Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc. et al

Filing 294

Transcript of Proceedings held on 02/22/2010, before Judge James Ware. Court Reporter/Transcriber Summer Fisher, Telephone number 408-288-6150. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerks Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction.After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. Release of Transcript Restriction set for 9/2/2010. (Fisher, Summer) (Filed on 6/4/2010)

L o u i s Vuitton Malletier, S.A. v. Akanoc Solutions, Inc. et al

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IN T H E U N I T E D S T A T E S DISTRICT COURT FOR T H E N O R T H E R N D I S T R I C T O F CALIFORNIA SAN JOSE DIVISION LOUIS VUITTON MALLETIER, S.A ., PLAINTIFF, VS . AKANOC SOLUTIONS, INC . E T AL, DEFENDANT. ) ) ) ) ) ) ) ) ) ) CV -07 -3952- JW SAN JOSE , CALIFORNIA FEBRUARY 22 , 2010 PAGES 1- 26

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 OFFICIAL COURT REPORTER : SUMMER FISHER , C S R, C R R CERTIFICATE NUMBER 13185
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TRANSCRIPT O F PROCEEDINGS BEFORE THE HONORABLE JAMES WARE UNITED STATES DISTRICT JUDGE

A P P E A R A N C E S:

FOR THE PLAINTIFF :

J. ANDREW COOMBS, A PROF. CORP. BY : ANDREW C O O M B S ANNIE WANG 517 EAST WILSON AVENUE, STE 202 GLENDALE , C A 91206

FOR THE DEFENDANT :

GAUNTLETT & ASSOCIATES BY : JAMES LOWE 18400 VON KARMAN, STE 300 I R V I N E, CA 92612

Dockets.Justia.co

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SAN JOSE , CALIFORNIA

FEBRUARY 22 , 2010

PROCEEDINGS (WHEREUPON, COURT CONVENED A N D T H E FOLLOWING PROCEEDINGS WERE HELD: ) T H E C L E R K: AKANOC SOLUTIONS. MR . LOWE : 07 -3952. L O U I S VUITTON V.

O N F O R DEFENDANT 'S MOTION . GOOD MORNING , YOUR HONOR .

JAMES L O WE APPEARING ON B E H A L F O F T H E DEFENDANTS. MR . C O O M B S: A N D ANDY C O O M BS AND

ANNIE WANG APPEARING FOR PLAINTIFF LOUIS VUITTON. T H E C O U R T: VERY WELL.

SO THIS IS A DEFENDANT' S RENEWED M O T I O N F O R J U D G M E N T A S A M A T T E R O F L A W WITH RESPECT TO T H E COPYRIGHT A N D THE TRADEMARK C L A I M S, OR IN T H E ALTERNATIVE A MOTION F O R N E W TRIAL. MR . LOWE : T H E C O U R T: THAT'S CORRECT, YOUR HONOR. I' M SURE Y O U AREN 'T GOING TO

COVER A L L T H E ISSUES IN THIS BRIEF ARGUMENT, B U T I' M H A P P Y T O HAVE Y O U ADDRESS WHICHEVER ONES THAT YOU WANT THE COURT T O HEAR THIS MORNING. MR . LOWE : THANK YOU , YOUR HONOR .

WE HAVE OBVIOUSLY HAVE SUBSTANTIALLY BRIEFED THESE ARGUMENTS ALONG WITH COUNSEL OVER THE LAST SEVERAL M O N T H S, B U T I DO WANT TO HIT CERTAIN HIGHLIGHTS.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PROBLEMS .

AS T H E C O U R T K N O W S I N A U G U S T OF LAST YEAR THERE W A S A JURY TRIAL. THE JURY FOUND O N BEHALF

OF LOUIS VUITTON AND AGAINST OUR CLIENTS WHO OPERATE AN INTERNET SERVICE P R O V I D E R, AND O N E O F T H E DEFENDANTS IS AN OFFICER OF THE COMPANIES THAT OPERATE THE I S P. AND THE JURY FOUND THAT THERE WAS CONTRIBUTORY TRADEMARKS AND COPYRIGHT INFRINGEMENT BECAUSE THE I S P'S H O S T E D, IN A S E N S E, OR HAD ON THEIR SERVERS CERTAIN ADVERTISEMENTS F O R BAG S A N D OTHER PRODUCTS THAT ARE ALLEGED TO BE KNOCKOFFS OF LOUIS VUITTON PRODUCTS. FURTHERMORE , A S THE COURT RECALLS, THESE WEBSITES THAT ARE APPEARING O N THIS S E R V E R HERE A P P E A R T O ORIGINATE IN CHINA OR SOME O T H E R P L A C E OUTSIDE THE U N I T E D S T A T E S. A N D THE PARTIES DON 'T

KNOW WHO THEY ARE , A N D VUITTON H A S NOT ESTABLISHED W H O THEY A R E. BUT W E THINK THERE ARE SEVERAL MAJOR THE JURY, WE THINK , DIDN 'T HEAR E V I D E N C E

THAT THEY W O U L D HAVE TO HEAR IN ORDER TO FIND F O R VUITTON. A N D THE JURY WAS N O T INSTRUCTED PROPERLY

BECAUSE VUITTON H A S CREATED SOME PROBLEMS IN T H E COURT 'S INSTRUCTIONS . THERE ARE TWO BASIC ISSUES . ONE IS
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TRADEMARK INFRINGEMENT AND T H E O T H E R I S COPYRIGHT INFRINGEMENT. AS TO BOTH OF THOSE IT IS NECESSARY

T H E PLAINTIFF ESTABLISH D I R E C T INFRINGEMENT BY SOME THIRD PARTY , N O T BY THEIR CLIENTS. AND OUR

POSITION IS THAT UNDER RULE 5 0, THEY D I D NOT ESTABLISH DIRECT INFRINGEMENT NOR DID THEY ESTABLISH CONTRIBUTORY INFRINGEMENT . ON T H E TRADEMARK MATTER , A S W E HAVE BRIEFED, THERE IS A REQUIREMENT FOR D I R E C T INFRINGE MENT THAT THERE BE BOTH A U S E IN COMMERCE A N D A LIKELIHOOD OF CONFUSION . THE KARL STORZ

