Jury holds web host liable after site sold counterfeit golf clubs

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By FRED HORLBECK, Senior Staff Writer

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A federal jury has awarded damages in a trademark-infringement action against an Internet company for helping to build and host a South Carolina website that sold counterfeit golf clubs.

In what lawyers say may be a first nationwide, Roger Cleveland Golf Co., Inc., of Huntington Beach, Calif., won $770,750 in statutory damages against Bright Builders, Inc., of Utah for contributory trademark infringement and unfair trade practices.

The jury also held Prince Distribution, the website’s owner, liable for $28,250 in statutory damages for unfair practices and trademark counterfeiting and infringement, according to court documents.

Lawyers for the plaintiff said they believe the case is the first where a jury found liability for an Internet intermediary that hadn’t first received actual notification of counterfeit sales by a third party.

Intermediaries include companies that design websites, host them or provide search and optimization services, said Jeffrey Patterson, a Columbia lawyer who represented the plaintiff.

The jury agreed with the plaintiff that Bright Builders had a duty to “proactively take some steps to ensure there’s not infringing activity going on at the websites that they host or help design. That’s what we feel is new about this case,” Patterson said.

“It has been the law previously where someone is put on notice that, ‘Hey, you’re hosting a website that’s got infringing product’ and the Internet intermediary had to react and take it down and solve the problem. If they didn’t react properly, they could be liable,” he said.

“This is the first one where I think it requires more of a proactive approach,” he said.

The case is Roger Cleveland Golf Company, Inc. v. Prince, et al., civil action No. 2:09-119-MBS. U.S. District Judge Margaret Seymour entered judgment on March 14.

The plaintiff sued Bright Builders and Prince Distribution, a South Carolina business, under the federal Lanham Act. The plaintiff claimed that Bright Builders helped build and host a website called www.copycatclubs.com, where Prince Distribution marketed counterfeit Cleveland golf clubs and used Cleveland trademarks.

A lawyer for Prince Distribution said the business’ owner won’t appeal the verdict because he believes Bright Builders should have warned him about trademark infringement.

“Honestly, my client is satisfied with the jury verdict because it put the brunt of the responsibility on the party that probably should have the highest duty,” said lawyer Christopher D. Lizzi of North Charleston.

“He hired Bright Builders to teach him how to make a website and he paid for them to instruct him and to guide him through the process of how to start a successful Internet business,” Lizzi said.

“They basically, according to my client, told him to go out and look at some sites and see what you like and cut and paste and put it on the site. And then they blindly look by when he gives them a domain name of copycatclubs, which should have at least been some type of red flag,” Lizzi said.

He added that his client eventually realized the clubs sold on the website “weren’t authorized” and admitted liability for trademark infringement before trial.

A lawyer for Bright Builders, Douglas Matthew Fraser of Mount Pleasant, declined to comment on the case.

The plaintiff’s lawyers said they theorized that Bright Builders knew or should have known that the website was committing trademark infringement. They cited the website’s name, its content and discussions between Bright Builders and the website’s owner.

Patterson’s co-counsel, Christopher S. Finnerty of Boston, said he believed Bright Builders had constructive notice of the website’s activities and had an obligation to act.

“It’s like a landlord doesn’t have an obligation to go in and ferret out whether his tenants are doing something illegal. But once the landlord has notice, he has to act,” Finnerty said.

The golf clubs sold on the website apparently were made in China, but the site featured trademarked pictures of Cleveland clubs, lawyers for the plaintiff said.

“So there was an inherent contradiction in terms of what they were saying and what they were putting on the website,” Patterson said.

“Every other business in every other endeavor is required to exercise some reasonable care to ensure their products and services don’t damage third parties. And we just couldn’t figure out why it should be different for Internet companies. That was the basic argument,” he said.