Minka Lighting, Inc. v. Bath Kitchen Decor, LLC, No. ED CV 13-02370, 2015 WL 12743863 (C.D. Cal. Feb. 13, 2015)
Minka sells ceiling fans, lighting products, and home accessories. It exclusively uses (or tries, as the facts show) about 2000 authorized distributors, who resell to consumers. It has registered copyrights in product photos as well as registered trademarks in various terms such as MINKA LAVERY for electric lighting fixtures.
Defendant Krayzman began selling ceiling fans and lighting products, using a merchant account owned/operated by defendant Tropper to process credit cards. The two formed BKD, a limited liability company, which offered numerous Minka products for sale on its website, at prices lower than the prices offered by Minka’s authorized distributors. “BKD’s website displays Plaintiff’s copyrighted photographs of its products, as well as Plaintiff’s trademarks.”
Minka demanded that BKD cease and desist using its copyrighted images and trademarks on its websites. BKD didn’t respond, but removed the images after its ISP threatened to shut the website down, though it didn’t remove the images from a related website, as the ISP for that site did not make a similar threat. Defendants then created a new company and displayed the same copyrighted images on a website for the new company, and sold Minka’s products through that site as well.
The court found copyright infringement in the product photos. Defendants’ fair use defense failed because the use wasn’t transformative—it was for the same purpose as the original—and it was commercial. The photos were creative but already published (at best neutral); the entire amount was used; and the commerciality of the nontransformative use justified a presumption of market harm, which defendants didn’t rebut. The fact that using the photos might have encouraged more sales of Minka products didn’t change the effect on the market value of the photos. (The court, unfortunately, didn’t address whether authorized distributors actually paid anything to Minka for their own uses and thus whether there was, in fact, a market value above zero.) Thus, the court found BKD and Krayzman liable for copyright infringement.
The court rejected individual liability for Tropper. Vicarious liability exists when a person “ ‘has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities.’ ” Tropper was involved in organizing BKD, and signed the lease for BKD’s office space. He was also heavily involved in setting up BKD’s finances. But there was no evidence that he was involved in managing BKD, and thus lacked the right and ability to supervise the infringing activity. Tropper told Krayzman “to make sure not to sell any product in a way in which companies were telling him not to.” Also, “numerous times, [Tropper] told [Krayzman] that he should not sell below MAP” - the minimum price set by manufacturers - “or not sell the Minka products.” At his deposition, Tropper stated that as far as the Minka products were concerned, Krayzman “certainly did not listen to [him].” Although he was copied on sales order confirmation emails sent from BKD’s website, and he was copied emails regarding the placement of large orders with distributors. But he didn’t monitor the amounts debited or withheld from BKD’s accounts by lending institutions, “thus indicating a limited role in the ongoing management of the company’s financial operations.” And Krayzman did all of the marketing for BKD, including putting up the websites. As a matter of law, Tropper wasn’t vicariously liable for copyright infringement. Nor was there evidence supporting direct liability.
Trademark claims: here things go a bit off the rails. On nominative fair use, defendants showed that they used the marks to refer to the trademarked goods. In the 9th Circuit, the plaintiff must then show that the use of the mark wasn’t nominative fair use. Defendants showed that they had genuine goods to sell. But, “[b]ecause the likelihood of confusion is often a fact-intensive inquiry, courts are generally reluctant to decide this issue at the summary judgment stage.” And there were factual issues on the second and third elements of nominative fair use. Defendants might have used more than what was reasonably necessary; although they mostly displayed no more than the marks themselves, there was one webpage that contained the “Minka Lavery” logo alongside logos for six non-Minka companies. “While widespread use of such logos might result in a finding in Plaintiff’s favor, the Court cannot find as a matter of law that, based on this one instance, the second element of the nominative fair use test is not met.”
The third factor, whether the websites suggested sponsorship or endorsement by Minka, was “even more fact-intensive.” Minka suggested that a statement on the website that if a customer would like to expedite his or her order, s/he could call to “inquire about product lead time and availability,” and BKD “may be able to have [the product] shipped to [the customer] from the manufacturer” suggested sponsorship or endorsement. [How? The court did not explain how the ability to order from a manufacturer indicates anything other than the ability to order from a manufacturer.] Defendants pointed out that the presence of products from a number of manufacturers would clearly indicate that consumers weren’t buying from the manufacturer, but the court declined to resolve the factual dispute.
Making matters worse, the court treated first sale as an independent defense and held that first sale only covers the marks actually applied to the goods—not references to the goods for sale on a website: “The doctrine’s focus on goods ‘bearing a true mark’ indicates that it applies to trademarks appearing on the products themselves, as distinct from the website used to sell the products.” So how are you supposed to tell people what you have for sale? Can you show pictures of what you have for sale, if the mark is applied to the goods in the pictures?
Tropper, at least, wasn’t individually liable for trademark infringement, because the standard for vicarious liability is more stringent for everything but copyright. So too with the trademark counterfeiting (!) claim, intentional interference claims, and UCL claims (where the California Court of appeal has held that vicarious liability just doesn’t exist).