Liability for trademark infringement for Internet service providers.

• Author: Weckstrom, Katja

1. Introduction II. ISPs in Action A. ISPs in the Market Context B. online Auction Sites: eBay C. Search Engines: Google III. LEGISLATIVE BASIS A. The E-Commerce Directive B. European Trademark Law 1. Harmonization in Practice: Trademark-Specific Legislation 2. Harmonization in Practice: General Rules That Apply to Trademarks C. Summary IV. THE CONFLICT IN PRACTICE: THREE APPROACHES A. Property Rules and Contributory Infringement B. Liability Rules: Duty to Act C. Liability Rules and Safe Harbors V. Analysis and Proposals A. Liability for ISPs 1. Intellectual Property Rights and Trademark Protection 2. Protecting Trademarks With Property or Liability Rules 3. Protecting ISPs With Property or Liability Rules B. Pooling Resources and Enhancing Cooperation VI. Conclusion I. Introduction

   The rise of the internet made two things apparent: (1) borderless, wireless, and classless communication challenges traditional societal and legislative structures; and (2) the advantages of the internet also benefit criminal actors and organized crime, and disproportionally so when legislation lags behind. (1) It is commonly known that members of organized crime groups use both technological hijacking of personal computers as well as ISPs to further their own goals. ISPs may serve as mere [technological] conduits of data, but nonetheless allow illegal activity. In addition, ISPs may also serve as hosts of illegal material or allow illegal transactions on their sites. Unlike in the case of copyright piracy, there are no sites or ISPs that trade exclusively in counterfeit goods. Instead, fake goods are mixed with legitimate trade in the primary or secondary markets.

   Illegitimate trade, by which trademarks are exploited, are commonly referred to as trademark piracy and trademark counterfeiting. The World Intellectual Property Organization, WIPO, defines trademark piracy as "the registration or use of a generally well-known foreign trademark that is not registered in the country or is invalid as a result of non-use."2 Trademark piracy targets the trademark itself and hijacks the trademark's value in order to sell the pirate's own products. (3) Article 6bis of the Paris Convention offers a remedy for holders of globally well-known marks who are victims of trademark piracy and allows them to prevent registration and use of identical or similar marks for identical or similar products, despite the mark not being used or registered in the country in question. (4)

   Counterfeiting, a second form of illegitimate trade, can be defined as "the unlawful forgery, copying, or imitation of an item, ... or the unauthorized possession of such an item, with the intent to deceive or defraud by claiming or passing the item as genuine." (5) While trademark counterfeiting often involves copying of the trademark itself, the primary object of copying is the product that is sold under a particular brand. (6) An element of deceit is present because the goal of the counterfeiter is to tap into the market of the brand and, to some extent, pass off the fakes as the real merchandise. (7) Unlike traditional trademark infringement and trademark dilution, which are sanctioned by civil remedies, trademark counterfeiting and piracy are universally criminally sanctioned. (8) For purposes of discussion in this article, reference to illegitimate trade refers solely to instances of trademark counterfeiting.

   Illegal trade such as the buying, selling, soliciting, or trading in material depicting child pornography is relatively easy to deal with in legislative terms, although enforcement in practice remains difficult. Infringement of trademark rights presents a more difficult legal conundrum because the sale of counterfeit goods is criminalized, but buying counterfeit goods may not be. Furthermore, when we approach the question from the perspective of trademark law, the object of protection is not the good itself, but the label under which it is sold. (9) This is also true in cases of trademark counterfeiting because trademark law does not protect the good itself. Therefore, legitimate trade under the same trademark is, technically speaking, identical to illegitimate trade because it stems from protection of a typed word-mark. Although modern trademark law recognizes several types of marks in the context of the internet, our focus is directed at word marks and the scope of exclusivity.

