Louis Vuitton Jury Verdict Reduced When Ninth Circuit Clarifies Damages Calculation

Louis Vuitton was awarded $21,000,000 in statutory damages for willful contributory trademark infringement and $600,000 in statutory damages for willful copyright infringement by the district court against two defendants following a jury trial.  On appeal in Louis Vuitton Malletier v. Akanoc Solutions, the Ninth Circuit affirmed the district court’s rulings on liability, but disagreed with the district court’s damages calculations and vacated and remanded the judgment.

Facts.  Louis Vuitton distributes luxury merchandise displaying its trademarks and copyrighted designs.  It discovered websites it believed were selling goods that infringed its trademarks and copyrights.  The websites listed email addresses that prospective customers could contact, but the websites did not sell merchandise directly.  Louis Vuitton determined that the Internet Protocol (IP) addresses used by the websites were assigned to Managed Solutions Group, Inc., (MSG) and Akanoc Solutions, Inc., based in San Jose, California. 

MSG leased servers, bandwidth and IP addresses to Akanoc Solutions, Inc.  Akanoc ran a web hosting business with these resources.  Both companies were managed by Steven Chen.  Louis Vuitton sent MSG, Akanoc and Chen at least eighteen Notices of Infringement, describing the trademark and copyright infringements and demanding the removal of the infringing content.  Louis Vuitton received no response and sued MSG, Akanoc and Chen for contributory copyright and trademark infringement.  Louis Vuitton determined that the direct infringers were in China.  From the court’s description of the facts, the website owners were the initial contributory infringers and the defendants were a second tier of contributory infringers.  The people who used their email addresses to conduct the infringing sales were the direct infringers.

The case went to a jury trial.  The jury found in favor of Louis Vuitton, awarding $10,500,000 against each of the three defendants for statutory damages for willful contributory trademark infringement of thirteen trademarks ($31,500,000 total on trademark) and $300,000 against each defendant for statutory damages for willful copyright infringement of two copyrights ($900,000 total copyright). 

Defendants moved for judgment as a matter of law following the verdict.  The district court granted MSG’s motion.  It concluded that the evidence did not show that MSG sold domain names or operated the servers.  The district court denied Akanoc’s and Chen’s motions, awarded statutory damages against them and permanently enjoined them from participating in similar conduct.  Akanoc and Chen appealed.  Louis Vuitton cross-appealed the district court’s order granting MSG’s motion for judgment as a matter of law.

The Ninth Circuit’s opinion addressed the cross-appeal, Akanoc’s and Chen’s motion for judgment as a matter of law, jury instructions and damages.  This blog post discusses the damages calculations.

Copyright Damages Calculation.    17 U.S.C. §504(c)(1) describes statutory damages:

[T]he copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just.

The statutory maximum for willful copyright infringement under 17 U.S.C. §504(c)(2) is $150,000, but the jury awarded $300,000 per defendant for willful contributory copyright infringement on two Louis Vuitton copyrights.  The district court did not think this award violated the statutory maximum, since it worked out to $150,000 per copyright per defendant.  The district court did not specify whether the defendants were separately liable or jointly and severally liable.

The Ninth Circuit stated:

[W]hen statutory damages are assessed against one defendant or a group of defendants held to be jointly and severally liable, each work infringed may form the basis of only one award, regardless of the number of separate infringements of that work.

(Opinion pdf page 15).

The Ninth Circuit pointed out that “there was no legal basis for multiplying the award by the number of defendants.”  (Opinion pdf page 16).  Copyright statutory damages maximums are calculated based on the number of protected works, not the number of defendants.  The district court’s award was $600,000 for two works, twice the $150,000 per work statutory maximum.

Trademark Damages Calculation15 U.S.C. §1117(c)(2) sets out the statutory maximum for willful trademark infringement involving counterfeit marks.

if the court finds that the use of the counterfeit mark was willful, not more than $2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just.

The statutory maximum changed from $1,000,000 to $2,000,000 while the case was pending and the parties agreed that the $1,000,000 maximum would apply.  The jury award of $10,500,000 per defendant was for the willful contributory infringement of thirteen marks.  The district court did not think this award violated the statutory maximum, either, as it worked out to $807,692 per trademark per defendant.

The Ninth Circuit applied the same reasoning to the trademark award as it did the copyright award, indicating that “15 U.S.C. §1117(c) entitles a plaintiff to anaward, not multiple awards.”  (Opinion pdf page 16).  The award of $10,500,000 per defendant exceeded the statutory maximum.

The Ninth Circuit determined that a new trial on the issue of damages was not necessary, as the jury intended each defendant to be liable for the same amount of damages.  The court ruled that the jury award should be enforced against Akanoc and Chen by making them jointly and severally liable for a single trademark damages award and a single copyright damages award.

This case is Louis Vuitton Malletier v. Akanoc Solutions, Inc., No. 10-15909.

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