ENDOSCOPY CASE OF T H E N I N T H CIRCUIT MADE THAT C L E A R AS O T H E R S HAVE . A N D I T'S IMPORTANT T O RECOGNIZE THAT TRADEMARK INFRINGEMENT IS DIFFERENT FROM SERVICE MARK INFRINGEMENT IN TERMS OF T H E U S E IN COMMERCE REQUIREMENT , W H E R EAS A SERVICE MARK C A N B E USED IN ADVERTISING . A TRADEMARK MUST B E AFFIXED TO GOODS

THAT ARE SOLD OR TRANSPORTED IN COMMERCE, A N D THAT MEANS ESSENTIALLY IN COMMERCE IN T H E U N I T E D STATES . SO IT 'S NOT E N O U G H THAT SOMEONE OUTSIDE THE UNITED STATES MERELY ADVERTISE THAT THEY HAVE PRODUCTS F O R SALE IN CHINA , F O R EXAMPLE, BUT THEY ACTUALLY HAVE TO AFFIX THE TRADEMARK T O T H E GOODS THAT ARE TRANSPORTED OR SOLD IN THE U N I T E D S T A T E S.
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T H E C O U R T:

A R E Y O U ARGUING THEY HAVE TO

AFFIX T H E TRADEMARKS TO T H E G O O D S I N T H E UNITED STATES? MR . LOWE : NO, B U T THEY HAVE TO BE SOLD

OR TRANSPORTED IN T H E U N I T E D STATES AT LEAST . N O W T H E EFFORT OF VUITTON WAS TO S A Y THERE IS S I M P L Y T H E ADVERTISING ON THE WEBSITES A N D THAT' S GOOD ENOUGH. N O T U S ED IN COMMERCE . WE THINK IT 'S NOT BECAUSE IT' S AND SECTION 1127 O F T H E

L A N H A M A C T MAKES IT CLEAR YOU HAVE TO TREAT SERVICE MARKS A N D TRADEMARKS DIFFERENTLY IN THIS USE IN COMMERCE ISSUE S. T H E S E C O N D POINT IS THE LIKELIHOOD OF CONFUSION H A S TO EXIST. A N D THERE IS NO EVIDENCE

PRESENTED A T T H E TILE O F LIKELIHOOD OF CONFUSION I N THE UNITED STATES CERTAINLY. MOST OF THE SITES

THEY COMPLAINED A B O U T A C T U A L L Y MADE IT CLEAR THEY WERE ONLY SELLING REPLICAS , THEY WERE NOT SELLING ACTUAL VUITTON PRODUCTS . AND THE ONLY EVIDENCE THAT WAS SUBMITTED OF ANYTHING THAT WAS DONE WITH RESPECT TO THESE WEBSITES W A S THAT O N E O F T H E I R INVESTIGATORS IN TEXAS , A T T H E SPECIFIC INSTRUCTION OF LOUIS VUITTON, ORDERED SOME PRODUCTS KNOWING THAT THEY WERE NOT VUITTON PRODUCTS BUT ORDERED CERTAIN
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PRODUCTS , A B O U T A DOZEN OF THEM OR SO, IN ORDER TO CREATE EVIDENCE F O R THIS T R I A L. ASIDE FROM THE FACT THAT M R. HOLMES A N D T H E P E O P L E IN PARIS WHO DIRECTED H I M T O A C T KNEW PERFECTLY WELL THESE WERE NOT VUITTON PRODUCTS -T H E C O U R T: IS YOUR ARGUMENT THAT T H E

LIKELIHOOD OF CONFUSION IS LIMITED JUST T O T H E PURCHASER? IN OTHER WORDS , I F Y O U KNOW Y O U ARE

B U Y I N G A KNOCK OFF OF A LOUIS VUITTON PRODUCT A N D THERE IS D I R E C T INFRINGEMENT BECAUSE THEY I N D E E D A R E N O T, THAT AS LONG A S T H E PURCHASER KNOWS IT 'S A KNOCKOFF , THAT C A N N E V E R SATISFY T H E LIKELIHOOD OF CONFUSION STANDARD? MR . LOWE : GO THAT FAR . THERE IS CASE LAW THAT INDICATES THAT IF T H E P U B L I C SO TO SPEAK, IF T H E CONSUMERS ARE CONFUSED ABOUT PRODUCTS OF THAT SORT, THAT THAT MIGHT BE SUFFICIENT. EVIDENCE OF THAT. B U T VUITTON PRESENTED NO NO, YOUR HONOR. W E WOULDN' T

S P E C U L A T I O N, PERHAPS, BUT THEY

H A D N O B O D Y WHO H A S EVER COMPLAINED ABOUT ANY OF THESE PRODUCTS . T H E ONLY THING THEY SUBMITTED IN TESTIMONY W A S A L E T T E R FROM T H E GENTLEMAN IN DENMARK WHO KNEW THAT T H E R E WERE KNOCK OFFS O U T
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THERE A N D W A S ANNOYED THAT THERE WERE.

