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The San Francisco’s leading online daily SFGate reported that a federal jury in California has found two web hosting companies and their owner liable for contributing to trademark and copyright infringement for hosting sites selling counterfeit Louis Vuitton goods. The jury assessed damages totaling more than $32 million against web hosts Akanoc Solutions Inc., Managed Solutions Group Inc., and Steven Chen, the owner of the two companies.

In awarding the damages, the jury agreed with Louis Vuitton Malletier S.A.’s claims that the defendants knowingly allowed several websites they hosted to sell products that infringed Louis Vuitton’s copyrights and trademarks.

The U.S. District Court for the Northern District of California is expected to issue a permanent injunction banning the web hosting providers from hosting websites which selling fake Louis Vuitton goods in the future.

California Based Court Paved A Way Web Hosts To Be Sued For Their Customers Conducting Illegal Activities

Attorneys of the Louis Vuitton said that the case is the first successful application on the Internet of the theory of contributory liability for trademark infringement. Under this theory, any companies that know, or should know, that they are enabling illegal activities have an obligation to remedy the situation. Web hosts that fail to do so can be held legally responsible for contributing to the illegal activities.

Lawyers of Mr. Chen, the owner of both web hosting providers had argued that Akanoc Solutions, a company that enable Chinese citizens to launch enterprises in United States and Managed Solutions were protected under the Digital Millennium Copyright Act‘s (DMCA). This is a law that limits the liability of ISPs for activities by its customers that might constitute copyright infringements. The defense lawyers said that Steven Chen and web hosting providers could not be held liable for the actions of websites they hosted but did not directly own or operate.

However the Louis Vuitton lawyers claimed that Steven Chen’s web hosting companies were contributing to the illegal activities conducted by their customers by providing the infrastructure that enabled the sale of counterfeit goods. They further said that web hosting providers had been informed of the activity by Louis Vuitton but refused to implement a policy for removing the offending sites, which was their responsibility.

A New Standard For Trademark Infridgements

The verdict “establishes a standard” for trademark infringement complaints on the Internet. In an interview with Computerworld today Andy Coombs, Louis Vuitton’s counsel said the verdict shows why it’s important for web hosting providers and ISPs to enforce acceptable use policies. “It’s one thing to have these policies, but you’ve got to implement them when given notice of abuse,” said the LV lawyer.

In the above described case, Louis Vuitton showed that it had sent numerous notices to the web hosting companies, but they were ignored or the companies didn’t acte upon expeditiously.

Reactions

The verdict drew mixed reactions. A forums poster who signed the comment as Bret Clark said in a discussion thread among network engineers in the NANOG website, that ISPs and web hosts shall not being held responsible for “policing its customers. “I’m constantly getting called up from scammers trying to [offer] me bogus warranty insurance for cars I don’t own. Does that mean I can sue Verizon because they are letting scammers use their network?”, said the poster.

“Jamie”, another user of the forum said that web hosts cannot ignore notification about one of its customers indulging in possibly illegal activities.

“It’s the first one in an Internet case where a web hosting provider was found liable for trademark infringement for failing to shut down a website after being given notice” of trademark infringing activities, said David Johnson, a lawyer specializing in digital media law in Los Angeles. He called the verdict precedent setting.

Under existing precedent a claimant who is seeking to prove a trademark infringement needs to prove that a defendant intentionally and knowingly enabled another to infringe a trademark. In the above described case, the court was convinced by the evidence presented by Louis Vuitton that the web hosting providers knew about the infringing activity.

“Web-based business software sales are growing briskly, even as most of the industry stalls, as the segment pioneered by Salesforce.com Inc benefits from the weak economy and fading concerns about security”, reported Reuters. According to research firm Gartner the sales of Cloud based software will grow with 22% to a record $8 billion. “We are still going strong,” says Sharon Mertz, Gartner analyst who advises IT managers on software purchases. “The model is pretty solid, even in these tight economic times.”, says Ms Mertz.

The rapid development of Cloud computing platforms puts pressure on established software companies such as Microsoft,  IBM, Oracle and SAP AG to play catch-up, after standing on the sidelines for most of the past decade as Salesforce and others gained credibility with corporate clients.

Many of the providers of Cloud software and Software as a Service (SaaS) host their technologies in their own data centers, offering their customers various IT services through web browsers. This model of doing computing saves corporate client and small business customers a lot of money on buying hardware and software licenses in advance and running programs on their own computers.

The SaaS model of delivering computer services through Internet begun outperforming tthe raditional model of selling software as the world economy worsened.

SaaS provider NetSuite Inc, founded by Oracle chief Larry Ellison, reported a 22%  increase in quarterly revenue. While companies like NetSuite are growing from a smaller base, their performance contrasts with a 33% fall in software revenue at SAP, a 6% drop at IBM and a 5% rise at Oracle. For example Salesforce’s forecast is to post a 23% increase in sales.

Gartner analysts expects the SaaS market to grow at average annual rates of 19.4% through 2013, far above the 5.2% growth for the overall business management software market. Salesforce, whose stock has gained 40%this year, is trading at about 56 times forward earnings according to Reuters Estimates. NetSuite, which is up 48% this year, trades at a multiple of 93. By comparison, SAP, whose shares have gained 12% this year, trades for about 14 times forward earnings. Oracle, whose stock is up 7%, trades at a multiple of 13.

