2010_10_12 LV Cross Brief Conformed (#16)

8/8/2019 2010_10_12 LV Cross Brief Conformed (#16)

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Case Numbers 10-15909/10-16015

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Louis Vuitton Malletier, S.A.,Cross-Appellant/Plaintiff

v.

Managed Solutions Group, Inc.Cross-Appellee/Defendant

____________________________________________

Akanoc Solutions, Inc. and Steve Chen,Appellants/Defendants

v.

Louis Vuitton Malletier, S.A.,Appellee/Plaintiff

Appeals from a Judgment of the United States District Court,Northern District of California, San Jose Division, Case No. 5:07-cv-03952 JW

Hon. James Ware, United States District Judge

PRINCIPAL AND RESPONSE BRIEF OF

CROSS-APPELLANT/APPELLEE/PLAINTIFF

J. Andrew Coombs (SBN 123881)Annie S. Wang (SBN 243027)

J. Andrew Coombs, A Professional Corporation517 East Wilson Avenue, Suite 202, Glendale, California 91206

Telephone: (818) 500-3200Attorneys for Plaintiff/Appellee/Cross-Appellant

Louis Vuitton Malletier, S.A.

Case: 10-16015 10/12/2010 Page: 1 of 74 ID: 7504746 DktEntry: 13


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CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 26.1(a) of the Federal Rules of Appellate Procedure,

Appellee and Cross-Appellant Louis Vuitton Malletier, S.A. identifies LVMH

Mot Hennessy Louis Vuitton S.A. as its parent corporation.



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TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT ........................................................... i

JURISDICTIONAL STATEMENT ............................................................................. 1

ISSUES PRESENTED FOR REVIEW ........................................................................ 1

STATEMENT OF THE CASE ..................................................................................... 2

STATEMENT OF FACTS ........................................................................................... 3

A.Louis Vuitton, Its Valuable Intellectual Property Rights and theHarm Caused By Counterfeiting and Piracy............................................ 3

B.Emergence of Defendants as Attempted Bulletproof Hosts ................ 71. Defendants Negligent Handling of Louis Vuittons Notices ................ 102. Defendants Manifold Means of Controls .............................................. 12

SUMMARY OF ARGUMENT .................................................................................. 16

ARGUMENT ON APPEAL

A.Defendants Refusal To Use Tools Available to Them To DisableAccess to Infringing Offers After Repeated Notices of Infringement

Makes Them Liable for Contributory Trademark Infringement ........ 211. The Standard of Review ......................................................................... 212. Abundant Evidence Proved Each Element of Contributory

Infringement ........................................................................................... 22

3. Defendants Had Control Over the Underlying Direct InfringementThrough a Variety of Tools .................................................................... 24

4. Uncontroverted Evidence of Numerous Written Notices TransmittedBefore and During the Litigation Amply Evidenced DefendantsActual Knowledge .................................................................................. 26

5. The District Court Did Not Abuse Its Discretion in Presenting theCase to the Jury ...................................................................................... 27

6. Intent is Not an Element of Contributory Trademark Infringement ...... 357. The Staple Article of Commerce Doctrine is Inapplicable .................... 38



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TABLE OF AUTHORITIES

CASES

A&M Records v. Napster, Inc. (Napster),239 F.3d 1004 (9th Cir. 2001) ........................................................... 23, 27, 29, 36-41

Academy of Motion Picture Arts & Sciences v. Creative House Promotions, Inc.,944 F.2d 1446, 1456 (9th Cir. 1991) ........................................................................ 33

Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079, 1087 (9th Cir. 2005) .................... 28

AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-54 (9th Cir. 1979) ........................ 33

Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 255,106 S. Ct. 2505; 91 L. Ed. 2d 202 (1986) ................................ 56

Arista Records LLC v. USENET.com,633 F. Supp. 2d 124, 158 (S.D.N.Y. 2009) ............................................................. 38

Bell v. Clackamas County, 341 F.3d 858, 865 (9th Cir. 2003) ................................... 21

Blanton v. Mobil Oil Corp., 721 F.2d 1207, 1216 (9th Cir. 1983) ............................. 44

Broadcast Music, Inc. v. Star Amusements, Inc.,44 F.3d 485, 487 (7th Cir. 1995)......................................................................... 44, 54

Brookfield Communs. v. W. Coast Entmt Corp.,174 F.3d 1036, 1056 (9th Cir. 1999) ....................................................................... 31

Cable/Home Communication Corp. Network Prods., Inc.,902 F.2d 829, 845, 846 n.29 (11th Cir. 1990) .................................................... 36, 40

Chalmers v. City of Los Angeles, 762 F.2d 753, 760 (9th Cir. 1985) ....................... 44

Columbia Pictures Industries Inc. v. Krypton Broadcasting of Birmingham, Inc.,259 F.3d 1186 (9th Cir. 2001) ............................................................................ 52, 54

The Comm. for Idahos High Desert, Inc. v. Yost,92 F.3d 814, 823 (9th Cir. 1996) ............................................................................ 48



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Crystal Semiconductor Corp. v. Tritech Microelectronics Intl,246 F.3d 1336, 1361 (Fed. Cir. 2001) ..................................................................... 43

Douglas v. Cunningham,294 U.S. 207, 210, 79 L. Ed. 862, 55 S. Ct. 365 (1935) .................................... 44, 54

Dream Games of Ariz., Inc. v. PC Onsite, 561 F.3d 983, 992 (9th Cir. 2009) ..... 51-52

F.W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228, 223 (1952) .................... 52

Fonovisa, Inc. v. Cherry Auction, Inc. (Fonovisa),76 F.3d 259 (9th Cir. 1996) ................................................... 22-23, 25, 27, 29, 41-42

Gilbrook v. City of Westminster, 177 F.3d 839, 847-48 (9th Cir. 1999) ....... 21, 55-56

Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir. 2001) ................................ 21

Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282, 1297 (9th Cir. 1984) ..................... 44

Hard Rock Caf Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143,1149 (7th Cir. 1992) ................................................................................................. 25

Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984) ........................ 52

Henry v. Lehman Commer. Paper, Inc., 471 F.3d 977, 1001 (9th Cir. 2006) ............. 45

Hewlett-Packard Co. v. Bausch & Lomb Inc.,909 F.2d 1464, 1469, 15 U.S.P.Q.2D (BNA) 1525, 1528 (Fed. Cir. 1990) ............ 43

In re Aimster Copyright Litigation, 334 F.3d 643, 650 (7th Cir. 2003). ..................... 37

International Union of Bricklayers & Allied Craftsman Local Union No. 20, AFL-CIO v. Martin Jaska, Inc., 752 F.2d 1401, 1404 (9th Cir. 1985) ............................. 63

Inwood Labs., Inc. v. Ives Labs. Inc., 456 U.S. 844, 854, 102 S. Ct. 2182, 72 L. Ed.2d 606 (1982) ......................................................................................... 22-23, 27, 35

Johnson v. Paradise Valley Unified Sch. Dist.,251 F.3d 1222, 1226 (9th Cir. 2001) ................................................................ 55-56



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Josephs v. Pacific Bell, 443 F.3d 1050, 1062 (9th Cir. 2006) .................................... 55

Karl Storz Endoscopy-Am., Inc. v. Surgical Techs., Inc.,285 F.3d 848, 854 (9th Cir. 2002) ............................................................................ 33

Kopczynski v. The Jacqueline, 742 F.2d 555, 560 (9th Cir. 1984) ............................ 63

L.A. News Serv. v. Reuters Television Intl,149 F.3d 987, 996 (9th Cir. 1998) ............................................................................ 51

Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817, 822 (9th Cir. 1980) ................. 33

Lindy Pen Co. v. Bic Pen Corp., 796 F.2d 254, 256-57 (9th Cir. 1986) .............. 31, 50

Lockheed Martin Corp. v. Network Solutions, Inc.,194 F.3d 980, 983 (9th Cir. 1999) ......................................................... 23, 25-26, 35

Los Angeles Memorial Coliseum Commn v. National Football League,726 F.2d 1381, 1398 (9th Cir. 1981) ................................................................. 22, 32

Los Angeles Memorial Coliseum Commn v. National Football League,791 F.2d 1356, 1360 (9th Cir. 1986) ........................................................... 22, 32, 44

Masson v. New Yorker Magazine, Inc., 85 F.3d 1394, 1397 (9th Cir. 1996) ............ 21

MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 934, 125 S. Ct. 2764, 162 L.Ed. 2d 781 (2005) (Grokster) ........................................................ 23, 27, 29,37-38