BUT THERE

W A S N O E V I D E N C E O F A N Y T H I N G THAT HAPPENED IN T H E U N I T E D S T A T E S WITH RESPECT TO THIS LIKELIHOOD O F CONFUSION. A N D CERTAINLY THE EVIDENCE IS CLEAR THAT PEOPLE ARE PERFECTLY WELL AWARE THAT THERE ARE GENUINE VUITTON PRODUCT S A N D THERE ARE KNOCKOFF PRODUCTS , A N D YOU C A N B U Y THE KNOCKOFF PRODUCTS IN A LOT OF P L A C E S, LA AND A N Y M A J O R CITY . THERE ARE DIFFERENT MARKETS FOR THESE T H I N G S BECAUSE WHERE AS A GENUINE VUITTON PRODUCT MIGHT BE FIVE THOUSAND DOLLARS F O R A HAND BAG , Y O U C A N B U Y IT FOR A HUNDRED DOLLARS IN S A N T E E A L L E Y. A N D P E O P L E KNOW PERFECTLY WELL THAT IT 'S NOT T H E REAL THING. CONFUSION. T H E PROBLEM SPECIFICALLY I N THIS CASE, YOUR HONOR, W A S THAT VUITTON PERSUADED T H E C O U R T T O INSTRUCT THE JURY . THERE WAS A PRESUMPTION OF B U T YOU HAVE TO HAVE LIKELIHOOD OF

LIKELIHOOD OF CONFUSION . T H E C O U R T: IS THERE A DIFFERENCE I N YOUR

VIEW BETWEEN THE TRADEMARK AND THE GOODS THEMSELVES? I N O T H E R W O R D S, IF YOU HAVE THE

GENUINE LOUIS VUITTON TRADEMARK, YOU HAVE THE DYE THAT IMPRESSES THAT ON THE LEATHER AND Y O U P U T IT
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ON A PRODUCT THAT IS N O T MADE BY LOUIS VUITTON, HAVE YOU INFRINGED T H E TRADEMARK ? MR . LOWE : NO, YOUR HONOR. Y O U COULD,

FOR EXAMPLE , DECORATE YOUR WALLS WITH VUITTON TRADEMARKS, B U T THAT 'S NOT A USE IN COMMERCE . T H E C O U R T: I' M N O T TALKING A B O U T T H E

WALLS , I 'M TALKING A B O U T PUTTING IT ON LEATHER GOODS . YOU 'VE G O T T H E GENUINE - - F O R EXAMPLE, YOU

GO TO T H E COMPANY THAT DOES MAKE T H E D Y E AND Y O U S A Y, GIVE M E T H E DYE A N D I WANT TO IMPRESS I T O NTO LEATHER, A N D Y O U ACTUALLY USE T H E L O U I S VUITTON TRADEMARK B U T YOU U S E I T O N SOMETHING THAT I S N O T A LOUIS VUITTON HANDB A G; HAVE Y O U INFRINGED T H E TRADEMARK? MR . LOWE : THE QUESTION IS WHETHER YOU THAT'S T H E I T'S

HAVE CREATED A LIKELIHOOD OF CONFUSION . ONLY WAY Y O U C A N INFRINGE A TRADEMARK. CREATING A LIKELIHOOD O F CONFUSION.

I T'S N O T

SELLING A PRODUCT , I T'S N O T ADVERTISING I T, NECESSARILY -T H E C O U R T: B U T H A V E N'T I BY DEFINITION

CREATED CONFUSION IF I USE T H E GENUINE TRADEMARK? MR . LOWE : NOT NECESSARILY , YOUR HONOR .

T H E Q U E S T I O N I S WHETHER THAT HAS CREATED A LIKELIHOOD OF CONFUSION . IF, F O R EXAMPLE , Y O U KNOW
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AND WHOEVER YOU ARE DEALING WITH KNOWS THAT THIS I S N O T A GENUINE PRODUCT, THERE' S N O LIKELIHOOD OF CONFUSION. IN OTHER WORDS , I F I T I S SOLD A N D

TRANSPORTED IN COMMERCE IN A WAY THAT WOULD CREATE A LIKELI HOOD O F CONFUSION, THAT COULD BE, WHETHER OR N O T Y O U USE T H E GENUINE D Y E O R SOME FACSIMILE O F IT . T H E C O U R T: SO Y O U W O U L D HAVE T H E L A W

STAND THAT YOU C A N I N F R I N G E T H E TRADEMARK OF LOUIS VUITTON AS LONG A S Y O U MAKE I T C L E A R THAT IT IS A KNOCKOFF ? MR . LOWE : QUITE RIGHT . INFRINGEMENT. U S E O F A TRADEMARK H A S TO BE IN AN INFRINGING WAY IN ORDER TO BE AN INFRINGEMENT. IT NO, YOUR HONOR. THAT 'S NOT

THE QUESTION IS WHETHER IT IS AN

H A S T O B E USED IN COMMERCE , H A S TO BE USED O N G O O D S SOLD AND TRANSPORTED A N D I T H A S TO BE OTHER THAN DECORATIVE -- THIS I S - - A TRADEMARK I S N O T LIKE A COPYRIGHT P E R SE, IT H A S T O A C T U A L L Y D O SOMETHING - T H E C O U R T: YOU CHANGED . I THOUGHT YOU IF I

WERE TALKING A B O U T LIKELIHOOD OF CONFUSION.

INCLUDE THE LOUIS VUITTON TRADEMARK OF IT A N D I P U T JUST ABOVE IT "KNOCKOFF ," YOUR A R G U M E N T I S THAT
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THAT IS NOT A VIOLATION BECAUSE THERE' S N O LIKELIHOOD OF CONFUSION BECAUSE I'M PROMINENTLY DISPLAYING IT AS A K N O C K O F F. MR . LOWE : THAT C O U L D B E. THAT MAY N O T

BE T H E E X A C T OUTCOME , YOUR HONOR , BECAUSE THERE A R E NUMEROUS FACTORS I S H O U L D SAY UNDER SLEEK CRAFT, T H E NINTH CIRCUIT HAS INDICATED T H E R E A R E VARIOUS FACTORS YOU C A N C O N S I D E R A S T O WHETHER THERE 'S A LIKELIHOOD OF CONFUSION . AND THAT CAN INCLUDE WHAT

OTHER P E O P L E T H I N K A B O U T I T, BUT O U R P O S I T I O N I S T W O-P R O N G HERE . ONE I S THAT THE JURY WAS INSTRUCTED THAT THERE W A S A PRESUMPTION OF A LIKELIHOOD O F CONFUSION, AND THAT' S S I M P L Y WRONG. THE

