Opinion ID: 3009507
Heading Depth: 3
Heading Rank: 3

Heading: Is there agency liability under section 43(a)?

Text: The question, then, is whether application of agency theory, including the doctrine of apparent authority, would 14 . If the doctrine of contributory infringement were the sole means of imposing liability for indirect conduct, AT&T would be without a section 43(a) remedy in this case. As the district court recognized, AT&T is not proceeding under a contributory infringement theory. Nor does it appear that it could. The record adequately supports the district court's conclusion that in the instances where [AT&T] brought objectionable acts of the sales representatives to the attention of Inga, Inga took appropriate steps to reprimand and discipline the sales representative. Winback, 851 F. Supp. at 631. further the goals of the statute. See, e.g., Hydrolevel, 456 U.S. at 570, 102 S.Ct. at 1944. In Hydrolevel, the Court, finding that under general rules of agency law, principals are liable when their agents act with apparent authority and commit torts analogous to the antitrust violation presented by this case, simply looked at the policy behind the antitrust laws to determine whether the doctrine should be applied. Id. at 565-66, 570, 102 S.Ct. at 1942, 1944. Because apparent authority theory is consistent with the congressional intent to encourage competition, the Court applied the doctrine. Id. The contributory infringement cases cited above demonstrate that in certain instances, secondary, indirect liability is a legitimate basis for liability under the federal unfair competition statute. There is a good reason for this: the Lanham Act is derived generally and purposefully from the common law tort of unfair competition, and its language parallels the protections afforded by state common law and statutory torts. Thus, the conduct prohibited by section 43(a) of the Lanham Act is even more analogous to common law torts than the antitrust laws at issue in Hydrolevel. The Act federalizes a common law tort. In construing the Act, then, courts routinely have recognized the propriety of examining basic tort liability concepts to determine the scope of liability. See, e.g., Electronic Lab. Supply Co., Inc., 977 F.2d at 806 (section 34(d)(11) of Lanham Act is like a tort statute); Hard Rock Cafe, 955 F.2d at 1148 (trademark infringement is a species of tort and we . . . have turned to the common law to guide our inquiry into the appropriate boundaries of liability); David Berg and Co. v. Gatto Int'l Trading Co, Inc., 884 F.2d 306, 311 (7th Cir. 1989) (unfair competition and trademark infringement are tortious); 3 McCarthy on Trademarks § 25.03[1] at 25-34 (trademark infringement and unfair competition are torts). We previously have held that the federal law of unfair competition under § 43(a) is not significantly different from the New Jersey [common] law of unfair competition and have applied the identical test to both claims. American Greetings Corp. v. DanDee Imports, Inc., 807 F.2d 1136, 1141 (3d Cir. 1986); see also American Home Prods. Corp. v. Barr Lab., Inc., 656 F. Supp. 1058, 1061 (D.N.J. 1987) (same), aff'd, 834 F.2d 368 (3d Cir. 1987). Other courts have ruled similarly. See, e.g., Words & Data, Inc. v. GTE Communications Servs., Inc., 765 F. Supp. 570, 579 (W.D. Mo. 1991) (Missouri common law regarding unfair competition is coextensive with federal law); Worthington Foods, Inc. v. Kellogg Co., 732 F. Supp. 1417, 1431 (S.D. Ohio 1990) (an analysis appropriate for a determination of liability under section 43(a) of the Lanham Act is also appropriate for determining liability under the Ohio Deceptive Trade Practices Act). Therefore, because section 43(a) parallels state tort law and is derived from tort common law, it is self-evident that application of at least some tort concepts of liability will advance the goals of [the Act]. Petro-Tech, Inc., 824 F.2d at 1356. Applying the analysis to the facts of this case, it is clear that liability based on agency principles is often appropriate.15 The Lanham Act has the broad purpose of protect[ing] . . . competitors from a wide variety of misrepresentations of products and service . . . . 20th Century Wear, Inc. v. Sanmark-Stardust Inc., 747 F.2d 81, 91 n.13 (2d Cir. 1984), cert. denied, 470 U.S. 1052, 105 S.Ct. 1755 (1985). By expressly creating a private right of action against the infringer, the Act creates a statutory tort of broad[] scope that provides a private remedy to a commercial plaintiff who meets the burden of proving that its commercial interests have been harmed by a competitor's [misrepresentations]. Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 227, 230 (3d Cir. 1990). Here, the parties recognize that AT&T has the right to sue the sales representatives under section 43(a). But, as Winback acknowledges, it would be inconvenient for AT&T to initiate suit in separate jurisdictions against every independent contractor which it believes violated its intellectual property rights. Appellee br. at 13-14. The only feasible way for AT&T to assert its federal rights would be to sue the principal, who, if an agency relationship is established, is able to exercise at least some control over its agents, who authorized the sales representatives to enter into contracts on its behalf, and who receives direct financial benefits from those 15 . The one case we have found that addresses this issue held without analysis (and apparently without dispute) that a principal could be held liable for the infringing acts of its agent acting with apparent authority. See Dreamwerks Prod. Group, Inc. v. Party Masters, Inc., Br. No. 91-22949, 1992 Bankr. LEXIS 711 at  47-48 (N.D. Ill. April 23, 1992). contracts. If the Act prohibited such liability, then infringing actions would continue undeterred, a company would benefit from undeterred unlawful acts, and the statute's purpose to prohibit unfair competition would go unrealized. '[I]t would be unjust to permit an employer to gain from the intelligent cooperation of others without being responsible for the mistakes, the errors of judgment and the frailties of those working under his direction and for his benefit.' Petro-Tech, 824 F.2d at 1358 (quoting Restatement (Second) of Agency § 219, comment (a) on subsection
Thus, we hold that the district court properly held that agency principles apply to the instant dispute. Nonetheless, our review of the record compels the conclusion that the district court erred by failing adequately to consider the various theories of agency under which Winback could be responsible for the torts of its representatives. In particular, the district court should have considered (1) whether Winback is liable for its representatives' acts, despite the fact that the representatives are independent contractors and despite the absence of a master-servant relationship; and (2) whether the representatives, even if not agents, were acting with the apparent authority of Winback.