Last Friday, August 28th, a jury in the Northern District of California, awarded French luxury goods maker, Louis Vuitton Malletier (part of LVMH), $32.4 million in statutory damages for its claims of contributory copyright and trademark infringement.   The amount awarded -- $31.5 million for contributory trademark infringement and $900,000 for contributory copyright infringement -- was certainly newsworthy standing alone.  But really what pushes this case to the top of the IP headlines is that the defendants held liable here -- Akanoc Solutions and Managed Solutions Group, Inc -- are Internet Service Providers (ISP) (and their primary -- Stephen Chen). 

Many a case has been brought against an ISP by a plaintiff trying to hold that ISP liable for the acts of its users.  I could be wrong, but I believe this is the first case where an ISP was held liable for the acts of its users.  For one reason or another these other ISPs and hosting sites have been able to escape liability.  But that was not to be the case here.  Through internal emails, Plaintiff LV was able to demostrate that the ISPs knew of the counterfieting taking place on the sites they hosted but took no action.  The jury agreed with LV that the ISP defendants should be liable because they knew of the large amounts of counterfeiting of LVMH product taking place on their sites and failed to take proper action to stop it.

The case began with a complaint filed back in 2007 in which LV claimed that "most if not all" of the sites hosted by Akanoc were trafficking in counterfeit goods.  About two years later, the jury awarded almost all of $1 million in damages requested for each of LV's fifteen trademark infringement claims against each of the three defendants. The copyright award was $150,000 for each of two copyrights against three defendants for a total of $900,000.

Although motions are still pending in the case, the amount of damages ordered by the jury should send a strong signal that ISPs must actively enforce their terms of use and effectively disable or remove content the subject of abuse notices from rights owners.  This case proives that an ISP that knows of an infringement and fails to take quick and effectuve action to remove the infringement from its site runs the risk of incurring a large damage award and serious damage to its business reputation as a result.