Novell, Inc. v. Unicom Sales, Inc., et al., No. C-03-2785 MMC, 2004 WL1839117, at *17 (N.D. Cal. Aug. 17, 2004) ............................................................ 48

Ostad v. Oregon Health Scis. Univ., 327 F.3d 876, 881 (9th Cir. 2003). .................. 21

Payless Shoesource, Inc. v. Reebok Intl Ltd.,998 F.2d 985, 989-90 (Fed. Cir. 1993) .................................................................... 33

Peer Intl Corp. v. Pausa Records, Inc.,909 F.2d 1332, 1336 (9

thCir. 1990) .................................................................. 52, 54



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Perfect 10, Inc. v. Amazon.com, Inc.,508 F.3d 1146, 1171-72 (9th Cir. 2007) ................................................. 23, 29, 39-40

Perfect 10, Inc. v. Visa Intl Serv. Assn,494 F.3d 788, 807 (9th Cir. 2007) .......................................................... 23, 29, 40-41

Phillip Morris USA Inc. v. Shalabi,352 F. Supp. 2d 1067, 1073 (C.D. Cal. 2004) ......................................................... 31

Phillip Morris USA Inc. v. Felizardo, 2004 U.S. Dist. LEXIS 11154, at *18(S.D.N.Y. June 18, 2004) ........................................................................................ 31

Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 120 S. Ct. 2097, 2110,147 L. Ed. 2d 105 (2000) ......................................................................................... 56

Religious Technology Center v. Netcom On-Line Communication Services, Inc.(Netcom), 907 F. Supp. 1361, 1374 (N.D. Cal. 1995)....................... 23, 36, 38-40

Sealy, Inc. v. Easy Living, Inc., 743 F.2d 1378, 1382 (9th Cir. 1984) ........................ 23

Superior Form Builders, Inc. v. Dan Chase Taxidermy Supply Co., 74 F.3d 488(4th Cir. 1996) ......................................................................................................... 52

Swinton v. Potomac Corp., 270 F.3d 794, 805 (9th Cir. 2001) ................................... 21

Tiffany Inc. v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010) ............................................... 28

Theme Promotions, Inc. v. News Am. Marketing FSI, 546 F.3d 991, 999 (9th Cir.2008) ........................................................................................................................ 55

Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1021 (9th Cir.1985) ........................................................................................................................ 48

United States v. Candelaria, 704 F.2d 1129, 1132 (9th Cir. 1983) ...................... 22, 32

United States v. Marabelles, 724 F.2d 1374, 1382-83 (9th Cir. 1984)....................... 22

STATUTES

15 U.S.C. 1117 .......................................................................................43, 46, 51, 53



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17 U.S.C. 504 .......................................................................................................... 51

28 U.S.C. 1291 ........................................................................................................... 1

RULES

Fed. R. App. P. 4(a)(3) .................................................................................................. 1

Fed. R. App. P. 28.1(e)(2)(A) ..................................................................................... 65

Fed. R. App. P. 32(a)(7) .............................................................................................. 65

Fed. R. Civ. P. 50(b) ..................................................................................................... 3

Fed. R. Civ. P. 59 .......................................................................................................... 3

Circuit Rule 28-2.6 ...................................................................................................... 65



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JURISDICTIONAL STATEMENT

On May 3, 2010, pursuant to Fed. R. App. P. 4(a)(3), Louis Vuitton

Malletier, S.A. timely filed its Notice of Cross Appeal of the award of Judgment as

a Matter of Law to Defendant Managed Solutions Group, Inc. for contributory

copyright and trademark infringement and to the corresponding Judgment

Awarding Statutory Damages and Permanent Injunction, both filed on March 19,

2010.1 This Court has jurisdiction over this appeal pursuant to 28 U.S.C. 1291.

ISSUES PRESENTED FOR REVIEW

1. Is an Internet Service Provider (ISP) that strives to be a bulletproof hostby refusing to remove or disable access to direct infringements properly held

accountable for continuing contributory infringement of trademarks and

copyrights where it has repeatedly been given notice of the underlying direct

infringements?

2. Was the jurys award of damages within the statutory scheme provided byCongress for contributory trademark counterfeiting and copyright

infringement proper?

3. Given the substantial evidence that Defendant, cross-appellee ManagedSolutions Group, Inc. (MSG) was liable for contributory infringement

1 Supplemental Excerpt of Record (SER) LV1-3.



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under both trademark and copyright claims, was it proper for the District

Court to reverse the jurys finding against MSG?

STATEMENT OF THE CASE

Louis Vuitton Malletier, S.A. (Louis Vuitton) filed suit on August 1, 2007,

after repeated unsuccessful efforts to have Defendants Akanoc Solutions, Inc.

(Akanoc), MSG and Steve Chens (Chen) (collectively Defendants) remove

websites selling counterfeit Louis Vuitton products from servers they owned and

operated.2 Discovery disputes concerning the existence and hosting of infringing

websites by Defendants were addressed by a court-ordered server inspection where

five of Defendants 1,500 servers were copied and examined by a forensic expert

on or about March 25, 2009.3

In December 2008, the District Court ruled that Louis Vuittons contributory

infringement claims raised disputed issues of fact, denying Defendants motion for

summary judgment, while granting Defendants motion for summary judgment as

to the claims for vicarious infringement.

In August, 2009, the jury trial proceeded before Judge James Ware. Louis

Vuitton moved for judgment as a matter of law at the close of all evidence as to all

2 SER LV452-491, 576-596, 614-625, 642-655.3 SER LV38-44.



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Defendants.4 The motion was made moot by the jury verdict finding liability and

assessing statutory damages against each Defendant.5

Louis Vuitton was thereafter granted injunctive relief.6 In response to

Defendants Rule 50(b) and 59 motions, the District Court set aside the jurys

verdict as to MSG on a ground never raised by Defendants. Appellants filed their

notice of appeal, and Louis Vuitton timely filed its notice of cross-appeal on the

issue of MSGs liability and damages.

STATEMENT OF FACTS

A.Louis Vuitton, Its Valuable Intellectual Property Rights and theHarm Caused By Counterfeiting and Piracy.

Louis Vuitton is a manufacturer and distributor of high quality, luxury

goods.7 As a result of its strict manufacturing standards, sourcing of specific raw

materials, unique designs and attention to detail, Louis Vuittons products are

highly valued and sought after by consumers and command a premium.8

Louis Vuitton began as a family business in 1854, primarily focused on

trunks and travel-related accessories.9 Today, it is a global fashion brand offering

not only its well-known lines of hand bags and luggage, but also clothing, shoes,

4 SER LV450:21-451:4.5 ER AKA00041-00054.6 ER AKA00001-00005.7 SER LV55:23-57:19.8 SER LV80:5-25, ER AKA00397:1-000398:9.9 SER LV55:23-56:6.



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jewelry and watches.10 Even though it has expanded tremendously, its

commitment to producing high quality product has endured. To ensure that its

exacting quality controls are maintained,11 Louis Vuitton manufactures its finished

products only in its own facilities employing highly skilled workers in France,

Spain, Switzerland and the United States.12 Similarly, Louis Vuitton distributes

and sells its products exclusively through owned and operated channels staffed

exclusively by Louis Vuitton personnel.13

As a result of these efforts to maintain the highest possible standards, Louis

Vuitton owns some of the most recognizable and valuable trademarks and

copyrights in the world.14 Louis Vuittons very success in creating its iconic

products has made it an attractive target for counterfeiters.15 Ironically, the

original monogram device was developed as an anti-counterfeiting measure in

1905.16 The story is no different today as the premium associated with Louis

Vuitton product serves as a magnet for counterfeiters who offer, distribute, market

10 SER LV56:7-57:19.11 SER LV70:10-71:8, 80:2-25, ER AKA00397:1-3.12 SER LV76:25-77:10.13 SER LV77:22-80:1.14 SER LV16:16-19:7, 968-1012.15 SER LV50:23-51:18.16 SER LV57:20-59:2.



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and sell poor quality knock-offs, often manufactured in sweat shops using harsh

chemicals and low-grade materials.17

To protect its intellectual property rights, preserve the integrity of its brand

and protect its customers, Louis Vuitton maintains a staff of enforcement

professionals employed around the globe with a sizeable budget dedicated to

fighting this insidious form of theft.18

Particularly with the emergence of the

Internet, this has become an enormous undertaking to which Louis Vuitton

dedicates substantial resources.19

The Internet has enabled counterfeiters to peddle their wares worldwide.

