Brandy Melville fails to secure permanent injunction in Ninth Circuit’s first ever contributory infringement ruling

In YYGM SA, DBA Brandy Melville v Redbubble Inc (case numbers 21-56150; -56236 Ninth Circuit, 24 July 2023) the US Court of Appeals for the Ninth Circuit addressed contributory trademark infringement for the first time, finding that specific knowledge is required for liability. 

Brandy Melville manufactures clothing and home goods and owns multiple trademarks – including the BRANDY MELVILLE HEART and LA LIGHTNING marks. Redbubble is an online marketplace where individual artists upload designs for printing on demand onto various articles; Redbubble handles payment, manufacturing and shipping.

In 2018, on two consecutive days, Brandy Melville notified Redbubble of infringing products on its marketplace, which Redbubble removed. One year later, Brandy Melville sued Redbubble for trademark infringement.

The district court granted summary judgment to Redbubble on several of its claims, and the case then went to trial on Brandy Melville’s contributory infringement and counterfeiting claims. The jury found Redbubble liable for contributory counterfeiting of the BRANDY MELIVILLE HEART and LA LIGHTNING marks and contributory infringement of those marks, as well as of various unregistered trademarks.

However, the court granted Redbubble judgment as a matter of law (JMOL) with regard to the contributory counterfeiting claim for the HEART mark. Brandy Melville moved for a permanent injunction, attorneys’ fees and prejudgment interest. The district court denied all of these motions.

Redbubble appealed the denial of JMOL on contributory infringement claims and the finding of wilful contributory counterfeiting of the LA LIGHTNING mark. Brandy Melville appealed the grant of JMOL on contributory counterfeiting of the BRANDY MELVILLE HEART mark and the denial of permanent injunction, attorneys’ fees and prejudgment interest.

A first for the Ninth Circuit

Addressing Redbubble’s appeal, the Ninth Circuit considered both contributory infringement and contributory counterfeiting together. The issue of the applicable standard in question of contributory liability was novel for the Ninth Circuit. The Lanham Act provides a cause of action when a party intentionally induces trademark infringement or continues to supply products to a third party despite knowing or having reason to know that the third party is engaging in infringement. This case dealt with the latter.

In other contexts, the Ninth Circuit has applied the ‘knows or has reason to know’ standard as satisfying the wilful blindness (in lieu of actual knowledge) element. Wilful blindness requires a subjective belief that infringement is likely occurring and deliberate actions were taken to avoid learning of it. While Redbubble argued that wilful blindness requires specific knowledge, Brandy Melville claimed that there is a duty to take reasonable corrective action once a party obtains general knowledge of infringement.

The court noted that for contributory copyright infringement, specific knowledge is not required. In keeping with its sister circuits, it held that “willful blindness for contributory trademark liability requires the defendant to have specific knowledge of infringers or instances of infringement”. The court, therefore, vacated and remanded for the district court to reconsider Redbubble’s JMOL motion under this standard.

The Ninth Circuit next considered Brandy Melville’s appeal, beginning with the district court granting Redbubble’s JMOL on its BRANDY MELVILLE HEART mark counterfeiting claims. The district court had found that Brandy Melville failed to show legitimate products that matched the allegedly infringing ones. The Ninth Circuit held that the district court erred in “glossing over” whether the marks in question were so strong as to lead to customer confusion, regardless of the type of product they appeared on. The Lanham Act “does not require counterfeit goods to be exact replicas of existing merchandise”. Accordingly, the court vacated and remanded for reconsideration under the correct likelihood-of-confusion test.

Next, the Ninth Circuit considered the denial of permanent injunction, attorneys’ fees and prejudgment interest. The Lanham Act creates a rebuttable presumption of irreparable harm, which is one prong that a plaintiff must prove to receive a permanent injunction. Here, the court found that the district court erred in finding that the delay in filing litigation wholly undercut this presumption. As the court noted, while such a delay is relevant, it is just one factor.

With regard to prejudgment interest, Brandy Melville had elected statutory damages under Section 1117(c) and prejudgment interest under Section 1117(a) of the Lanham Act. The district court denied prejudgment interest because these provisions do not provide for such an award. The Ninth Circuit explained that the rationale underpinning statutory damages is that, unlike actual damages, they broadly contemplate the plaintiff’s compensation, the defendant’s penalty and deterrence of future wrongdoing. The court explained that allowing a plaintiff to receive both statutory damages and prejudgment interest would “inflate the amounts disproportionate to what Congress thought fit to remedy those harms”. Because Brandy Melville had elected statutory damages, it was not entitled to prejudgment interest. Therefore, the court vacated and remanded the permanent injunction and attorneys’ fees denial but affirmed the denial of prejudgment interest.

Looking ahead

While we await further guidance on the application of the knowledge standard on remand, parties looking to sue online marketplaces for contributory trademark infringement should be prepared to show the marketplace’s knowledge of specific instances of infringement.