Corporate Officers May Be Personally Liable for Company Infringements
Sept. 12, 2013
A recent court order denying a motion to dismiss an action for trademark and copyright infringement reiterates the well-established principle that corporate officers who engage directly in conduct that infringes on the intellectual property rights of others may be held liable for the infringement despite having acted in his or her corporate capacity.
Asher Worldwide Enterprises, LLC (“AWE”), owner of reliabuy.com, sued Housewaresonly.com, Incorporated and its principals, Stuart and Marcia Rubin (collectively, the “Rubins”) for unfair competition under the Lanham Act and for copyright infringement. AWE alleged, among other things, that the Rubins infringed on AWE’s copyrights by copying product descriptions from reliabuy,com and reproducing them on housewaresonly.com, a competing website. (See, Asher Worldwide Enterprises, LLC v. Housewaresonly.com, Incorporated, United States District Court, Northern District of Ill., Case No. 12 C 568.)
As alleged by AWE, the Rubins’ copying wasn’t inadvertent. In late 2009 and early 2010, AWE published 65 product descriptions on reliabuy.com and several months later 47 of them appeared on housewaresonly.com. In August 2010, AWE published 25 more descriptions and all of them subsequently appeared on housewaresonly.com. The Rubins allegedly copied descriptions again in October 2010, publishing 75 of 139 new reliabuy.com product descriptions. And when AWE redesigned its website to focus on discount commercial restaurant equipment, the Rubins started a competing site (restaurantkitchenwarehouse.com) and copied over 200 product descriptions that had been created by AWE.
The Rubins unsuccessfully argued that they could not be held liable for infringements by their corporation unless there was some “special showing” — for example, that the corporation served as their “alter ego.” That argument was quickly shot down by the court. Citing Seventh Circuit precedent, the district court ruled that the plaintiff need only allege that the corporate officers “acted willfully and knowingly and personally participated in the infringing activities or used the corporation to carry out their own deliberate infringement.”
While merely being an officer in a corporation is not enough to invoke personal liability, the court held, “[w]hen corporate officers are in control of the decisions of the corporation at all times, [ ] they may be liable for the intellectual property infringements of the corporation.”
That an individuals was acting on behalf of his or her corporation is no defense to personal liability for trademark and copyright infringement. The standards for imposing personal liability on corporate officers — and employees — are similar in most, if not all, federal circuits and state courts. The Supreme Court spoke on the subject in Calder v. Jones, 465 U.S. 783 (1984), a libel case brought by Shirley Jones against the National Enquirer and two of its employees, an editor and writer who were responsible for the offending article. In ruling that the individual defendants could be haled into court in California, Justice Rehnquist observed that “their status as employees does not somehow insulate them from jurisdiction… In this case, petitioners are primary participants in an alleged wrongdoing intentionally directed at a California resident.”
That principal has not changed over the years. In 2009, the Ninth Circuit held that an individual “is liable under the Lanham Act for ‘torts which he authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the corporation and not on his own behalf.’“ POM Wonderful LLC v. Purely Juice, Inc. and Paul Hachigian, No. 08-56375 (9th Cir. 2009), citing Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999) (quoting Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1015 (9th Cir. 1986.)
McCarthy also teaches that trademarks, like copyrights, may be infringed upon by individuals as well as a corporation, and “all participants, including those acting merely as officers of a corporation, may be jointly and severally liable.” McCarthy on Trademarks, Chapter 25, Section 25:24.
In short, corporate officers and employees who engage directly in infringing conduct do not escape personal liability merely because they acted in a corporate capacity. A copy of the AWE decision, dated August 26, 2013, can be accessed [http://www2.bloomberglaw.com/public/desktop/document/Asher_Worldwide_Enterprises_LLC_v_Sur_La_Table_Inc_et_al_Docket_N/1] here.