Gibson Guitar Corp. v. Viacom International Inc.

District Court grants motion to dismiss amended complaint against Viacom asserting secondary trademark liability based on licensing relationship with co-defendant that marketed and sold products that allegedly infringed plaintiff’s trademarks, finding that control Viacom exercised as licensor under licensing agreement was not sufficient to support a claim of contributory or vicarious trademark infringement.

Plaintiff Gibson Guitar Corp. brought suit against defendants Viacom International, Inc., and John Hornby Skewes & Co., Ltd. (JHS), asserting Lanham Act claims and state law claims based on the alleged unauthorized use of Gibson’s trademarks in products made and sold by JHS under a licensing agreement with Viacom. Viacom owns the trademarks to the animated television character SpongeBob Square Pants, and JHS promotes and sells various products, musical instruments including a ukelele with a V-styled body, using the SpongeBob trademark. Gibson asserted ownership of several trademarks related to its Flying V guitar style, and alleged that the JHS SpongeBob SquarePants Flying V ukulele infringes its trademarks. The complaint alleged both contributory and vicarious trademark infringement against Viacom. The district court previously granted Viacom’s motion to dismiss, finding that Gibson’s original complaint failed to articulate which defendants allegedly performed which acts underlying plaintiff’s claims. (Read our summary of the district court’s decision here.) Gibson filed an amended complaint and Viacom again moved for dismissal for failure to state a claim. The district court again granted Viacom’s motion to dismiss for failure to state a claim, finding that the control Viacom that exercised as licensor under its licensing agreement with JHS was not sufficient to support a claim of either contributory or vicarious trademark infringement.

To be liable for contributory trademark infringement, a defendant must have either intentionally induce the primary infringer to infringe or continue to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied. When the alleged direct infringer supplies a service rather than a product, under the second prong of this test, the court must find direct control and monitoring of the instrumentality used by a third party to infringe the plaintiff's mark. Acknowledging the relative difficulty of establishing contributory infringement, the district court rejected Gibson’s assertion that Viacom intentionally induced JHS’s alleged infringement by controlling and approving JHS’s products and receiving fees pursuant to their license agreement. In the court’s view, he licensing agreement, without more, could not establish sufficient control over JHS’s actions to constitute intentional inducement, and the amended complaint did not allege any other specific or affirmative acts intended by Viacom to induce or encourage infringement by JHS. Although it acknowledged that a certain amount of supervision and control is required of licensors under trademark law, the court observed that the legal requirement of control is intended to protect consumers from deceptive use of the licensor’s trademark. A licensor bears a duty to ensure that a licensed product conforms to the licensor’s own quality standards; its duty does not extend to ensuring that a licensed the product “breaks no other law, including trademark infringement.” To allow a claim to rest solely on a license agreement would, in the court’s view, “expose every licensor to claims of contributory infringement for every license” and “dilute the standard… by lowering the bar for intentional inducement.”

The court also held Viacom’s “actual or constructive” knowledge of the alleged infringement was irrelevant, because Viacom lacked the requisite degree of control to prevent continuing infringement. Under the second prong of the applicable contributory infringement test, Viacom did not control the “instrument of infringement.” While Viacom could bar the use of its own SpongeBob trademarks on products infringing on Gibson’s trademarks, JHS could still make infringing products without the Viacom trademark. Viacom’s licensing relationship was not sufficient to support contributory infringement liability, regardless of its alleged knowledge of JHS’s infringing use.

Likewise, the court found that Viacom could not be held vicariously liable for JHS’s actions. Vicarious liability for trademark infringement requires that the defendant and the infringer have an apparent or actual partnership, with the authority to bind one another in transactions with third parties, or exercise joint ownership or control over the infringing product. The court concluded that the license agreement did not give Viacom the joint control or ownership sufficient to make Viacom vicariously liable, as the licensor’s control was only indirect. Although plaintiff asserted that the full extent of Viacom’s relationship with JHS was unknown and would become clearer after discovery, the court saw no alleged facts that, taken as true, would give rise to vicarious liability.