The websites that were the subject of Louis Vuittons numerous notices in this

action were virtual stores in which the infringers offered unauthorized low-

quality copies of a full range of Louis Vuittons legally protected products for

sale.20 In many cases, these stores offered products in several different classes of

goods, with infringement of numerous different trademarks in each of these

separate classes of goods.21 For the public to have access to these websites or

web stores, the services and facilities of a specific kind of ISP capable of

offering web-hosting capacity, like Defendants, was absolutely required to

17 SER LV57:21-58:10, 73:16-75:14, 80:2-25, ER AKA00397:1-00398:13.18 ER AKA00397:22-00398:9, 00398:14-25, SER LV81:1-8.19 SER LV51:7-18.20 See, for example, SER LV656-665, 674-725, 838, 864-866, 1048-1050.21 Id.; see also, for example, SER LV1089-1112.



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physically store the content and provide customer access.22 A single server can be

assigned numerous Internet Protocol (IP) addresses, and a single IP address can

host many infringing websites. 23

Seeking compliance from ISPs is one of the few cost-effective ways to

address prolific online infringement. Louis Vuitton regularly sends hundreds of

Digital Millennium Copyright Act (DMCA) compliance notices of infringement

(NOI) to web hosts, obtaining near 100% success in removal of the offending

content. 24 Such cooperation occurs even where legitimate ISPs do not stand in a

direct relationship with the underlying infringers.25

Defendants were the one notable exception: they chose to ignore every one

of Louis Vuittons numerous notices in an attempt to shield their customers from

Louis Vuittons legitimate claims of infringement by acting as bulletproof hosts.

22 SER LV1113.23 IP addresses are numeric addresses assigned by regional internet registries and,in the case of the United States based ISPs, by the American Registry for InternetNumbers (ARIN). ER AKA00263:4-14. Website content is usually accessedusing domain names. The domain name system administered by the Internet

Corporation for Assigned Names and Numbers is responsible for registeringdomain names and insuring that Internet inquiries based on the domain namesystem are routed to the correct IP address. Defendants received a delegation ofseveral thousand IP addresses from ARIN. SER LV247:23-25; ER AKA00263:4-18.24 SER LV104:4-14.25 SER LV104:15-106:11.



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B.Emergence of Defendants as Attempted Bulletproof Hosts.Akanoc and MSG are ISPs, specifically web hosts, located in San Jose and

Fremont, California.26 Chen is their actively participating owner and general

manager.27 Although Chen testified that MSG merely owned the hardware and

leased it to Akanoc, the evidence demonstrated that MSG maintained separate

email accounts to handle abuse complaints, including NOI, in the same fashion as

the abuse email accounts owned by Akanoc.28 The IP addresses assigned to MSG

did not reflect any delegation or sub-assignment to Akanoc (or any other alleged

customers) although the delegation of those addresses by ARIN required

publication of such information.29 There was no written inter-company

agreement.30 The compensation paid by Akanoc for this alleged lease agreement

was vague and uncorroborated.31 Defendants each had a specific and necessary

role to the unlawful infringement.

Defendants offered their counterfeiting customers: (i) server capacity on

which to store the infringing content, (ii) Internet access through assignment of an

IP address at which the content could be accessed, (iii) Internet routing that

ensured that queries for content hosted on Defendants servers are routed to the

26 SER LV331:11-17, 332:4-12, 336:9-12, 1183-1191; ER AKA00261:17-21.27 ER AKA00359:3-20, 00364:3-10; SER LV262:10-15.28 SER LV199:1-8, 303:4-8, 307:16-308:5.29 SER LV388:3-389:4, 604-610 at 5(b).30 ER AKA00365:25-00366:2.31 ER AKA00365:25-00366:10.



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correct location of that content, (iv) bandwidth through which traffic could travel

to and from the websites hosted on Defendants servers, (v) close proximity to the

Internet backbone in their highly specialized facility, 32 and (vi) most valuably,

shelter from abuse complaints.

Companies that operate such server farms have a critical and large-scale

impact when those systems are used for counterfeiting and piracy. Illustrating the

point, the court-ordered inspection of just five (5) of Defendants 1,500 servers

uncovered literally thousands of infringing websites.33 In the instant case,

Defendants fulfilled the crucial role of host.

Despite repeated efforts by Louis Vuitton, Defendants continued to provide

counterfeiters with the means through which they offered their illegal merchandise

with impunity.34 The result of Defendants undisturbed business practices was that

the same infringing websites operated by the same handful of customers remained

undisturbed on Defendants servers for years.35 It is not surprising that some of the

32 SER LV332:20-25, ER AKA00259:19-25, LV333:1-334:25, ER AKA00261:1-00262:19; see also SER LV1041-1042.33 SER LV325:11-18, 446:24-447:25, 1121-1137, 1143-1163.34 See footnote 2; SER LV492-495, 496-575, 611-612, 626-639, 1014-1030, 1032-1040, 1114-1116, 1121-1137, 1143-1182; ER AKA 00788-00807.35 SER LV379:15-382:6, 384:23-385:1 (bag925.com), 407:11-408:1, 408:9-409:12, 446:24-447:25, 1121-1137, 1180-1181.



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worst recidivist offenders were hosted on servers leased to Defendants best

customers.36

Between the fall of 2006 and the spring of 2007, Louis Vuitton transmitted

no fewer than eighteen (18) NOI to Defendants about websites dedicated to the

offer for sale of counterfeit merchandise.37 These NOI concerning publicly

accessible websites were transmitted to Defendants by both email and registered

mail.38 None of these NOI resulted in the removal or disabling of access to the

infringing content on servers owned by Defendants and located on IP addresses

assigned to them.

Louis Vuitton had to make significant efforts to locate Defendants in order

to send them these NOI.39 Before the lawsuit Defendants had no registered agent

with the United States Copyright Office for the receipt of NOI.40 Defendants failed

to post accurate and/or current contact information on their website even up to the

date of the trial;41 and failed to update addresses in the ARIN WHOIS which they

were contractually required to update upon sub-delegating responsibility for any of

the IP address allocation to their customers.42 Aggravating the difficulty in

36 SER LV299:3-19, 371:12-374:11, 397:2-401:17.37 See footnote 2; SER LV165:15-166:1.38 Id.; SER LV95:20-97:1, 98:14-99:11.39 SER LV127:2-128:24, 137:11-138:8, 169:4-22.40 SER LV362:19-363:22.41 SER LV384:2-14, 1181.42 SER LV388:3-389:4, 604-610 at 5(b), 1182.



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contacting the correct Defendant was the tendency for websites to jump between

MSGs and Akanocs IP address allocations.43 Defendants did not contradict Louis

Vuittons evidence that the NOI were sent, received and ignored. Their sole

defense was a mysterious email server crash about the time litigation was filed

for which the Defendants had no backup.44

Defendants own woefully deficient practices allowed their servers to

become a safe-haven for a multitude of illegal activities.

1. Defendants Negligent Handling of Louis Vuittons Notices.From at least fall 2006 to spring 2007, Defendants handled hard copy

NOI, including those forwarded by Louis Vuitton, by placing them unopened on an

unmanned desk.45 Even one NOI sent to Chens residence, and received by him,

was taken to the office and added to the pile of abandoned mail.46 Defendants took

no action.

As to Defendants manner of dealing with NOI by email, the alleged

computer crash makes it impossible to tell what, if anything, Defendants did

43 SER LV143:3-14, 153:14-19, 345:5-20; see, for example, SER LV779-782.44 SER LV274:15-276:4. In one case, an email by Chen showed Defendantsknowledge of at least one infringing website identified in the Complaint, their

response (or lack thereof) to notices about those websites and Defendantscomplicity with their underlying customers. SER LV376:11-378:11, see also SERLV1031.45 Chen testified that mail was delivered to upstairs and then sit on a deskthatwas the time that a lot of mail was not even being opened, nobody really paidattention to it SER LV279:14-281:22, 282:18-283:3, 305:12-23.46 SER LV284:19-286:13.



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with respect to Louis Vuittons emailed NOI.47 Their standard operating procedure

for email NOI, however, was not much more effective than the treatment they

accorded the abandoned hard copy NOI. Accordingly, in either event, websites

that were the subject of Louis Vuittons notices continued to be hosted on

Defendants servers.48

The corporate Defendants had only one employee between them, Juliana

Luk (Luk), responsible for handling all abuse complaints, including NOI, for

both corporate Defendants.49 Luk was part-time and located in another city.50 She

received no training.51 Her only specified task was to forward complaints to

Defendants customers.52 Any follow-up notices of continued misconduct were

almost always treated the same way as initial complaints. 53 Amazingly, the only

record Luk had of complaints received was what she could remember in her

brain.54 Occasionally, and irregularly, Luk called upon Chen for help. There was

no system governing the division of responsibility and the assignment of abuse

complaints between them. Nothing other than the unbolding feature built into

the Defendants email program indicated that a particular piece of mail had been

47 SER LV274:15-276:4.48 See footnote 34.49 SER LV196:15-24, 197:20-198:4.50 SER LV195:12-17, 196:15-24.51 SER LV195:10-11.52 SER LV197:11-19, 254:9-13.53 SER LV201:7-15, 207:12-208:14, 223:10-224:16, 225:22-25.54 SER LV208:12-14.