NINTH CIRCUIT HAS SAID THAT I S N O T THE L A W HERE IN THE NINTH CIRCUIT . AND WHEN VUITTON H A D THE JURY

INSTRUCTED THAT T H E R E W A S A LIKELIHOOD OF CONFUSION, THAT E S S E N T I A L L Y SENT THEM OFF T H E RAILS . SO THEY PRESENTED THAT AND THEY HAD NO EVIDENCE OF A N Y LIKELIHOOD OF CONFUSION, THEY S I M P L Y SAID THERE A R E T H E S E P E O P L E OUT THERE IN CHINA SELLING THESE THINGS A N D W E D O N' T LIKE IT . T H E C O U R T: MR . LOWE : GO TO YOUR COPYRIGHT -THANK YOU .
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YOUR HONOR, IN TERMS OF COPYRIGHT, THE PROBLEM IS THAT T H E COPYRIGHT A C T ONLY APPLIES WITHIN THE UNITED STATES. A N D EVERYTHING THAT WAS

PRESENTED H A D TO DO WITH ACTIVITIES IN CHINA . MR . H O L M E S, ON B E H A L F O F VUITTON PRODUCT, B O U G H T SOME OF THEM AND THEY ALLEGEDLY H A D A N ITEM ON THERE THAT LOOKED LIKE A C O P Y R I G H T E D I M A G E. THERE A R E T W O COPYRIGHTS INVOLVED I N THIS CASE. THEY ARE BOTH TWO -DIMENSIONAL WORKS THAT ARE TO BE DONE IN LEATHER O R F A B R I C WITH CERTAIN PATTERNS A N D SO ON , A N D THOSE ARE AFFIXED TO PHYSICAL PRODUCTS. T H E E V I D E N C E W A S THAT T H O S E WERE IN FACT AFFIXED TO PRODUCTS BY KNOWN MANUFACTURERS I N CHINA . AND MR . H O L M E S ORDERED P R O D U C T S, SENT M O N E Y

TO CHINA , H E DIDN 'T ORDER THEM THROUGH T H E W E B S I T E S OF T H E DEFENDANTS , B U T ORDERED THEM THROUGH E-MAIL , SENT THE MONEY THROUGH WESTERN U N I O N, PAID F O R AND COMPLETED T H E TRANSA C T I O N IN CHINA AND INSTRUCTED T H E CHINESE WITH WHOM H E D E A L T T O DELIVER THEM TO T H E U N I T E D STATES SO THAT THIS C O U R T C O U L D HAVE JURISDICTION OVER THEM. NONE OF THAT COPYRIGHT INFRINGEMENT HAPPENED IN T H E U N I T E D STATES , I T H A P P E N E D I N CHINA . THE ONLY THING THAT VUITTON W A S ABLE TO

SHOW WAS THERE WERE PICTURES ON A WEBSITE THAT WAS
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H O S T E D HERE IN T H E U N I T E D STATES . WERE NOT T H E COPYRIGHT.

THOSE PICTURES

VUITTON IS N O T C L A I M I N G

THAT THEY O W N THE COPYRIGHT I N P H O T O G R A P H S O F BAGS . THEY OWN T H E COPYRIGHTS OF T H E T W O- DIMENSIONAL THINGS O N LEATHER AND FABRIC. SO WHAT IS HAPPENING HERE IS SIMPLY THAT ON T H E SERVERS THERE A R E SOME PHOTOGRAPHS T W O O R THREE GENERATIONS DOWN, PHOTOGRAPHS OF BAGS THAT HAVE BEEN MADE BY SOMEBODY OTHER THAN VUITTON, PHOTOGRAPHS THAT WERE N O T TAKEN BY VUITTON O F PRODUCTS THAT WERE ALLEGEDLY USING VUITTON'S IMAGES A N D WHAT N O T I N C H I N A W H I C H I S N O T A VIOLATION OF U. S. LAW . WHAT THEY THEN TRY T O D O I S CONFUSE THESE THIRD GENERATION IMAGES WITH THEIR ACTUAL TRADEMARKS -- OR THE COPYRIGHTS, I SHOULD S A Y. A N D THAT 'S NOT WHAT THEY WERE RIGHT IN . T H E CASE THAT THEY C I T E D, THE A M A Z O N CASE, W A S A SIGNIFICANTLY DIFFERENT O N E ACTUALLY BECAUSE IN THAT CASE PERFECT 10 WAS ACTUALLY SELLING PHOTOGRAPHS THAT THEY TOOK AND THEY WERE SELLING THEM O N THE INTERNET. BUT GOOGLE AND

AMAZON WERE FACILITATING THE SALE O F THOSE PHOTOGRAPHS THAT HAD BEEN TAKEN BY PERFECT 1 0; PERFECT 10 OWNED THE PHOTOGRAPHS .
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SO THEY ARE N O T P H O T O G R A P H S O F SOMETHING ELSE THAT S O M E B O D Y ELSE MADE BUT THEY OWN T H E PHOTOGRAPHS . WHEN THOSE PHOTOGRAPHS WERE SOLD

THROUGH GOOGLE AND AMAZON, THE COURT FOUND THAT WAS A COPYRIGHT INFRINGEMENT. B U T HERE WE D O N'T HAVE VUITTON C L A I M I N G THEY OWN PHOTOGRAPHS , THEY O W N T H E S E O T H E R COPYRIGHTS. T H E C O U R T: Y O U'V E G O T A VERY -- A N D I

APPRECIATE THERE' S SOME EXTENSION O F T H E LAW THAT' S GOING ON HERE. B Y T H E WAY , I D I D LOOK BACK AT MY

INSTRUCTIONS AND I THINK THE PRESUMPTION THAT I DID INSTRUCT ON H A D T O D O I F I T'S AN IDENTICAL MARK . THERE IS A PRESUMPTION OF LIKELIHOOD O F CONFUSION BECAUSE THERE CAN B E SITUATIONS WHERE THE MARKS A R E SIMILAR B U T N O T IDENTICAL . IN THIS CASE

