyright Infringe-

ment, 2006 STAN.TECH.L.REV. 3 (2006); Oswald, supra note 8; Guy Pessach, An International-

Comparative Perspective on Peer-to-Peer File-Sharing and Third Party Liability in Copyright Law:

Framing the Past, Present, and Next Generations’ Questions,40VAND.J.TRANSNAT’LL. 87 (2007);

Alfred C. Yen, Third-Party Copyright Liability after Grokster, 91 MINN.L.REV. 184 (2006).

2008 / International Issues in Secondary Liability 249