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opened. Based on nothing more than that an email was so identified as having

been read, Luk assumed that that particular piece of correspondence, once

unbolded, had actually been handled.55 Defendants manner of keeping track of

complaints was inadequate, not to say non-existent.

Chen was also of the view that intellectual property infringement reports

were in the nature of private business disputes that should be resolved between the

rights owners and the direct infringers and concerning which Defendants had no

responsibility whatsoever. 56 Examination at trial revealed that Chen was

contemptuous of Louis Vuittons claim and, even on the stand, asserted the

infringement notices were in the nature of private business disputes implying

they were no concern of Defendants.57

Nevertheless, there were never any challenges or responses to Louis

Vuitton,58 while Defendants made sure to promptly act in response to complaints

received from other companies, namely, eBay and Microsoft.59

2. Defendants Manifold Means of Control.Were Defendants inclined to address Louis Vuittons NOI, Defendants

had an arsenal of tools with which to control the abuse and to secure the removal

55 SER LV210:23-211:9.56 ER AKA00303:15-00305:1.57 Id.; SER LV376:11-378:11, see also SER LV1031 (stupid LV, instead of suitape168 they suit us).58 SER LV413:2-9.59 SER LV201:16-25, 202:7-203:2, 230:17-231:15.



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of the infringing content. Defendants chose not to apply any of them. Defendants

had the technical means: since Defendants had physical control over the server,

they could, for example, manually unplug the servers power supply or

otherwise mechanically prevent its operation. In addition, Defendants had the

logical means: Defendants had control over the routers and over software

routing Internet traffic to a specified server; thus, Defendants could have disabled

an IP address so that an Internet user would not resolve a domain name query to

content hosted on the server for example.60 Most importantly, Defendants had the

contractual means: Defendants own policy, expressly set forth in their contracts

with their customers, clearly evidences that they had the ability and the right to do

something to stop the abuse.61

Defendants Terms of Service specifically provided for a regimen

of progressively more stringent penalties for customers who failed to remove

illegal content from their websites.62 In response to NOI, Defendants were entitled

to do the following if a customer failed to take action within a relatively short

time after being notified of the NOI: (i) temporarily unplug the server on which

the infringing content was located, (ii) impose a monetary penalty; (iii) suspend the

60 SER LV437:4-438:15.61 ER AKA00526-00531.62 Id.



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customers account, or (vi) terminate the contract with the customer in response to

repeated violations.63

At no time did Defendants invoke any of the provisions of their Terms

of Service against their infringing customers, except for the occasional and very

brief unplugging of servers.64 Despite abundant evidence of repeated

infringement, Defendants rarely penalized anyone, and never terminated any of

their customers.65

Since Defendants conduct signaled that infringers did not have to fear

any of the more severe measures, the unplugging predictably had no deterrent

effect on the counterfeiters operating the websites infringing on LVs rights: The

infringing content that was the subject of LVs notices to Defendants continued to

reappear on Defendants servers without subjecting the infringers to the more

severe measures contemplated by Defendants Terms of Service. 66 Often the

infringing content was assigned to the same customer and sometimes on the same

server as the content complained of in LVs original notice. 67

63 Id.64 ER AKA00360:5-00361:15; SER LV328:2-8, 358:1-360:23, 371:12-374:11,

397:2-401:17; ER AKA00526-00531.65 ER AKA00360:5-00361:15; SER LV328:2-8; 371:12-374:11, 397:2-401:17,430:5-431:6.66 See footnotes 34, 64, and 65; SER LV379:5-382:6.67 For example, Louis Vuitton transmitted a notice in July 2008. Approximately100 sites were hosted at one IP address and, given the volume, Chen elected todispense with notice and simply temporarily unplug the server. SER LV407:11-



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Defendants asserted that their customers were merely resellers

themselves.68 Although this characterization is without significance to Defendants

liability, the record was to the contrary. Chen testified he did not know what their

customers did and that the customers could in fact be the operators of the

websites.69 Defendants claimed that their customers were engaged in other non-

infringing uses or that scores of legitimate users were adversely affected;

however, Defendants claimed ignorance on this same issue when it served them,70

and it was clear that each IP address was assigned only to one customer at a time71

so that only the offending customer would be affected. The fact is, contrasted with

abundant evidence of illegal activity using Defendants goods and services, there

was no evidence adduced at trial of any legitimate use being made of those same

goods and services.

Expert testimony, offered by both sides, confirmed that even the mere

handful of servers inspected by Louis Vuitton contained evidence of hundreds of

408:1. Although this might be thought to evidence greater responsiveness, 45 ofthose websites were up, operating and located at the same IP address in February,2009. SER LV408:9-409:12. While the server was again temporarily unplugged,

Defendants never took any of the other steps to enforce their own Terms of Serviceas a result of this recurring conduct. ER AKA00360:5-00361:15; SER LV373:24-374:11; 399:18-401:17.68 Opening Brief, p. 4.69 SER LV372:19-373:1, 385:24-386:2470 Id.71 SER LV422:7-10.



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websites offering counterfeit Louis Vuitton merchandise.72 According to

Defendants own expert, several of these websites, which were the subject of prior

notices from Louis Vuitton, were active months after Louis Vuittons

notifications.73 Out of hundreds of websites reviewed by Louis Vuittons

investigator, all websites hosted by Defendants were engaged in some form of

counterfeiting or piracy.74

Accordingly, the jury correctly awarded nearly the maximum in statutory

damages for Defendants willful actions.75

SUMMARY OF ARGUMENT

The central question on this appeal is whether an ISP, seeking to offer

bulletproof hosting services to online infringers, can structure its business in

such a way as to avoid liability for known, persistent and widespread direct

infringement enabled by its servers, routers, bandwidth and IP addresses, despite

repeated notices of such infringing activity. The jury said no, finding evidence

that led not only to findings of contributory infringement, but findings of willful

infringement by Defendants.

Louis Vuitton provided uncontroverted evidence of its valuable intellectual

property rights and of the widespread counterfeiting on Defendants servers. The

72 See footnote 33.73 SER LV446:24-447:25, 1121-1137.74 SER LV246:1-10.75 ER AKA00041-00054.



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proliferation of online counterfeiting that successfully capitalizes on the relative

anonymity offered by the Internet and global reach of those online offers pose

significant challenges requiring extensive efforts to curtail abuse. Those efforts

include the transmission of notices conforming to those specified by the DMCA to

ISPs world-wide. Almost uniformly, these notices result in removal of the

infringing content.

Not so in Defendants case. Louis Vuitton demonstrated repeated efforts to

secure cooperation from Defendants through numerous NOI, both in email and by

hard copy, none of which had any impact on the infringing activity that was the

subject of those NOI. Louis Vuitton demonstrated those NOI were intentionally

ignored by the Defendants and, even when express delivery notifications were sent

to Chens home, they were taken to the office and left unattended with other

unopened, abandoned correspondence.

Louis Vuitton showed that the Defendants had at their disposal a panoply of

tools they could have used to address Louis Vuittons notices, tools that stemmed

from their physical control of the server (including physically disconnecting or

unplugging the server), from their logical control over the software routing

Internet traffic to and from the servers on which the infringing content was located

(including programming the router to null route IP addresses or disabling IP

addresses), and contractual remedies stemming from the rights Defendants



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enjoyed to enforce their Terms of Service by notifying their customers, fining

their customers and, ultimately, suspending or terminating repeat customers.

Defendants made no use of the remedies at their disposal in response to NOI

transmitted to them before litigation was filed by Louis Vuitton and no use of the

more meaningful tools, either before or after the litigation was filed.

This uncontradicted evidence demonstrated the underlying infringement, the

NOI provided to Defendants and the control Defendants had over the means of

infringement. The fact that the infringing conduct continued unabated even after

the litigation was filed, even until the time of trial, combined with the sheer

quantity of infringing activity, led the jury to assess substantial statutory damages

at or near the statutory limits for willful infringement. The magnitude, persistence

and brazenness of the underlying infringements and Defendants own deliberate

conduct when confronted with LVs repeated NOI amply support an award of the

magnitude permitted by statute, awarded by the jury, confirmed by the District

Court and entitled to great deference in this Court.