   In the world of 1s and 0s, established legal concepts (10) have a whole new meaning; in practice, legal concepts in the context of the internet may mean nothing at all, or at least not what they mean in the real market. (11) While somewhat useful in distinguishing other than protected uses from real market commerce, these artificial constructs become increasingly burdensome in the virtual context when attempting to force new uses into set molds. (12) Thus, we run the risk of addressing the issue of third party liability squarely as a question of direct infringement without considering the secondary nature of the tort. (13) In a time when the text of a directive from the year 2000 is outdated, efforts still seem focused on defining in technological detail what constitutes and what does not constitute infringement. At the same time, we know that organized crime adapts faster than restrictive measures are imposed. Still, questions of liability are decided in this framework using definitional bridges such as "neutrality," "actual knowledge," and "technical capacity." (14)

   The Anti-Counterfeiting Trade Agreement (ACTA) (15) extends the discussion on legislative safe harbors and liability of internet intermediaries to infringements in trademark law. However, much of the discussion still seems to center on copyright infringement, while issues peculiar to trademark law seem to be given less, if any, in-depth scrutiny. Thus, if the activities of ISPs are opened to scrutiny under the respective trademark laws in place, the balancing outcomes from the copyright setting should not be applied without scrutiny to ISP liability, but should first be recalibrated to trademark law. (16) This is especially important since trademark laws tend not to distinguish between direct and indirect infringers, nor do the laws cap the use of all available remedies. (17)

   Another recent attempt at navigating this unmapped legal landscape was made by the EUCJ, as well as Advocate General (AG) Poiares-Maduro, in three joined cases concerning Google's Adwords service and keyword advertising in general. (18) The ruling answered broad questions such as whether trademark law can apply at all to the activities of ISPs. It opened the possibility of a broad reading of outdated (19) technological language in the E-Commerce Directive (20) to include Google's activities. However, it could be interpreted to open the safe harbor in practice, since the ruling hinges on the concept of 'actual knowledge,' which is not defined in either the directive or in practice.

   In practice, Article 15 of the E-Commerce Directive, which includes a prohibition against imposing a general duty on ISPs to monitor infringing activity on their sites, had been interpreted to require bona fide cooperation, e.g., with a notice-and-take down procedure, but nothing more. (21) While actual knowledge remains undefined in practical terms, ISPs will face right holder pressure in court. This is because contemporary, allegedly infringing ISP activity fits less and less neatly with the technological definitions underlying the legal provisions in place. (22)

   Legislation tailored to solve a general problem is now marginalized in favor of specific legislation tailored to right holder interests, or no legislation, with accompanying battles in court. The remedies available to right holders, which include criminal sanctions or automatic damages for willful trademark infringement, are a measurement for societal consequences. (23) The effect is enhanced since trademark law today, in most countries, does not distinguish between indirect and direct trademark infringement. Courts are left to balance established interests vested in trademark law against the vague and disproportionate interests of a disorganized group of ISPs. (24) The latter interests are also constantly changing because technological and other innovation spurs new business ideas and models on the internet while making others obsolete. The question becomes one of priority. Legislation that allows innovation that spurs ISPs to supply where there is demand, or legislation that allows right holders en groupe (25) to curtail innovation by a multitude of disproportionate threats of damages. This article suggests that we put the carriage back behind the horse and allow the horse to pull the carriage into the unknown.

   More specifically, this article makes three suggestions. First, it is vital to prioritize in light not of current economic value and actors, but in light of preserving and stimulating continued economic growth, recognizing that growth may take place in new fields, and thus shift economic power in society. Without diminishing the importance of the legitimate interests of holders of intellectual property rights in, for example, combating counterfeiting and piracy, the recent technological breakthroughs should be allowed to reach their potential, and the overall social benefit of the activity of an internet service provider should weigh heavily against curtailment. Ex post facto legislation should therefore be preferred over ex ante legislation. This means that ISPs should presumptively enjoy protection against individual lawsuits that suggest liability because harmful conduct occurs on the internet, not because the ISP itself has acted inappropriately.

   Second, substantive trademark law should develop new tools to define trademark infringement on the internet. There are two sides to this argument. On the one hand, the virtual market differs from the real world market, and trademarks are utilized...