THE EVIDENCE WAS THAT THEY WERE IDENTICAL . L E T M E HAVE Y O U RESERVE MORE OF YOUR ARGUMENT TO RESPOND TO VUITTON PRODUCT S' ARGUMENT. MR . C O O M B S: A S T O THE LIABILITY ISSUES

THAT HAVE BEEN LARGELY ADDRESSED ALREADY, AND THE N E W E X T R A TERRITORIALITY I S S U E I WOULD LIKE TO HAVE MY ASSOCIATE ADDRESS THAT. MS . WANG : YOUR H O N O R, AS A C O M M O N THEME,

AS Y O U'V E NOTICED IN T H E B R I E F I N G, THE DEFENDANTS
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HERE ARE MISSTATING THE L A W.

IN TERMS OF T H E

TRADEMARK INFRINGEMENT CLAIM AN OFFER OF INFRINGING IS SUFFICIENT TO ESTABLISH TRADEMARK LIABILITY. IN ADDITION TO T H E S T A T U T E S I N T H E LANHAM A C T, THE NINTH CIRCUIT AUTHORITY -- I ALSO HAVE ANOTHER CASE FROM THE NINTH CIRCUIT LEVI STRAUSS & CO . V . S H I L O N, 1 2 1 F .3D 1309 WHICH STATES EXPLICITLY THAT A N OFFER T O SELL WITHOUT MORE WOULD SUFFICE TO ESTABLISH LIABILITY. IN THAT CASE I T W A S A SITUATION WHERE AN INVESTIGATOR O N B E H A L F OF A R I G H T S OWNER WENT T O A STORE A N D W A S ABLE T O G E T AN OFFER FOR COUNTERFEIT SALES WITHOUT SECURING ANY SALES . IN THIS CASE W E A C T U A L L Y HAVE EVIDENCE OF SALES IN ADDITION TO O F F E R S, ET CETERA . T H E C O U R T: I THINK THAT T H E PLAINTIFF 'S

CONCERN THOUGH IS THAT WAS N O T TRANSACTED THROUGH THE SERVICES O F THE DEFENDANT . THAT THEY PROBABLY

IDENTIFIED WHO T H E S E L L E R WAS A N D THEN WENT IN SOME OTHER ROUTE R A T H E R THAN THROUGH THE S E R V E R T O MAKE THE PURCHASE. I S N'T THAT A STRONG ARGUMENT? MS . WANG : NO, IT 'S NOT , YOUR HONOR

BECAUSE THE O F F E R S THAT WERE ON THE WEBSITE IN THE FIRST PLACE WERE HOSTED ON T H E DEFENDANT' S SERVERS .
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THERE 'S NO WAY ANYBODY WOULD HAVE SEEN THAT OFFER IN T H E F I R S T P L A C E I F N O T FOR T H E DEFENDANT' S INVOLVEMENT OF H A V I N G THAT INFORMATION S T O R E D HERE IN S A N JOSE . SO IN TERMS OF T H E A R G U M E N T T H E R E A R E ALL THESE SORT OF IN- BETWEENS. T H E R E'S NO W A Y THAT

THAT SALE W O U L D HAVE BEEN CONSUMMATED IF NOT F O R THE WEBSITE OFFER AND THE DIRECTIONS O N THAT WEBSITE DIRECTING THAT SALE. T H E C O U R T: I ALSO REMEMBER THAT THERE

WERE BARRIERS THAT THE SELLER , ANTICIPATING THAT PERHAPS THEY W O U L D B E I N SOME DIFFICULTY IN SELLING T H E P R O D U C T S, HAD S E T U P W A YS IN WHICH T H E TRANSACTION W A S DONE TO DO AN INDIRECT SALE THAT ACTUALLY H A D T O G O THROUGH SOME E-MAIL PROCESS. WELL, H O W A B O U T THIS LIKELIHOOD OF CONFUSION I S S U E. MS . WANG : YOUR H O N O R, AS YOU POINTED OUT

IN TERMS OF T H E CASE L A W C I T E D B Y T H E DEFENDANTS THAT CASE D I D NOT S A Y THAT MR . LOWE INDICATED. THAT CASE W A S NOT A CASE A B O U T COUNTERFEITS, F O R O N E T H I N G. B U T I T ALSO -- T H E C O U R T D I D INSTRUCT ON T H E IDENTICAL ISSUE AND D I D I N S T R U C T O N T H E SLEEKCRAFT FACTORS. A N D T H E CASES CITED BY THE
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DEFENDANTS, T H E KARL STORZ ENDOSCOPY CASE DOES SAY THAT THE LIKELIHOOD OF CONFUSION IS N O T LIMITED TO T H E PURCHASER AND THAT THE JURY COULD HAVE MADE THAT DETERMINATION JUST ON A SIDE-B Y-SIDE COMPARISON, THAT IT WOULD OBVIOUS I N THIS CASE BECAUSE THE POINT OF A KNOCKOFF IS TO LOOK LIKE T H E REAL THING. T H E C O U R T: FINAL WORDS ? MR . LOWE : YOUR H O N O R, A COUPLE MORE VERY WELL.

P O I N T S, AND I WOULD LIKE T O ADDRESS THAT. FIRST OF A L L, NO ONE S A W T H E S E I T E M S E X C E P T FOR MR . H O L M E S AND SOME PARTIES OUTSIDE T H E U N I T E D S T A T E S, ACCORDING T O T H E EVIDENCE PUT ON . SO IT WASN' T A S I F T H E R E W A S GREAT ACTIVITY GOING IN T H E U .S. A N D I THINK T H E C A S E S THAT COUNSEL IS TALKING ABOUT EITHER ARE TALKING ABOUT SERVICE MARKE R S OR THEY A R E TALKING A B O U T DEALING WITH A DIRECT SELLER HERE I N THE UNITED STATES. AND THE

PROBLEM IS THE L A N H A M A C T DOESN' T A P P L Y T O T H I N G S GOING ON IN CHINA U N L E S S T H E R E'S SOME IMPACT ON T H E U. S. TRADE, A N D T H E R E'S NO EVIDENCE OF THAT. T H E C O U R T: Y O U KNOW , T H E INTERNET HAS

CHANGED THE GEOGRAPHIC MEANS OF WHERE A SALE TAKES
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PLACE .