This record, the overwhelming weight of case law and the Congressional

intent codified in the DMCA demonstrate that all Defendants were properly held

accountable by the jury. The Defendants position would create an open-ended

safe harbor for a variety of illegal conduct, not limited to product counterfeiting: it



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would allow ISPs to structure their enterprises in such a way as to facilitate illegal

conduct while simultaneously avoiding liability for the illegal conduct so enabled.

Instead of arguing the merits, or accurately describing the record, Appellants

embark on unrelated or irrelevant lines of argument in the Opening Brief. Many

issues asserted in the Appellants Opening Brief are entirely outside the scope of

this appeal. These include (i) vicarious liability, which did not go to trial, (ii)

intentional inducement, which was not alleged, (iii) direct control and monitoring,

since Defendants provided both goods and services, (iv) constructive knowledge,

since there was sufficient actual notice, (v) content filtering, since Defendants had

a variety of tools to address infringement, (vi) constitutional scrutiny, since

statutory damages are not vulnerable to such scrutiny, (vii) actual damage

instructions and standards, since Louis Vuitton elected statutory damages, and

(viii) joint and several liability as among the Defendants, since Defendants waived

their objection on this issue.

The record shows that the Defendants had ample actual notice (in addition to

constructive notice) and had ample means of control over the means of

infringement, none of which were ever effectively used by them all of which

supports the jurys verdict and the Courts judgment of liability. Given

Defendants repeated failures to act, combined with the enormity of the

infringements using Defendants goods and services, the jurys award of



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substantial statutory damages against each Defendant was appropriate. There was

ample evidence to support the jurys finding of liability as against MSG. MSG had

its own servers and infringing websites, its own email addresses for abuse, and

MSG was consistently referred to by Defendants and their counsel as an ISP. In

ruling upon the Defendants post-trial motions, the District Court apparently

concluded that Chens testimony that MSG owned the assets and Akanoc operated

the business was sufficient to exonerate MSG. This finding was contradicted by

the record of how Defendants businesses operated and ignored the active

involvement of each of the ISP defendants. The Court should not have substituted

its judgment about Chens testimony on this point for that of the jury.

Moreover, even if MSG only owned the relevant means of infringement,

the control that it enjoyed by virtue of that ownership is sufficient control for

purposes of contributory liability. MSG still had responsibility over its alleged

lessee (Akanoc) to do what was required and failed to do it. For these reasons,

MSG is properly held accountable.

The jury correctly found all Defendants independently responsible for their

acts of contributory infringement and the jurys decision regarding MSG should be

reinstated under the applicable standards of review and to prevent manifest

injustice.



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ARGUMENT ON APPEAL

A.Defendants Refusal to Use Tools Available To Them To DisableAccess to Infringing Offers After Repeated Notices of Infringement

Makes Them Liable for Contributory Trademark Infringement.

1. The Standard of Review.The jury verdict was amply supported by the record, outlined above, by

applicable case law and by the District Courts carefully crafted jury instructions.

The Court can overturn the jurys verdict only if there is no legally

sufficient basis for a reasonable jury to find in favor of Louis Vuitton. Bell v.

Clackamas County, 341 F.3d 858, 865 (9th Cir. 2003) (emphasis added).76 When

the error is said to arise from the formulation of the instructions, the instructions

are to be considered as a whole and an abuse of discretion standard is applied to

determine if they are misleading or inadequate. Guebara v. Allstate Ins. Co., 237

F.3d 987, 992 (9th Cir. 2001) citingMasson v. New Yorker Magazine, Inc., 85

F.3d 1394, 1397 (9th Cir. 1996). The harmless error standard applied in civil cases

is less stringent than that applied in the criminal context. See Swinton v.

Potomac Corp., 270 F.3d 794, 805 (9th Cir. 2001).

76 We review the denial of a motion for a judgment as a matter of law de novo.Ostad v. Oregon Health Scis. Univ., 327 F.3d 876, 881 (9th Cir. 2003). We viewthe evidence in the light most favorable to the party in whose favor the juryreturned a verdict and draw all reasonable inferences in its favor. Id.; Gilbrook v.City of Westminster, 177 F.3d 839, 847-48 (9th Cir. 1999).



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Moreover, [a] trial judge is given substantial latitude in tailoring the

instructions so long as they fairly and adequately cover the issues presented when

evaluated in the context of the whole trial. Los Angeles Memorial Coliseum

Commn v. National Football League, 791 F.2d 1356, 1360 (9th Cir. 1984) citing

United States v. Marabelles, 724 F.2d 1374, 1382-83 (9th Cir. 1984). A party is

not entitled to an instruction on its theory of the case if that theory lacks support

either in law or in the record. Los Angeles Memorial Coliseum Commn, 791

F.2d at 1360 citing e.g., Los Angeles Memorial Coliseum Commn v. National

Football League, 726 F.2d 1381, 1398 (9th Cir. 1981); United States v. Candelaria,

704 F.2d 1129, 1132 (9th Cir. 1983).

2. Abundant Evidence Proved Each Element of ContributoryTrademark Infringement.

There was abundant evidence proving each element of contributory

trademark infringement and upon which the Court instructed the jury.

Contributory trademark infringement exists where a service provider (1)

intentionally induces another to infringe a trademarkor (2) continues to supply a

product to one whom it knows or has reason to know is engaging in trademark

infringement (emphasis added). Inwood Labs., Inc. v. Ives Labs. Inc. (Inwood),

456 U.S. 844, 854, 102 S. Ct. 2182, 72 L. Ed. 2d 606 (1982) (manufacturer of

generic drugs found not liable for inducing pharmacists to mislabel their generic

product); see also Fonovisa, Inc. v. Cherry Auction, Inc. (Fonovisa), 76 F.3d



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259, 264-265 (9th Cir. 1996) (applying Inwood test for contributory trademark

infringement); Lockheed Martin Corp. v. Network Solutions, Inc. (Lockheed),

194 F.3d 980, 983 (9th Cir. 1999) (consider the extent of control exercised by the

defendant over the third partys means of infringement.);see also Sealy, Inc. v.

Easy Living, Inc., 743 F.2d 1378, 1382 (9th Cir. 1984) (knowing or having reason

to know the materials supplied will be used to infringe a trademark, is contributory

trademark infringement) (disapproved on other grounds). The requirements of the

claim are, therefore, two-fold: (i) knowledge and (ii) continuing to supply goods or

services used to infringe. Lockheed, 194 F.3d at 984.

The verdict is consistent with this Courts precedents finding liability where

defendants had sufficient control over the means of infringement. Indeed, the

Court has upheld claims involving an electronic file sharing system on a central

server, A&M Records v. Napster, Inc. (Napster), 239 F.3d 1004, 1021 (9th Cir.

2001), free software not on a central server, MGM Studios Inc. v. Grokster,

Ltd.(Grokster), 545 U.S. 913, 919 (2005), and an electronic bulletin board,

Perfect 10, Inc. v. Amazon.com, Inc. (Amazon), 508 F.3d 1146, 1171-72 (9th

Cir. 2007) citing Religious Technology Center v. Netcom On-Line Communication

Services, Inc. (Netcom), 907 F. Supp. 1361, 1374 (N.D. Cal. 1995).

Even in Perfect 10, Inc. v. Visa Intl Serv. Assn (Visa), 494 F.3d 788,

807 (9th Cir. 2007), where liability was not found, this Court specifically



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contrasted Visa, reasoning that Visa did not maintain the servers on which

infringing websites resided and implying that such involvement would result in a

finding of liability. Id. at 800 (emphasis added). In contrast, Defendants not only

maintained the servers on which infringing websites resided and provided access to

the Internet for content on those servers, they shielded the infringers from any

interruption of their illegal businesses by providing a bulletproof hosting

environment.

3. Defendants Had Control Over the Underlying DirectInfringement Through A Variety of Tools.

Liability for contributory trademark infringement arising from the provision

of services requires an evaluation of the Defendants control over the

instrumentality or over the third partys means of infringement.77 The evidence

showed Defendants had extensive control over their goods and services that were

critical to an Internet-based counterfeiting operation.

Defendants hosted the infringing content on their servers in their specialized

facility and protected their infringing customers by providing a bulletproof

shield against take-down notices, despite prior notices and a multitude of unused

but available tools to stop the infringement and exercise control over their systems

77 Such analysis is, accordingly, unnecessary, to the extent that Defendantsprovided a package of goods and services, not services alone, as implied by theirown assertion that the staple article of commerce doctrine applies, addressedbelow.



