Seattle Trademark Lawyer

On July 3, the Ninth Circuit affirmed the Northern District of California’s dismissal of Perfect 10, Inc.’s secondary trademark liability claims against Visa International Service Association and affiliated banks and data processing services.

Perfect 10 publishes the magazine “PERFECT 10” and operates the subscription Web site www.perfect10.com, which it claims features “tasteful copyrighted images of the world’s most beautiful natural models.” Perfect 10 claims copyrights in the photographs published in its magazine and on its Web site, federal registration of the PERFECT 10 trademark, and blanket publicity rights for many of the models appearing in the photographs. It alleges that numerous Web sites based in several countries have stolen its proprietary images, altered them, and illegally offered them for sale online. Instead of suing the direct infringers, Perfect 10 sued the defendant financial institutions that process credit card payments to the allegedly infringing Web sites.

In December 2004, the Northern District of California granted the defendants’ motion to dismiss plaintiff’s claims, which Perfect 10 appealed. With respect to Perfect 10’s trademark claims, the Ninth Circuit found as follows:

“To be liable for contributory trademark infringement, a defendant must have (1) ‘intentionally induced’ the primary infringer to infringe, or (2) continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied. When the alleged direct infringer supplies a service rather than a product, under the second prong of the test, the court must ‘consider the extent of control exercised by the defendant over the third party’s means of infringement. For liability to attach, there must be ‘[d]irect control and monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark.’”

The Ninth Circuit concluded Perfect 10 failed to plead a viable claim under either prong of the test. “First, it has not pled facts showing that Defendants ‘intentionally induced’ infringement of Perfect 10’s mark. …”

“Second, Perfect 10 has failed to allege facts sufficient to show ‘[d]irect control and monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark. Perfect 10 claims that the ‘product’ or ‘instrumentality’ at issue here is the credit card payment network through which Defendants process payments for infringing material. As discussed at length above [in connection with the court’s analysis of plaintiff’s copyright claims], this network is not the instrument used to infringe Perfect 10’s trademarks; that infringement occurs without any involvement of Defendants and their payment systems. Perfect 10 has not alleged that Defendants have the power to remove infringing material from those websites or directly stop their distribution over the Internet. At most, Perfect 10 alleges that Defendants can choose to stop processing payments to these websites, and that this refusal might have the practical effect of stopping or reducing the infringing activity. This, without more, does not constitute ‘direct control.’”

The Ninth Circuit also affirmed dismissal of Perfect 10’s claim for vicarious trademark infringement because defendants’ relationship with the alleged infringers does not establish a “symbiotic” relationship or “joint ownership or control” for trademark purposes. In the Ninth Circuit’s words, “Defendants process payments to these websites and collect their usual processing fees, nothing more.”

Judge Alex Kozinski disagreed with these conclusions. In his dissent, he wrote: “Without defendants’ payment systems, the infringers would find it much harder to peddle their infringing goods.” Therefore, he found that Perfect 10 had pled facts sufficient to state a claim for contributory trademark infringement.

As for vicarious trademark infringement, Judge Kozinski wrote: “plaintiff alleges that the Stolen Content Websites cannot operate without the use of credit cards, while defendants make huge profits by processing these illegal transactions. If this is not symbiosis, what is?” Based on this finding, he found the majority also erred in absolving defendants of vicarious trademark infringement.

The case cite is Perfect 10, Inc. v. Visa Int’l Svc. Ass’n, __ F.3d __, 2007 1892885, No. 05-05170 (9th Cir.).