Bursting the [Red]Bubble? Northern District of California Considers Online Retailer’s Scope of Liability for Copyright and Trademark Infringement

Written by Lillian Lee

On January 28, 2021, the U.S. District Court for the Northern District of California addressed an online retailer’s liability for copyright and trademark infringement arising out of its users’ submissions.  Atari Interactive, Inc. v. Redbubble, Inc., Case No. 4:18-cv-03451.  The court on cross-motions for summary judgment deferred on most issues, holding that Plaintiff Atari Interactive, Inc. (“Atari”) could proceed on some infringement claims but not others. However, the detailed opinion highlights some factual and legal nuances that brand-owners and platforms will want to consider in their enforcement and operations.

Atari makes and sells video games. Defendant Redbubble, Inc. (“Redbubble”) is an online retailer of products printed with user-submitted designs.  The Redbubble platform allows independent artists to upload their designs for sale.  The artist then selects the products on which the art may be printed and sold from a predetermined list that Redbubble provides.  Thereafter, Redbubble “undertakes at least four of the five steps necessary to complete a sales transaction: the artist uploads the art, but Redbubble manages the order, coordinates the creation of the goods, arranges for delivery, and handles all customer service issues, returns, and refunds.”

Contending that Redbubble advertised and sold products bearing Atari trademarks and copyrighted designs, Atari sued, claiming direct and indirect trademark and copyright infringement.  After discovery, both sides moved for summary judgment.

Direct Trademark Infringement

The district court first considered Atari’s claim for direct trademark infringement.  The parties’ dispute centered on whether Redbubble directly “used” Atari’s marks in commerce as required for direct infringement, or merely facilitated others’ use, which would leave indirect infringement as the only potential legal angle for Atari.

The court found that a disputed issue of fact existed.  First, the court departed from a recent decision in Ohio involving Redbubble, noting that (unlike with other platforms such as eBay or Amazon’s Marketplace), Redbubble, not the artists, manufactured and sold the physical product on which the marks appeared.  Second, even assuming that the artists owned the physical product, Redbubble could still sell those products as the artists’ agent.  Indeed, customers contracted with Redbubble, and not the artist.  Third, the court found that a factfinder “could conclude that either Redbubble or the artist was the offeror for the same reasons that they could conclude that either was the seller.” 

The court therefore denied Redbubble’s summary judgment motion on direct trademark infringement.  However, the court also denied Atari’s motion after concluding that a jury could find that Redbubble is merely a “transactional intermediary” that facilitates the creation of products at the user’s direction, as opposed to a direct seller.

Indirect Trademark Infringement

Atari also argued that Redbubble was vicariously liable based on direct trademark infringement by fulfillers, and contributorily liable based on direct infringement by artists.  Vicarious liability occurs where defendant and infringer have an “apparent or actual partnership, have authority to bind one another in transactions with third parties or exercise joint ownership or control over the infringing product.”  The court determined that Atari had introduced circumstantial evidence of Redbubble’s control over the appearance of the physical products but failed to show direct evidence of the relationship between Redbubble and fulfillers.  However, given the circumstantial evidence of Redbubble’s control, a reasonable jury could find it vicariously liable for trademark infringement. 

Next, the court found that genuine issues of material fact existed as to Atari’s request for judgment in its favor on its contributory infringement claim.  Relying on “the balance of authorities” suggesting “contributory infringement could occur when a service provider fails to take reasonable steps to prevent infringement while having general knowledge that such infringement is taking place,” as compared to a more narrow view taken by the Second Circuit, the court rejected Atari’s argument that Redbubble failed to take proper preventative actions.  Redbubble had shown that its Marketplace Integrity Team proactively screens for infringing content based on information received from content owners.  Nevertheless, the court found evidence of Redbubble knowingly allowing over 1000 repeat infringers to upload designs “significant” given the Ninth Circuit’s focus on knowledge that “users of [defendants’] services were engaging in trademark infringement.”  These numbers were enough in the court’s view to create issues for trial.

Direct Copyright Infringement

To establish direct copyright infringement claim, a plaintiff must (1) show ownership of the allegedly infringed material, (2) demonstrate that the alleged infringers violated at least one exclusive right granted to copyright holders under 17 U.S.C. § 106, and (3) show causation (also referred to as volitional conduct) by the defendant.  The court found Atari to have established the first two elements, but did not find sufficient evidence to establish the third element of volitional conduct.  Redbubble’s only “act” was “providing a system where artists can upload their designs for display on a picture of a product.”  Redbubble did not “select any material for upload, download, transmission or storage” (its users did), and did not exercise control beyond the general operation of its website, or instigate the display.  However, the court found a material issue of fact as to whether Redbubble was liable for “direct infringement of Atari’s copyright distribution rights.” 

Predictably, Redbubble argued that the DMCA’s safe harbor for “service providers” protected it against liability.  17 U.S.C. § 512(c).  To qualify for safe harbor, the service provider must make a threshold showing that the infringing material was stored “at the direction of the user.”  The court determined that Redbubble “actively participates in modifying the files uploaded by users to display the designs on Redbubble-selected physical products.”  Therefore, the images stored on Redbubble’s site were not stored “at the direction of the user,” and Redbubble was not entitled to Section 512(c) protection.

Indirect Copyright Infringement

Finally, the court concluded that Atari could not succeed on its claims for indirect copyright infringement.  Contributory copyright infringement requires a showing that the defendant “(1) has knowledge of another’s infringement and (2) either (a) materially contributes to or (b) induces that infringement.”  The court found that Atari did not establish the knowledge requirement as it provided no evidence that Redbubble knew of “specific infringing material” and failed to act to remove the listings following receipt of notice.

Vicarious copyright infringement requires showing that the defendant “has (1) the right and ability to supervise the infringing conduct and (2) a direct financial interest in the infringing activity.”  Redbubble only contested the first prong, showing evidence that it lacks the ability to monitor and stop infringing conduct, and that it requires cooperation from the content owner to determine whether particular content infringes.  The court agreed, stating that finding infringement for Redbubble would be like “searching for a needle in a haystack (where Redbubble lacks knowledge of needles’ appearance).” 

The decision adds to the growing body of law focusing on the scope of an online retailer’s liability for trademark and copyright infringement—a particularly key area as online platforms adopt new and diverse models for facilitating sales, and one that is finding its way through the courts, including in closely watched cases like Chanel’s lawsuit against The RealReal.  As physical stores continue to stay closed and online sales surge, brand owners and platforms will continue to face questions about where the lines are to be drawn between direct and indirect infringement liability.

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