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and procedures.78 Appellants agree in their Opening Brief that what they supplied

were servers and web-hosting services.79 The infringing websites could not have

operated but for the servers and services provided by Defendants. The trial court

correctly instructed the jury on the specific assistance and contribution to

infringement made by Defendants.

Even Fonovisa, relied upon by Appellants, demonstrates the underlying

fallacy of Defendants argument that Defendants lack sufficient control over those

websites: according to Appellants formulation of the applicable principles, the

shops and stalls selling counterfeit wares are the means of infringement and the

swap meet itself is too far removed from control over those means to be held liable

a conclusion utterly at odds with the result in Fonovisa. The District Courts

description of the means of infringement was entirely consistent with governing

law in this Circuit.

Appellants attempt to align this case with Lockheed fails, since this case is

fundamentally different. As in Hard Rock Caf Licensing Corp. v. Concession

Services, Inc., 955 F.2d 1143 (7th Cir. 1992) and Fonovisa (both cases upon which

Appellants admit Lockheed relied), Defendants had control over the site and

facilities of infringement, specifically physical control over their servers where the

infringing material resided and was protected, and traffic was routed to and from

78 See footnotes 32, 34, 66.79 Opening Brief, p. 26 (i.e., Internet servers and web-hosting services).



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those servers by Defendants.80 Defendants contribution was even more sustained

and cannot be compared to the service at issue in Lockheed that involved merely

the translation of domain names into IP addresses.81

4. Uncontroverted Evidence of Numerous Written NoticesTransmitted Before and During the Litigation Amply Evidenced

Defendants Actual Knowledge.

Louis Vuitton adduced uncontroverted evidence of eighteen (18) separate

NOI transmitted to Defendants before the Complaint was filed, including multiple

follow-up notices.82 Louis Vuitton adduced evidence of additional NOI served

upon Defendants after the litigation was served and the fact of these NOI was also

uncontroverted as shown by Defendants own evidence.83 These NOI provided

the Defendants with actual knowledge, but the systematic hosting and evidence of

hundreds of websites also evidences constructive knowledge.

In keeping with Defendants bulletproof package of goods and services,

many of the sites that were the subject of these NOI continued to be hosted on

Defendants servers after service of these NOI; in some cases, they were hosted on

Defendants servers even at the time of trial.84 Not only did the content remain in

storage on Defendants servers, it was accessible to the public through the

80 See footnote 32; see also SER LV422:15-19.81 See alsoER AKA00115:14-AKA00116:5.82 See footnote 2.83 ER AKA00788-00807.84 See footnote 66.



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bulletproof package of goods and services supplied by Defendants the digital

storage, routing services, IP addresses and bandwidth all of which was

impervious to abuse notices transmitted in accordance with industry standards,

governing law and Defendants own Terms of Service even pending their

defense of this action.85

Abundant settled authority, beginning with Inwood and continuing with

Fonovisa, Napster and Grokster, cited above, makes clear that the actual notice

provided by Louis Vuitton combined with the Defendants ongoing contribution to

the underlying direct infringement support the jurys finding of liability and the

Courts Judgment.

5. The District Court Did Not Abuse Its Discretion in Presenting theCase to the Jury.

The Court appropriately described the issues and asked the jury to decide

whether Defendants were liable for contributory trademark infringement based

upon settled principles articulated in the cases outlined above. Regardless whether

reviewed for abuse of discretion or de novo, the District Court correctly instructed

the jury on the elements of contributory infringement.

Appellants object to the District Courts jury instructions for suggesting that

the jury look to the degree of control Defendants exercised over their servers or

85 Id.



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services.86 Regardless whether reviewed for abuse of discretion or de novo, the

District Court correctly instructed the jury on the elements of contributory

infringement. Appellants suggest that Defendants lacked control over the means of

infringement, despite their control over their bulletproof servers, IP addresses,

routers and Internet bandwidth. This impermissibly narrows the scope of potential

contributory infringement claims. The instructions correctly allowed the jury to

make its determination whether Defendants, who operated a sophisticated server

environment, resistant to actual NOI, were liable for contributory infringement.

Appellants strive to salvage their argument that they had insufficient control

by reference to non-binding, irrelevant and inapplicable authority, including: (i) an

Australian decision that has no persuasive value because it interpreted language

from an Australian statute not present here and applies its inapplicable statutory

language to a decentralized peer-to-peer technology (BitTorrent) materially

different from the facts of this case, (ii) standards for vicarious infringement, even

though no vicarious claims were tried,87 (iii) Tiffany Inc. v. eBay, Inc., 600 F.3d 93

(2d Cir. 2010), a case that did not involve, as this one did, defendants that

dedicated minimal resources, took no effective action and failed to disable

86 Appellants complain about the Courts presentation of the facts, an instructionwhich is reviewed for an abuse of discretion rather than de novo. See Altera Corp.v. Clear Logic, Inc., 424 F.3d 1079, 1087 (9th Cir. 2005).87 Opening Brief, pp. 17-18.



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infringing content about which they had been given undisputed actual notice,88 and

(iv) citations of cases about payment processing services, since payment

processing services typically engage in isolated transactions, materially different

from the sustained involvement of Defendants as hosts of infringing websites.

The outcome of this case reflects the purpose of derivative liability as

observed by the U.S. Supreme Court: When a widely shared service or product is

used to commit infringement, it may be impossible to enforce rights in the

protected work effectively against all direct infringers, the only practical

alternative being to go against the distributor of the copying device for secondary

liability on a theory of contributory or vicarious infringement. Grokster, 545 U.S.

at 929-930. The Ninth Circuit also recognized that services or products that

facilitate access to websites throughout the world can significantly magnify the

effects of infringing conduct and that in certain instances, seeking compliance

from providers may be the only meaningful way for copyright holders to protect

their rights. Amazon, 508 F.3d at 1172. As this Court noted in Visa, maintaining

the servers upon which the infringing websites reside is precisely the type of

control envisaged by this Courts earlier authority in Napster and Fonovisa. Here,

the District Court properly instructed the jury as a result of which the jury arrived

at a decision wholly consistent with that earlier authority.

88 See footnotes 34 and 66.



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Even if the jury instruction had been incorrect, the error would have been

harmless in light of Defendants intentional acts and omissions to keep the

infringing websites up and running despite an arsenal of physical, logical and

contractual tools at their disposal.89 Even if the infringing websites themselves

had been the means of infringement as Defendants assert, they were not the only

means of infringement. The Defendants servers, routers, bandwidth and IP

addresses were also means by which the infringement was allowed to occur and to

persist and over all of which Defendants had control.

Defendants continued to supply the infringing websites to users on the

Internet by refusing to take them down and keep them down despite numerous

specific NOI from Louis Vuitton.90 Defendants servers and services were the sole

reason infringing websites were left accessible and undisturbed to continue their

infringements using Defendants goods and services, despite numerous lawful

complaints. Even under the de novo standard cited by Appellants, the same

outcome would follow and Appellants appeal should be denied. The jury was

correctly instructed in light of the facts of the case.

Appellants also take issue with the Courts lack of instruction on the

definition of counterfeit mark, even though it was uncontested that the infringing

89 See footnote 64. Defendants arguments on lack of control are inconsistentwith the record.90 See footnotes 34 and 66.



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product was counterfeit.91 In the instant case, Defendants hosted and protected

websites engaged in the offer for sale, importation, distribution and sale of

counterfeit Louis Vuitton merchandise.92 The entire purpose of the knock-offs is

to look like the real thing. The law presumes confusion where counterfeit product

is involved and it was not necessary for the jury to engage in a more

comprehensive likelihood of confusion analysis.

Controlling authority is clear that the use of virtually identical knock-off

marks in the same class of goods or services as the registered infringed-upon mark

creates a presumption of confusion. Brookfield Communs. v. W. Coast Entmt

Corp., 174 F.3d 1036, 1056 (9th Cir. 1999) (In light of the virtual identity of

marks, if they were used with identical products or services likelihood of confusion

would follow as a matter of course.); seeLindy Pen Co. v. Bic Pen Corp., 796

F.2d 254, 256-57 (9th Cir. 1986) (reversing a district courts finding of no

likelihood of confusion even though the six other likelihood of confusion factors

all weighed against a finding of likelihood of confusion); Phillip Morris USA Inc.

v. Shalabi, 352 F. Supp. 2d 1067, 1073 (C.D. Cal. 2004) citing Phillip Morris USA

Inc. v. Felizardo, 2004 U.S. Dist. LEXIS 11154, at *18 (S.D.N.Y. June 18, 2004)

91 Opening Brief, pp. 32-34.92 See footnotes 34 and 66; SER LV325:11-18, 328:2-8, 371:12-374:11, 397:2-401:17, 430:5-431:6, 446:24-447:25.