IF YOU GO TO A SITE THAT IS R E A L L Y

CONTROLLED BY A S E R V E R THAT'S LOCATED IN SAN JOSE A N D THEY A R E SELLING A GOOD, PART O F T H E TRANSACTION HAS T O TAKE PLACE , B Y DEFINITION , I N S A N JOSE BECAUSE THE OFFER OF T H E GOOD IS T A K I N G PLACE AS A RESULT OF THERE BEING T H E I M A G E O F T H E GOOD ON THE S E R V E R LOCATED IN S A N JOSE . T H E U L T I M A T E M O N E Y M A Y GO TO A BANK ACCOUNT LOCATED A N Y W H E R E, AND T H E G O O D S M A Y COME FROM YET A THIRD LOCATION. T H E O NLINE SALE. SO THIS IS NOT A -- THIS O NLINE WORLD HAS CHANGED THE N A T U R E O F C O M M E R C E, HASN'T IT ? DOESN 'T THE L A W NEED IT REFLECT THAT? MR . LOWE : WELL, YOUR H O N O R, I T H I N K T H E AND THAT IS T H E N A T U R E OF

COURT IS THINKING ABOUT T H E TYPICAL E- COMMERCE SITUATION A M A Z O N OR EB A Y O R SOME OF THOSE SITUATIONS WHERE THE TRANSACTION ACTUALLY TAKES PLACE , Y O U PUT YOUR CREDIT CARD ON THE SITE AND Y O U ACTUALLY B U Y I T. THIS IS NOT THAT KIND O F T R A N S A C T I O N. T H E E V I D E N C E I S THAT A L L THAT HAPPENED IS Y O U S A W PICTURES ON T H E WEBSITE HERE FROM T H E SERVER IN S A N JOSE B U T Y O U HAD TO ACTUALLY CONTACT SOMEONE I N CHINA , SEND THE MONEY T O CHINA PHYSICALLY , TAKE
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DELIVERY OF T H E PRODUCT IN CHINA , HAVE IT THEN SHIPPED TO THE U N I T E D S T A T E S OR PARIS OR WHERE ABOUTS Y O U WANT TO HAVE IT SHIPPED. SO IT 'S NOT THAT KIND O F SITUATION. HAD

THEY HAD THAT EVIDENCE WE WOULD BEING TALKING A B O U T A DIFFERENT CASE T H E C O U R T: INFRINGE MENT. B U T THIS IS CONTRIBUTORY

DOESN 'T THE FACT THAT T H E WHOLE

THING S T A R T S WITH AN ON LINE ADVERTISEMENT OF A PRODUCT THAT ALLEGEDLY VIOLATES THE COPYRIGHTED TRADEMARK, ISN 'T THAT SUFFICIENT F O R CONTRIBUTION? MR . LOWE : NO, YOUR HONOR. WHAT COURTS

HAVE REFERRED TO IS IT' S M E R E L Y A PRECONDITION TO POSSIBLE INFRINGING ACTIVITY; AND FRANKLY , I T W O U L D N'T BE A N Y DIFFERENT THAN T H E ACTIVITY OF THE P O S T A L SERVICE OR UP S O R EVEN T H E UTILITY COMPANY THAT PROVIDED THE POWER TO T H E B U I L D I N G W H E R E T H E SERVERS ARE LOCATED. A T SOME POINT Y O U HAVE TO

STOP AND Y O U HAVE TO HAVE SOME A C T U A L INTENTIONAL MATERIAL CONTRIBUTION B E F O R E YOU C A N HAVE THAT -T H E C O U R T: I AGREE. L E T' S N O T GO TO THE

POWER COMPANY, B U T A T SOME POINT Y O U D O HAVE TO START -- I S N'T IT AN APPROPRIATE PLACE TO START WITH CONTRIBUTORY INFRINGE MENT, TO START WITH T H E SERVER THAT ACTUALLY HOSTS THE PLACE WITHOUT WHICH
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YOU COULD NOT KNOW THAT THERE WAS A PRODUCT THAT W A S F O R SALE? MR . LOWE : NO, YOUR HONOR. BECAUSE YOU

HAVE TO DISTINGUISH BETWEEN M E R E L Y A PRECONDITION A N D T H E MEANS OF THE INFRINGE MENT. T H E M E A N S O F INFRINGEMENT IS A WEBSITE THAT IS CONTROLLED FROM CHINA M E R E L Y S A T ON A S E R V E R HERE , A N D THE DEFENDANTS DID N O T HAVE A N Y REAL MEANS OF CONTROL OVER THAT OTHER THAN T O U N P L U G I T, TO DISABLE A N I P ADDRESS AS THEY DID CONSTANT LY. SO THEY WERE N O T TRYING TO HELP OUT , THEY WERE ACTUALLY TRYING TO INTERFERE, THEY WERE T R Y I N G STOP IT, B U T THIS IS A DIFFICULT SITUATION. AS T H E C O U R T M A Y KNOW, NO COURT IN THE WORLD H A S Y E T FOUND AN ISP L I A B L E F O R CONTRIBUTORY INFRINGEMENT I N THIS SITUATION. AND THE CASES THAT

HAVE BEEN PUSHING THIS HAVE FAILED, AND W E SUBMITTED A NUMBER O F T H O S E. WE S U B M I T THAT THIS COURT SOME N O T BE THE FIRST TO S A Y THAT IT 'S OPEN S E A S O N ON ISP 'S BECAUSE THAT WOULD ESSENTIALLY CRIPPLE INTERNET COMMERCE BECAUSE THE DEFENDANTS HAVE N O REAL MEANS OF STOPPING WHAT PEOPLE ARE DOING SOMEWHERE ELSE OTHER THAN WHAT THEY 'VE TESTIFIED THAT THEY DID DO .
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CASE. PROVISION?