It was probably impossible to predict such a scenario a 10 year a ago, when Marc Benioff quit his executive job at Oracle to found web based business software business. He brought together a few programmers who worked out of a small apartment in the building where he lived. The new team developed Salesforce’s first software programs for managing sales and marketing fairly quickly. The hard work was to get customers was a bigger challenge due to various security concerns.

However Salesforce gradually signed up customers, including financial institutions like Merrill Lynch and Aon, which conducted intensive reviews of its data centers. Having references from these companies helped the new enterprise to overthrow concerns about security.

Today, Salesforce counts among its 55,000 business customers including Dell, Sprint Nextel Corp, Starbucks Corp, Toyota Motor, and the U.S. Army.

“The maturity of the SaaS model has come a long way,” explains Tom Hattier, an IT manager with General Electric. and adds that more and more companies have embraced it. General Electric has been using web based software for several years decided to go live last October with a corporate-wide system hosted by Aravo Solutions that manages GE’s database of more than 500,000 suppliers.

However the growing popularity of Cloud class software has been boosted by innovations in Web 2.0 technologies implemented by companies like Google. The web giant sells business versions of its email, calendar spreadsheet and word processors and offers consumers, offering them extra collaboration and archiving functions.

Microsoft, which is still expected to launch its Cloud platform Azure offers online marketing software, programs targeted at small businesses and is getting ready to bring its popular Microsoft Office software online and to sell it as a service.

IBM and Oracle are alos launching new SaaS products. while SAP puts out a line of accounting programs for small to middle-sized businesses.

And a string of smaller companies sell niche software to manage sales, marketing and human resources that they hope will become the next big hit. They include ConstantContact.com, Kenexa Corp, RightNow Technologies, SuccessFactors.com, Taleo Corp, Ultimate Software Group, etc.

There are also many other new and start-up companies such as Abiquo and Daas.com,which develop PaaS (Platform as a service) solutions and have already entered the market or are about to debut their cloud software in 2009.

Eucalyptus, the open-source project which was the core Amazon’s cloud infrastructures set up has been established as a private company, named Eucalyptus Systems. The Eucalyptus said that its new venture raised $5.5 million. The company aims to support the open-source cloud platform and  to deliver on-premise private and hybrid cloud computing solutions for large-scale businesses.

Eucalyptus is an acronym from “Elastic Utility Computing Architecture for Linking Your Programs to Useful Systems”. It has recently became a component of the Ubuntu Linux server distribution.  According to company founder Rich Wolski “Eucalyptus Systems will enable businesses of any size to leverage their own IT resources to get the benefits of cloud computing without the concerns of lock-in, security ambiguity, and unexpected storage costs that can be associated with public clouds”.

Eucalyptus is the only private cloud platform today that supports the same application programming interfaces (APIs) as Amazon Web Services.

Hewlett Packard announced that it releases a new blade server and storage system that aims to power the new generation virtual data centers and to be used for cloud computing class IT services and platforms.

Along with the HP BladeSystem Matrix (a a cloud infrastructure in a box) HP has said that the new HP LeftHand storage P4000 SAN is available as a standalone iSCSI SAN product or as a part of virtualized blade server infrastructure in a bundle called HP StorageWorks SB40c with P4000 Virtual SAN Appliance Software.

The HP’s announcement of the new enterprise IT storage solution came month after Cisco entered the blade server market with its new Unified Computing System for virtualized data centers, and a week after EMC introduced a Symmetrix V-Max storage system and new architecture. Cisco and EMC agreed to join forces to ensure their systems can easy to interoperate.

One of the well-recognized U.S. dedicated hosting providers The Planet announced that it plans to go overseas and to open its first data center in Europe. This would be the first data center operation of the company outside North America. the company claims to face an increasing demands for an international, globally redundant hosted infrastructure. The Planet says its new facility will be build in London area.

”For the past 18 months, we’ve evaluated international markets that are of strategic importance to our planned global expansion, and Europe has been at the forefront of those discussions. We’ve had serious customer interest, which underscored that the time was right to move forward”, said Douglas J. Erwin, Chairman and Chief Executive Officer at The Planet.

The dedicated hosting provider plans to start offering its proprietary virtual racks solution on UK and EU market in April. The Planet will offer 20kW of power per rack, backed by N+1 redundancy on generators, transformers and UPS systems. According to hosting provider, its new customers will have access to a 10GB private fiber interconnect to The Planet’s core network, as well as local connectivity to Tier-1 providers and the major EU peering exchanges.

The company has begun building its London based data center two years ago. Recently it added some peering points on the East and West Coasts of the United States. The Planet says that their storage cloud and CDN (Content Delivery Network) products also provide global access points. 42% of the provider’s customers are coming from outside U.S.

The Planet has signed a colocation agreement with TelecityGroup, a company that maintains 20 data centers in 7 EU countries. The web host announced that the procedures in its new facility comply with ISO 9001:2000, a standard that defines requirements for the quality management systems for data center operations.

At the need of the 2009 The Planet said it planed to open its 7th data center in Dallas, a 86,000 square foot collocation facility in Dallas. It is expected to be opened in May 2009.