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(in cases involving counterfeit marks, it is unnecessary to perform the step-by-

step examination . . . because counterfeit marks are inherently confusing.).

Louis Vuitton introduced voluminous exhibits evidencing the offer and sale

of knock-off merchandise the entire object of which was to mimic authentic Louis

Vuitton merchandise as closely as possible. Defendants provided no evidence to

the contrary.

Defendants were not entitled to any instruction on the definition of a

counterfeit mark, especially when they did not dispute that the infringing marks

were counterfeit. A party is not entitled to an instruction on its theory of the case

if that theory lacks support either in law or in the record. Los Angeles Memorial

Coliseum Commn, 791 F.2d at 1360 citing e.g., Los Angeles Memorial Coliseum

Commn, 726 F.2d at 1398; Candelaria, 704 F.2d at 1132. It was clear in the trial

record that the fake products and offers did not originate from Louis Vuitton.

Appellants are silent on the uncontroverted similarity between Louis Vuittons

trademarks and the knock-offs offered on websites using Defendants servers. It

was obvious that the knock-offs offered on sites hosted by Defendants were likely

to confuse. Appellants cannot now claim error for the District Courts decision not

to instruct on inappropriate non-issues.

Even if the District Court erred in not instructing on the definition of a

counterfeit mark, the error was harmless as the jury was able to find likelihood of



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confusion under alternate analyses. In addition to the presumption described

above, the jury was instructed on the Sleekcraft factors which were largely

satisfied through the jurys own visual comparison.93 The jury was not required to

rely on any presumption of a likelihood of confusion alone. The Court did instruct

the jury on the Sleekcraft factors,94 and the jury was well equipped to make the

finding of likelihood of confusion based on its own observation.95

Given the

almost identical nature of the copies and the authentic goods, the jurys finding

93AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979) (In

determining likelihood of confusion the following factors must be balanced: (1)strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4)evidence of actual confusion; (5) marketing channels used; (6) type of goods anddegree of care consumers are likely to exercise in purchasing them; (7) intent ofthe defendant in selecting the mark; and (8) likelihood that the parties will expandtheir product lines.) Given the nature of counterfeit product, several of thesefactors weigh strongly in favor of confusion, not limited to (1), (2), (3), (5) and (6)

most of which are also satisfied through visual comparison of the counterfeitgoods with authentic merchandise.94 ER AKA00075-00076.95 Karl Storz Endoscopy-Am., Inc., 285 F.3d 848, 854 (9th Cir. 2002). Thoughunnecessary in light of the uncontested and obvious copying at issue here, a jurydetermination based on observation is clearly contemplated by Sleekcraft, 599 F.2dat 348-49. The law in the Ninth Circuit is clear that post-purchase confusion,i.e., confusion on the part of someone other than the purchaser who, for example,simply sees the item after it has been purchased, can establish the requiredlikelihood of confusion under the Lanham Act. Karl Storz Endoscopy-Am., Inc.,

285 F.3d at 854 citing Academy of Motion Picture Arts & Sciences v. CreativeHouse Promotions, Inc., 944 F.2d 1446, 1456 (9th Cir. 1991); Levi Strauss & Co. v.Blue Bell, Inc., 632 F.2d 817, 822 (9th Cir. 1980). Confusion of non-purchasersobserving the infringing item is no less injurious to the trademarkowners reputation than confusion on the part of the purchaser at the time of sale.Karl Storz Endoscopy-Am., Inc., 285 F.3d at 854 citingPayless Shoesource, Inc. v.Reebok Intl Ltd., 998 F.2d 985, 989-90 (Fed. Cir. 1993).



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was soundly supported by the evidence. The error raised by Appellants simply did

not exist or was harmless at best.

Defendants assertion that the record does not evidence the use of certain

trademarks in specified classes of goods does a disservice to the hard work of the

jury. It is based on an inaccurate and incomplete review of the record. Several

questions raised during deliberations demonstrate the jury carefully combed the

record to confirm infringement of the numerous uncontroverted marks introduced

into evidence. ER AKA00055-00067. Defendants contention that specified

trademarks were not used in specified classes is contradicted by a review of the

record as careful as that done by the jury: For example, (1) see SER LV673, 798

for examples of counterfeit uses of the mark registered as number 275,345 in

handbags; (2) SER LV1112 for an example of mark numbered 1,770,131 in

headgear; (3) SER LV860, 863, 878-879 for examples of mark 1,990,760 in

watches. Examples of other uses the Defendants could not locate but the jury

could are cited in the margin.96

Applying the settled law of the Ninth Circuit, and applying it to the business

of Internet web-hosting, the Court correctly instructed the jury and the jury arrived

at an appropriate result amply supported by the record.

96 Other Exhibits which evidence use in specific classes overlooked by theDefendants include SER LV661, 754, 789, 797, 798, 805, 851, 859, 863, 865, 954,1084-1112 .



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6. Intent is Not an Element of Contributory TrademarkInfringement.

Appellants claim that the Court should have instructed the jury on intent, in

addition to the well-settled elements described in the cases cited above. In doing

so, Appellants confuse distinct legal claims governing secondary liability. Louis

Vuitton asserted no claim based on contribution by inducement. Liability for

inducement requires a finding of intent. Liability based on contribution to the

underlying direct infringement requires only notice. Thus, Appellants arguments

about intent are irrelevant and properly disregarded.97

Inducement is a distinct legal claim. As noted above, Inwood clearly and

unambiguously used the word or to separate the two bases for contributory

trademark infringement, with only inducement requiring intent. Inwood, 456 U.S.

at 854.

Further, the Court did not require the contributory infringer to supply its

service to the direct infringer but to one who is engaging in trademark

infringement. Id.; see also Lockheed, 194 F.3d at 983 (Contributory

infringement occurs when the defendant supplies a product to a third party with

actual or constructive knowledge that the product is being used to infringe the

97 Moreover, in view of the jurys separate finding of willfulness in findingheightened statutory damages under both Trademark Act and Copyright Act, anyerror in instructing on intent was clearly harmless insofar as such intent was foundby the jury in awarding statutory damages.



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service mark.).98 Here, whether or not one accepts Defendants vague,

amorphous and contradictory evidence about the alleged intermediate resellers,

Defendants were, nonetheless, providing the means by which the direct infringers

were able to access the global marketplace offered up by the Internet.

Appellants then cite contributory copyright infringement cases, further

confusing the issue,99

arguing that [e]very appellate decision finding contributory

liability in an online context has found intent by the defendant to contribute to

infringement.100

This is wrong. In Napster, for example, this Court noted that knowledge, not

intent, was required for contributory liability. 239 F.3d at 1020 (Contributory

liability requires that the secondary infringer know or have reason to know of

direct infringement) (citing Cable/Home Communication Corp. Network

Prods., Inc. (Cable/Home), 902 F.2d 829, 845 & 846 n.29 (11th Cir. 1990);

Netcom, 907 F. Supp. at 1373-74 (framing the issue as whether Netcom knew or

should have known of the infringing activities).

Like Napster, Defendants had actual knowledge; they were given repeated

notice of numerous websites, many of which were available long after notification

98 These cases clearly show there is no requirement of a direct relationshipbetween the contributory infringer and the underlying direct infringer, and the factsof this case illustrate why it would be wrong to do so. Defendants cannot purportto create an imaginary middleman to avoid liability.99 Opening Brief, pp. 23-24.100 Opening Brief, p. 23.



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by Louis Vuitton, and in some instances, still accessible at the time of trial.101

Napster does not support Appellants arguments.

Aimster is equally unhelpful because it did not impose a requirement of

intent but instead endorsed the sufficiency of willful blindness to satisfy

constructive knowledge required for liability. 102 In re Aimster Copyright

Litigation, 334 F.3d 643, 650 (7th

Cir. 2003). Here, the evidence was that

Defendants were more than willfully blind, and certainly not less so.

Appellants reliance on Grokster is also unfounded, since Grokster

specifically noted that it did not address liability under all contributory theories but

only under the plaintiffs inducement claim, which is irrelevant here. Grokster,

545 U.S. at 934. There was, therefore, no error as the jury was correctly instructed

on the requirement of knowledge, which was proved at trial.