YOUR HONOR, THERE A R E T W O MORE Q U I C K POINT S, IF I M A Y. O N E IS ON THE ISSUE OF

MR . CHEN 'S LIABILITY , T H E OFFICER LIABILITY WE THINK HAS NOT BEEN ESTABLISHED MERELY BECAUSE H E WORKED THERE O R MANAGED THE BUSINESS DOES NOT MEAN THAT HE IS LIABLE -T H E C O U R T: I S N'T THAT A STATUTORY

MR . LOWE :

NO, YOUR HONOR.

T H E R E H A S TO

BE A C T U A L CONDUCT BY MR . CHEN SEPARATE FROM THE BUSINESS . A L L O F T H E CASES THAT VUITTON H A S C I T E D INVOLVED INDIVIDUALS W H O DELIBERATELY WENT O U T OF THEIR W A Y T O C A U S E A CORPORATION TO INFRINGE , MOST OFTEN DIRECTLY INFRINGE BY ORDERING T H E INFRINGING PRODUCTS , B Y LYING T O PEOPLE ABOUT WHAT THEY WERE DOING , B Y CONCEALING WHAT WAS GOING ON A N D S O O N. A N D NONE OF THAT EVIDENCE APPEARS I N THIS T H E R E'S SIMPLY N O E V I D E N C E A B O U T M R. CHEN'S

ACTIVITY E X C E P T H I S EFFORT TO STOP WHAT'S GOING ON . SO AT T H E VERY LEAST HE S H O U L D N O T HAVE A N Y LIABILITY. FINALLY, YOUR HONOR, IF I MAY JUST BRIEFLY, WE 'VE BRIEFED THIS, BUT CLEARLY THE JURY W A S O U T OF CONTROL PERHAPS BECAUSE OF INSTRUCTIONS ,
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PERHAPS BECAUSE O F PASSION ABOUT LOUIS VUITTON, I D O N'T KNOW. BUT CLEARLY, THEY CAME BACK WITH A N

EXCESSIVE VERDICT , ONE THAT I S COMPLETELY BEYOND ANYTHING THAT' S EVER HAPPENED IN T H E HISTORY OF THIS COUNTRY, AND WELL BEYOND T H E MAXIMUM DAMAGES THAT COULD POSSIBLY BE IMPOSED U N D E R E I T H E R THE TRADEMARK O R COPYRIGHT ACT . AM A Z I N G L Y, MR. C O O M B S A S K E D F O R A MILLION DOLLARS IN DAMAGES A N D THEY CAME BACK WITH $3 2.4 MILLION IN DAMAGES, WELL B E Y O N D TWO OR THREE TIMES WHAT THE MAXIMUM DAMAGES A R E. A N D WE ARGUED

W H Y THAT IS IMPROPER UNDER T H E DISCUSSION OF PUNITIVE DAMAGES AND AS MUCH AS THERE WAS NO HARM THAT WAS SHOWN , S O I T'S ESSENTIALLY A L L P U N I T I V E AND THE INSTRUCTIONS INDICATED THIS WAS T O PUNISH, A N D THEY FRANKLY GOT CARRIED AWAY. SO AT T H E VERY LEAST T H E C O U R T O U G H T T O ORDER A NEW TRIAL ON THIS ISSUE AND BECAUSE THEY OBVIOUSLY WERE CONFUSED ABOUT LIABILITY AND DAMAGES -T H E C O U R T: WHICH Y O U A R G U E I HAVE THE

POWER TO REMIT PORTIONS OF T H E P U N I T I V E DAMAGES IN E X C E S S O F WHAT WOULD BE AN A M O U N T THAT WOULD BE -ACTUALLY , I N THIS CASE THE JURY WAS GIVEN T H E R A N G E S O N A STATUTORY B A S I S A N D IT WAS S I M P L Y T H E
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MULTIPLE TIMES T H E N U M B E R OF INFRINGEMENTS. HOWEVER, JUST ON THE ISSUE OF REMITTED , DO I HAVE T H E RIGHT TO REMIT? MR . LOWE : DO . YES , YOUR HONOR . I THINK YOU

THE QUESTION IS H O W W O U L D Y O U GO ABOUT THAT?

THIS HAS HAPPENED ONLY ON A F E W OCCASIONS A N D COURTS HAVE STRUGGLED WITH H O W T O D O I T. CERTAINLY, ONE OF T H E POSSIBILITIES IS YOU JUST PICK A NUMBER WITHIN THE MAXIMUM AND MINIMUM RANGE, B U T THAT WOULD FRANKLY BE ARBITRARY BECAUSE THERE' S N O B A S I S F O R FIGURING OUT WHAT THAT IS , A N D ESSENTIALLY THIS I S A N U M B E R THAT IS A PUNITIVE DAMAGE NUMBER THAT UNDER CONSTITUTIONAL L A W S H O U L D BE TIED T O SOME A C T U A L D A M A G E FIGURE , SOME KIND O F HARM , EVEN IF Y O U C A N' T EXACTLY QUANTIFY IT . WE H A D A R G U E D THAT A T T H E VERY L E A S T T H E COURT SHOULD ORDER A NOMINAL DAMAGE FIGURE, A D O L L A R F O R EXAMPLE, BUT AT T H E VERY LEAST , VUITTON ONLY ASKED FOR A MILLION DOLLARS . THEY CERTAINLY

SHOULDN' T B E GETTING MORE THAN THAT , AND CLEARLY T H E JURY W A S O U T OF CONTROL WHEN THEY MADE T H E AWARD THAT THEY D I D. T H E C O U R T: THIS LAST P O I N T.
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OKAY.

