Payment Provider Liability for Contributory Trademark Infringement

In Gucci America, Inc. v. Frontline Processing Corp., No. 09 Civ. 6925 (HB) (S.D.N.Y. June 23, 2010), a New York court denied a motion to dismiss contributory trademark infringement claims brought against the defendant credit card processing companies by Gucci. The court held that credit card processing companies may be held liable for contributory trademark infringement under the relevant Supreme Court test. See Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U. S. 844 (1982).

The court held that defendants (and others) who provide service to websites that sell counterfeit goods can be liable if the plaintiff can show that they:

(1) intentionally induced the website to infringe through the sale of counterfeit goods; or (2) knowingly supplied services to websites and had sufficient control over infringing activity to merit liability.

The court’s decision relied on the “willful blindness” standard set forth in Tiffany v. eBay, 600 F.3d 93 (2d Cir. 2010) and distinguished the Ninth Circuit’s decision in Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788 (9th Cir. 2007) due to the fact that in this case, unlike in Perfect 10, the infringement relied on credit card services because the infringement was based on the sale of tangible counterfeit products.

This and other recent cases highlights the need for credit card companies and other payment providers to carefully assess the steps they can and should take to limit liability for trademark infringement and other liabilities.