Forums: Discussions for entrepreneurs and small business.

If you have trademark or copyright registrations, it must be frustrating to see others copying you.  One company [Perfect 10, Inc.] got tired of it.  Perfect 10 got so tired of it they sued the credit card companies because they continued to process credit card payments to websites that infringe Perfect 10’s intellectual property rights after being notified by Perfect 10 of infringement by those websites.

 

Ultimately, Perfect 10 lost but we’ve got to give them full credit for creativity and raw guts for suing Visa and Mastercard on trademark and copyright infringement by processing credit card payments to websites that infringe Perfect 10’s intellectual property rights.  Perfect 10 publishes the magazine “PERFECT10” and operates a subscription website, both of which “feature tasteful copyrighted images of the world’s most beautiful natural models.”  Instead of suing the direct infringers in this case, Perfect 10 sued the financial institutions that process certain credit card payments to the allegedly infringing websites.

 

-------------------------

James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

So why did they lose?

That sounds perfectly legit to me ... Mastercard and VISA were basically transacting money for illegal goods, and they should have some accountability, no? I mean, if they were warned and did nothing ... a law suit sounds legit to me.

What about the gateways? Are they somehow responsible for this too? For processing the payments?

And the merchants themselves?

And might I laugh a little that you ... er ... failed to mention the content of the magazine?

As a devil`s advocate ... they are honestly suing everyone. They want to complain to Google because the images show up on a Google Image search. They don`t like the images on wallpapers for downloading and such. They seem to be ... I don`t know, fighting technology instead of working with it.

In legal-ease, perfect 10 "failed to state a claim."  In other words, the credit card companies did what they are accused of, it`s just not legally actionable.  The connection between the infringment and credit cards was just too thin.  In other words, you can`t sue the electric company just because the infringers were using electricity at the time of the copying and can`t sue car comany just because infringers were driving a car at the time, etc...

It would be HUGE to be able to sue a credit card company everytime somebody did something bad that could be traced back to a credit card being used.  It would make the credit card companies liable for a LOT that they really can`t control.  Basically, credit cards would no longer exist with such a system - IMHO.  Can you sue the credit card company if somebody uses a credit card to buy a knife which is used to stab somebody?  Interesting approach, but not realistic.

-------------------------

James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

I was thinking of it more like a landlord.

Landlord rents out a place, people doing bad things in that apartment, neighbors complain to landlord. Landlord does nothing. Crime still going on, is landlord partly liable?

This happens with hosting too ... someone claimed Perez Hilton`s blog was posting copyrighted pictures. They complain to the host ... host immediately drops Perez Hilton without warning because they don`t want the liability.

So if people are "stealing" and "posting" copyrighted imagery, which seems to be this magazine`s biggest complaint, then probably the route to go is complain to the host.

I think that your "buy a knife" scenario is not applicable here, because of this part which you stated earlier:
"because they continued to process credit card payments to websites that infringe Perfect 10’s intellectual property rights after being notified by Perfect 10 of infringement by those websites"
A better comparison is if Chase Bank issued a Mastercard to John Smith. John Smith then used his Mastercard to purchase guns legally. He then deserialized them and resold them illegally, for a premium. If multiple complaints about John Smith were made to Chase Bank and they chose to look the other way ("John Smith pays his bills on time every month so he`s a good customer!") instead of reporting this to the authorities and/or canceling the credit they extended to him ... then yes, at some point (which is probably up to a jury to decide) they become liable for the crime being committed.

Most companies would rather just bow down and drop a potentially criminal customer rather that risk the PR nightmare. But in this case ... probably because the content of the magazine ... the PR stays out of the equation. You`d bet if this was Barbie toys or Ansel Adams photographs, all the major news outlets would gladly pick this story up.

I think their issue with Google and the thumbnail pictures is highly worth a discussion too ... the issue being that the magazine/site sells thumbnail-sized images for cell phone use, so Google is infringing.

It is ALSO noteworthy however ... how many people they have sued. Credit cards, Google, Amazon ...

The credit card companies are not in a position to monitor the content of any transaction.  How are they to know whether any particular transaction is fraudulent or unlawful?  To really intervene, they would have to assume that ALL transactions to/from a particular party were ALWAYS fraudulent or unlawful.

In your Hosting example, the host has some access to the content when it is posted.  What does the credit card company know at the time of sale?  The parties and the amount to be charged - that`s pretty much it.  They can`t really know if THIS purse that is being paid for is authentic.

-------------------------

James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

In Ohio, Landlords` liability is limited to portions of the rental property where they had some sort of access and control.  There have been some dog bite type cases where the landlord and tenant both got sued.  Where the landlord stores things on the property or jointly uses the land with the tenant, landlord is more likely to be on the hook. 

By analogy, most credit card companies will have very little access and control over the goods/services being bought/sold.  There may be some very limited set of facts out there to give liability, but most courts are probably going to be really hesitant to go down that road.

-------------------------

James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com