A N D COULD YOU ADDRESS

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MR . C O O M B S:

QUICKLY ON T H E P O I N T O F

MEANS V E R S U S PRECONDITION, THAT IS AN ALIEN CONCEPT THAT HAS NO BEARING HERE. IT 'S TAKEN FROM A TRIAL

COURT DECISION ENTERED A C O U P L E WEEKS AGO IN AUSTRALIA A N D HAS NO RELEVANCE F O R THE ANALYSIS THIS COURT HAS ENGAGED IN, THAT THE JURY IS ENGAGED IN , A N D FRANKLY H A S NO IMPACT ON T H E C O U R T'S REASONING. AS F A R A S T H E DOLLAR AMOUNTS ARE CONCERNED, I W O U L D LIKE TO CORRECT MR. LOWE' S STATEMENT I N THE RECORD . WHAT I REQUESTED I N

CLOSING ARGUMENT WAS N O T LESS THAN A MILLION DOLLARS, AND THE JURY CLEARLY DID AWARD NOT LESS THAN A MILLION DOLLARS. B U T TO SAY LOUIS VUITTON

ONLY ASKED FOR A MILLION DOLLARS IS A MIS STATEMENT OF T H E R E C O R D. AS F A R A S T H E STATUTORY D A M A G E A M O U N T IS CONCERNED, FIRST OF ALL , I T'S N O T S O L E L Y PUNITIVE. IT IS DESIGNED TO BE COMPENSATORY A N D IT IS DESIGNED TO BE PUNITIVE A N D I T I S D E S I G N E D T O B E A DETERRENT. AND I N THIS CONTEXT WITH LITERALLY HUNDREDS OF SITES A N D EACH SITE HAVING HUNDREDS OF O F F E R S, SOME O F W H I C H H A D BEEN SUBJECT OF NOTICES BEFORE THE COMPLAINT WAS FILED AND WERE STILL O N
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WHEN MR. CHEN WAS SITTING ON THE STAND , T H E S E A R E N O T O U TLANDISH NUMBERS. A N D I N FACT , W E WERE A L L HERE WHEN THE JURY CAME BACK SEVERAL TIMES WITH QUESTIONS EVIDENCI N G THEIR CAREFUL DELIBERATION ON THE APPROPRIATE AMOUNT O F STATUTORY DAMAGES T O AWARD I N THIS CASE. SO WE WOULD RESPECTFULLY S U B M I T THAT NOTWITHSTANDING M Y CONSERVATISM IN CLOSING A R G U M E N T THAT THE $3 1 MILLION IS AN APPROPRIATE D A M A G E A W A R D WHICH S H O U L D B E ALLOWED TO STAND . T H E C O U R T: A N D I AM REMINDED THAT THIS

IS A CASE W H E R E T H E R E W A S A REQUEST F O R INJUNCTIVE R E L I E F W H I C H C A N SOMETIMES PLAY IN THE COURT 'S MIND WITH RESPECT T O WHETHER OR N O T A LARGE PUNITIVE AWARD S H O U L D B E ALLOWED TO STAND IN LIEU OF SIMPLY HALTING THE PRACTICE ; HOWEVER , I 'M ALSO R E M I N D E D THAT THE DEFENDANT'S POSITION IS IT H A S N O M E A N S O F ACTUALLY COMPLYING WITH EVEN A LIMITED INJUNCTION BECAUSE IT DOESN' T HAVE T H E ABILITY TO U N P L U G I T S SERVER AND STAY I N BUSINESS. AND BY BEING A

S E R V E R, IT' S FOREVER PREY TO INTERNET SITES THAT SEEK TO SELL K N O C KO F F P R O D U C T S. THANK YOU BOTH FOR YOUR ARGUMENT , MATTER IS SUBMITTED.
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MR . C O O M B S:

YOUR HONOR , ONE QUESTION.

WHEN WE WERE HERE LAST MONTH IT WAS YOUR HONOR' S INTENTION TO TRANSMIT A D R A F T FORM OF T H E INJUNCTION BEFORE THIS HEARING TODAY. I DON 'T THINK WE' VE SEEN A N Y T H I N G A N D I W A S WONDERING IF WE HAD AN U P D A T E O N T H E STATUS OF THE INJUNCTION . T H E C O U R T: T H A N K S F O R REMINDING ME . I PERHAPS DIRECTED B Y I

WILL TAKE A LOOK AT THAT.

STAFF TO HOLD OFF UNTIL I HAD T H E BENEFIT OF THIS ARGUMENT BECAUSE IT COULD HAVE INFLUENCED T H E LANGUAGE OF WHAT I D I D ON THE INJUNCTION, B U T I 'LL F O L L O W THROUGH ON THAT. MR . C O O M B S: T H A N K Y O U, YOUR HONOR.

(WHEREUPON, T H E PROCEEDINGS I N THIS MATTER WERE CONCLUDED.)

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CERTIFICATE OF REPORTER

I, T H E UNDERSIGNED O F F I C I A L C O U R T REPORTER OF T H E U N I T E D STATES DISTRICT COURT F O R THE NORTHERN DISTRICT O F CALIFORNIA , 280 SOUTH FIRST S T R E E T, SAN JOSE, CALIFORNIA, DO H E R E B Y CERTIFY: THAT THE FOREGOING TRANSCRIPT , CERTIFICATE INCLUSIVE, CONSTITUTES A TRUE , FULL AND CORRECT TRANSCRIPT O F M Y SHORTHAND NOTES TAKEN AS SUCH OFFICIAL COURT REPORTER OF THE PROCEEDINGS HEREINBEFORE E N T I T L E D A N D REDUCED B Y C O M P U T E R-A I D E D TRANSCRIPTION TO THE BEST OF MY ABILITY.

__ ___ ___ ___ ___ ___ ___ ___ ___ S U M M E R A . F I S H E R, C S R, CRR CERTIFICATE NUMBER 13185