In 21st-century commerce, the advantages of establishing an online presence are undeniable. An online presence offers economical and unparalleled opportunities for businesses to connect with a global audience, conduct transactions seamlessly, and elevate their brand presence. However, this resource is not without its challenges, and online operators must tread carefully through the legal waters that accompany such online ventures.

A recent case before the U.S. District Court for the Northern District of New York, Car-Freshner Corporation v. Meta Platforms, Inc., saw Car-Freshner Corporation (CFC) and Julius Samann Ltd. (JSL) take on social media giant Meta Platforms, Inc. (Meta) in a trademark infringement dispute. This legal battle provides an exploration of critical legal aspects relevant to online operators, and how platform providers can find themselves contributorily liable for trademark infringement if they do not act promptly.

Meta failed to act and take down asserted infringements when so advised of the activity. Had Meta promptly taken down the infringing posts, as many platforms routinely do, Meta would not have been subject to a claim of contributory infringement. The consequences of failing to take down alleged infringing content can be harsh.

Below, we discuss how businesses may inadvertently incur greater liability than anticipated if they fail to follow accepted practices to root out intellectual property infringement occurring on their websites.

Background

Plaintiffs, CFC and JSL, filed a complaint against Meta on December 6, 2022, alleging claims of trademark infringement. JSL owns trademarks for Little Trees air fresheners, the quintessential air fresher brand that hangs from many rear-view mirrors, a family of marks exclusively licensed to CFC. Meta, the operator of Facebook and Instagram, faced claims that third parties were using plaintiffs' trademarks on Facebook Marketplace and Instagram to sell infringing air fresheners, stickers, and t-shirts.

What we focus on in this article is plaintiffs’ contributory infringement claim that Meta was liable for the third party sellers’ trademark infringement on its platforms, and why Meta’s motion to dismiss this claim was denied.

Contributory Liability

Liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another.

Contributory liability may be imposed on a party who indirectly contributes to the infringement committed by third parties. While a direct infringer is the one placing the infringing marks on goods, the contributory infringer plays some role in enabling or facilitating the infringement.

In trademark cases, a party may be contributorily liable if it becomes aware of infringement but does not implement necessary measures to rectify or prevent it. This may include scenarios where a party provides a platform for the sale of infringing goods, knowing or having reason to know about the infringement, yet fails to take sufficient action to halt the unauthorized activities. More specifically, the court emphasized that a defendant's liability for contributory infringement depends on its actions after becoming aware of the infringement:

[W]here a defendant knows or should know of infringement, whether that defendant may be liable for contributory infringement turns on what the defendant does next . . . If it undertakes bona fide efforts to root out infringement . . . that will support a verdict finding no liability, even if the defendant was not fully successful in stopping infringement. But if the defendant decides to take no or little action, it will support a verdict finding liability.

Plaintiffs asserted that they informed Meta about third party infringing products through four separate trademark reports to Facebook and Instagram, and despite providing evidence of federal trademark registrations for the marks, both platforms refused to remove the posts.

Meta provided evidence that it responded to the reports, stating that it could not be contributorily liable because in its responses it raised defensive issues with Plaintiffs, including “nominative fair use,” “commentary,” and “the un-likelihood of confusion based on the appearance of the marks in the actual marketplace, as they will be encountered by consumers.” Meta stated it could not conclude that the identified third party content infringed plaintiffs’ trademarks.

Nevertheless, accepting plaintiffs’ allegations as true in the motion to dismiss stage, the court agreed that they sufficiently stated their claim. Meta had knowledge of the alleged infringement and instead of removing the posts or products from its platforms, it continued to advertise the products.

Although Meta took down the posts once plaintiffs filed their original complaint, the court deemed this insufficient to negate liability for the period when the posts were up. While the direct liability claim against Meta was dismissed, Meta's motion to dismiss the contributory liability claims of trademark infringement was denied.

Conclusion

The mystery in Car-Freshner v. Meta is why Meta failed to act and take down the asserted infringements when it was advised of the activity. Meta is not known for showing more than scant solicitude for protecting the merchants in its marketplace. Had Meta promptly taken down the infringing posts, as most platforms routinely do, it would not have been subject to a claim of contributory infringement. The failure to take down alleged infringing content can be harsh and the majority of platforms would not and do not do today what Meta did.

The court's ruling on this issue highlights the responsibilities of website providers in addressing trademark infringement.

Even if a website provider does not directly place infringing marks on goods, it can still be held contributorily liable if it fails to take adequate measures. Thus, the extent of a defendant's liability is contingent upon its actions following its awareness.

If a defendant takes little or no action, liability may be found. But if a defendant undertakes bona fide efforts to take down the infringements, even if not entirely successful, it will likely avoid a contributory liability claim.