101 See footnote 66.102 We also reject Aimsters argument that because the Court said in Sony that

mere constructive knowledge of infringing uses is not enough for contributoryinfringement, and the encryption feature of Aimsters service prevented Deep fromknowing what songs were being copied by the users of his system, he lacked theknowledge of infringing uses that liability for contributory infringement requires.Willful blindness is knowledge, in copyright law (where indeed it may be enoughthat the defendant shouldhave known of the direct infringement). In re AimsterCopyright Litigation, 334 F.3d at 650 (internal citations omitted).



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7. The Staple Article of Commerce Doctrine is Inapplicable.Appellants confusion of distinct theories of liability is compounded by their

assertions based on the staple article of commerce doctrine.103 This doctrine

requires intent only when knowledge is absent, e.g. where one sells an item with

substantial lawful as well as unlawful uses. It has never been applied in the

trademark context. Even if the doctrine were to apply to contributory trademark

infringement claims, it would not be applicable here, since Defendants had actual

knowledge of the infringing acts of their customers.104

The staple article of commerce doctrine protects only against imputing

culpable knowledge or intent to a defendant who merely distributes a product or

provides a service that is capable of substantial non-infringing use. Grokster, 545

U.S. at 934-935.

Where evidence of actual knowledge exists, the staple article of commerce

safe harbor does not shield a defendant. Id.; see also Napster, supra, 239 F.3d at

1021) (citing Netcom, 907 F. Supp. at 1374 (N.D. Cal. 1995); Arista Records LLC

v. USENET.com, 633 F. Supp. 2d 124, 158 (S.D.N.Y. 2009) (The Court need not

resolve this apparently difficult question, as it has already been determined that

Sonys staple article of commerce doctrine does not provide Defendants

immunity, as they maintain an ongoing relationship with their users.).

103 Opening Brief, p.24.104 See footnote 34.



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This Court has also expressly rejected application of the doctrine to cases

involving the ongoing provision of services. Napster, 239 F.3d at 1021.

Appellants supply a package of goods and services that demonstrates ongoing

involvement consistent with the reasoning of this Court in Napster. Because of the

nature of their businesses and the overwhelming evidence of constructive and

actual knowledge, the staple article of commerce doctrine is inapplicable.

B.The Facts Evidencing Defendants Contributory TrademarkInfringement Support the Jurys Finding of Liability for

Contributory Copyright Infringement.

This Court has consistently found contributory copyright liability on facts

similar to those present here. Liability is appropriate if a computer system

operatorhas actual knowledge that specific infringing material is available using

its system, and can take simple measures to prevent further damage to copyrighted

works, yet continues to provide access to infringing works. Amazon, 508 F.3d at

1172 (citations omitted); see also Napster, 239 F.3d at 1021 (9th Cir. 2001) (in the

context of a provider of Internet access or services, if a computer system operator

learns of specific infringing material available on his system and fails to purge

such material from the system, the operator knows of and contributes to direct

infringement, finding liability for knowledge, assistance and failure to block

access to infringing content); see also Netcom, 907 F. Supp. at 1374 (finding



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electronic bulletin board operator contributorily liable for failing to delete an

infringing post).

The applicable standard correctly applied by the District Court is that a

defendant may be liable for contributory copyright infringement if it knew of the

infringing activity and induced, caused, or materially contributed to the infringing

conduct of another. Amazon., 508 F.3d at 1171. To satisfy the first element,

knowledge, a contributory infringer must possess actual or constructive knowledge

of the direct infringement. Napster, 239 F.3d at 1020 (Contributory liability

requires that the secondary infringer know or have reason to know of direct

infringement.) (citing Cable/Home, 902 F.2d at 845 & 846 n.29); Netcom, 907 F.

Supp. at 1373-74 (framing issues as whether Netcom knew or should have known

of the infringing activities). The trial court instructed on both knowledge and

material contribution.

On its face, there was no error on the instruction of knowledge. The Ninth

Circuit Model Civil Jury Instruction includes the knew or should have known

language pursuant to well-established case law.105 The District Courts instruction

explicitly included the knew or should have known standard.106

105 Ninth Circuit Manual of Model Jury Instructions, Instruction No. 17.21Derivative Liability - Contributory Infringement.106 ER AKA00079:16-18.



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The District Court correctly framed the instruction on the material

contribution to describe the Defendants goods and services consistent with the

examples from controlling authority and common sense.107 The finding of liability

based on Defendants business of knowingly providing server capacity to

customers engaged in infringing activity is consistent with the Ninth Circuits

finding of liability in the case of one who knowingly provides the site and

facilities for the underlying infringement. Visa, 494 F.3d at 798-99. Thus, it

upheld liability in Fonovisa, 76 F.3d at 264, where the flea market proprietor

provided the environment for sales to thrive. Likewise, in Napster, 239 F.3d at

1022, Napster was found to have materially contributed to users direct

infringement by providing site and facilities for that infringement. As for Visa

itself, this Court noted that (unlike Defendants here) Visadid not maintain the

servers on which infringing websites reside. 494 F.3d at 800. Instead, it merely

provided transaction-by-transaction payment processing services. Id. Here,

Defendants did maintain the servers and the trial courts instructions were tailored

to those facts.

The jurys separate affirmative findings on the elements for contributory

copyright liability satisfy the applicable law. Based on the evidence, the jury

found that the websites used Defendants goods and services to infringe and were

107 ER AKA00079:11-22.



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allowed to continue doing so despite notice. A negative answer would have

exonerated Defendants, but the jury answered affirmatively. The instructions

appropriately reflected the circumstances of this case, and a contrary verdict was

possible if the jury had believed the Defendants presentation. They simply did

not.

C.The Jurys Award of Statutory Damages Within the Range Specifiedby Statute Are Appropriate and the Amounts Are Entitled to Great

Deference.

Statutory damages are properly awarded for claims of contributory

trademark infringement and contributory copyright infringement. The jury was

properly instructed on the potential ranges of statutory damages and the

considerations that apply to assessing them. As a contributory infringer, each of

the Defendants is jointly and severally liable with each of the underlying direct

infringers whose conduct they each enabled. The jury was appropriately instructed

and asked to render a verdict substantially in the form proposed by Defendants.

They found the Defendants conduct willful and rendered a verdict well within

congressionally mandated limits. Those awards should not now be disturbed on

appeal.

1. Defendants Are Jointly and Severally Liable for Damages with theUnderlying Direct Infringers.

A defendant who is contributorily liable is jointly and severally liable for the

damages awarded for any underlying infringement. Fonovisa, 76 F.3d at 264



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(contributory liability is founded in common law tort and a contributory infringer

is jointly and severally liable with the prime tortfeasor); Crystal Semiconductor

Corp. v. Tritech Microelectronics Intl, 246 F.3d 1336, 1361 (Fed. Cir. 2001)

(contributory patent infringement) citing Hewlett-Packard Co. v. Bausch & Lomb

Inc., 909 F.2d 1464, 1469, 15 U.S.P.Q.2D (BNA) 1525, 1528 (Fed. Cir. 1990).

Under the Lanham Act, a wronged plaintiff is entitled to disgorgement of the

defendants profits and collection of any damages sustained by the plaintiff as well

as the costs of the action. 15 U.S.C. 1117(a). Alternatively, [i]n a case

involving the use of a counterfeit markin connection with the sale, offering for

sale, or distribution of goods or services, the plaintiff may electto recover,

instead of actual damages and profits under subsection (a), an award of statutory

damages for any such use in connection with the sale, offering for sale, or

distribution of goods or services. 15 U.S.C. 1117(c). Louis Vuitton elected

statutory damages.

The jury found Defendants liable for contributory trademark infringement,

and Louis Vuitton elected to pursue statutory damages for its claims. Thus,

Defendants are jointly and severally liable for the direct infringement with the

underlying infringers. Appellants assertions that the requisites for an award of

statutory damages were not proved are unconvincing and contrary to controlling

authority and basic principles of contributory liability.



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2. The Jurys Assessment as to Each Defendant was supported bythe Record and Is Entitled to Great Deference.

[A] jurys award of damages is entitled to great deference. Henry v.

Lehman Commer. Paper, Inc., 471 F.3d 977, 1001 (9th Cir. 2006). The applicable

standard when reviewing an award of statutory damageswithin the allowed range

is even more deferential than abuse of discretion. Broadcast Music, Inc. v. Star

Amusements, Inc., 44 F.3d 485, 487 (7th Cir. 1995). The employment of the

statutory yardstick, within set limits, is committed solely to the court which hears

th

Documents

2010_10_12 LV Cross Brief Conformed (#16)