Are e-commerce platforms liable for stocking trade mark infringing goods?
E-commerce is gaining strength as the years go by. The European 2020 Ecommerce Regional Report reflects a growth in the value of e-commerce of 12.7% in Europe in 2020 compared to the previous year. While it is true that the COVID-19 crisis has meant a downturn in the world economy and a drop in growth in many sectors, this has not been the case for online commerce, which has seen a boost in growth and an increase in the use of online sales platforms during the crisis.
This growth also carries the risk of an increase in the sale of trade mark infringing goods on e-commerce platforms. But do these platforms have any responsibility? The Court of Justice of the European Union (CJEU) had the opportunity to rule on this issue in Coty v. Amazon C-567/18.
Coty Germany was the owner of the European trade mark Davidoff under which it markets its perfumes. Coty found out that perfumes under the Davidoff trade mark were being sold by third parties through Amazon without its consent. Coty brought proceedings against Amazon before the German courts, which eventually reached the CJEU by way of a request for preliminary ruling from the German Federal Court of Justice. The CJEU was asked whether those who unknowingly store goods for third parties that infringe trade mark rights possess those goods for the purpose of offering or marketing them. Basically, was Amazon making use of the Davidoff trade mark by offering or marketing the product?
The CJEU cites its own jurisprudence, which establishes that use shall be deemed to exist where there is active conduct and direct or indirect control of the act constituting the use, and provided that the use of the sign is made in the context of its own commercial communication. For the CJEU, it is the persons who market the products that make use of the signs, not Amazon. The platform simply creates the technical conditions necessary for third parties to make such use.
Therefore, the CJEU exempts e-commerce platforms from liability where they are not aware of trade mark infringement of the third-party products they store.
Notably, the CJEU’s ruling departs from the Advocate General Campos Sánchez-Bordona’s earlier recommendation in his Opinion of 28 November 2019. In Sánchez-Bordona’s view, Amazon does have active conduct and control over the infringing products as Amazon is far from a mere carrier or stockist. Rather Amazon participates in the eyes of the consumer in the sale of the products, for example, in their packaging or advertising, and so it stores these products for the purpose of offering or marketing them. Ignorance on the part of the platform does not exempt it from liability when it could reasonably be required to put in place the appropriate means to detect the infringements.
The CJEU also highlights that, insofar as one economic operator allows another to use the trade mark, provisions of the e-Commerce Directive must be considered, which provide exemptions for online marketplaces where data is stored without actual knowledge of the unlawful information or facts.
However, the European Commission has already warned of the inequalities in the digital market and the growth of illegal online content, products and services in the wake of the COVID-19 crisis. For this reason, on 15 December 2020 it published a regulatory package comprising two regulations: 1) the Proposal for a Regulation of the European Parliament and of the Council on a Single Market for Digital Services (Digital Services Act) and amending Directive 2000/31/EC (hereinafter the “Proposal”); and 2) the Proposal for a Regulation of the European Parliament and of the Council on Contestable and Fair Markets in the Digital Sector (Digital Markets Act).
The first Proposal is envisaged for e-commerce platforms that have a significant reach, for example where the number of recipients exceeds 45 million, which is equivalent to 10% of the EU population.
The Explanatory Memorandum of the Proposal establishes the need for clear and harmonised rules on responsibilities and accountability for digital services.
Article 5 of the Proposal introduces liability under consumer protection law for online trading platforms who distance sell with traders and provide the specific item of information or otherwise make the transaction possible, where it appears to the consumer that it is the platform itself, or by a third party under its control, that provides the product. If we go back to the Sánchez-Bordona’s conclusions, his position on Amazon’s involvement in the sale and purchase of its products could be aligned with this provision.
We will have to wait and see whether the CJEU maintains its current interpretation in future cases or whether it changes its view in light of the new legislative package and in particular Article 5 of Proposal, which holds e-commerce platforms liable for infringement with respect to the storage of goods that are deemed to infringe intellectual property rights.