Online marketplaces: Part 2 - Liability for Counterfeit Goods
Can online marketplace providers face liability for third-party counterfeiting: perspectives from the Louboutin-Amazon case and the upcoming Digital Services Act
Can online marketplace providers be held liable for the advertising and trade of counterfeit goods on their platforms? Does the fact that an advertisement serving to promote counterfeit goods presents a heading with the online marketplace provider’s service mark, have any bearing on the answer to the previous question? And does the fact that an online marketplace provider does more than just stocking and shipping counterfeit products – that is to say, the provider plays an ‘active role’ in the trade and delivery of the contentious products - have any impact on the foregoing assessment?
These are the thorny questions to which the Court of Justice of the European Union (the CJEU) has recently been invited to respond, as part of the preliminary reference procedure submitted by a Luxembourgian Tribunal d’Arrondissement in the case opposing Louboutin, the French luxury shoe maker, and a number of EU-based Amazon entities. The dispute centers around a number of advertisements, promoting counterfeit shoes and displayed on the Amazon marketplace, on behalf of third-party trademark infringers. At issue is also the stocking and delivery of these counterfeit goods by Amazon, by way of its ‘Fulfilment by Amazon’ delivery service, and as we work for several online marketplaces from luxury goods portals through to travel vaccinations and products platforms, we thought that it would be helpful to share our insights in this area.
The issue of online marketplace providers’ liability is one that has been written about extensively in the past. It is also one of the issues that the Digital Services Act, the EU Commission’s most recent proposal for a regulation on a Single Market for Digital Services specifically aims to address. The difficulty being that the Digital Services act - hereafter DSA and details of which were unveiled this past 15th December - does not provide an unequivocal answer to the difficult questions which have served as an opening for this article. In our previous article in this series, we looked at liability for online marketplaces generally pre-DSA and in light of the impending legislation.
In the second article of this series, we focus specifically on the issue of liability for infringing or counterfeit goods as between brands and online platforms, acting as an intermediary between such brands and consumers for sales of products to end-customers.
Indeed, as is often the case in with EU law – where the CJEU’s caselaw is often called-upon to help clarify the EU’s primary and secondary statutory law - the Louboutin-Amazon case therefore represents a welcome opportunity to clarify the EU’s position on the matter. As such, IP Law experts have called Case C-148/21 ‘one to watch’.
In this article, we delve deeper into the matter of online market place liability; we examine what the DSA could (or could not) hold in store for online marketplace providers; and we discuss why the Louboutin-Amazon case is so important.
Louboutin v. Amazon - the saga of case C-148/21
With case C-148/21, the CJEU will therefore have the difficult task of clarifying whether online marketplace operators may be held liable for third-party counterfeiting of a registered EU trademark as part of an advertisement on said online marketplace’s website and/or the delivery of counterfeit goods.
The questions referred to the CJEU by the Luxembourgian Tribunal d’Arrondissement in this case, reveal just how many question marks are raised by the issue of online marketplace providers’ liability for counterfeit goods. Both questions refer to Article 9 (2) of Regulation 2017/1001 on the European Union trade mark.
This is the provision which grants the proprietor of an EU registered trademark the right to prevent all third parties not having their consent to do so, from using said sign, in the course of trade. That is:
…where the use of such sign is used in relation to goods or services which are identical with those for which the EU trade mark is registered; where such use could lead to confusion between the identical goods and services in question; or where, irrespective of the similarity between the goods and services, the proprietor has a reputation in the Union and where use of that sign without takes unfair advantage of this reputation…
Regarding the contentious advertisements, the Luxembourgian court asked the CJEU to clarify whether the aforementioned Article 9 (2) can be “interpreted as meaning that the use of a sign identical with a trade mark in an advertisement displayed on a website is, in principle, attributable to its operator if, in the perception of a reasonably well informed and reasonably observant internet user, that operator has played an active part in the preparation of that advertisement or if that advertisement may be perceived by such an internet user as forming part of that operator’s own commercial communication?”.
The Luxembourgian court also asked whether the fact that the contentious advertisement presents a heading in which the operator’s service mark is reproduced and/or that the operator is a well-known distributor of a wide range of goods, can have a bearing on the answer to the previous question.
Regarding Amazon’s stocking and delivery of the counterfeit products, the Luxembourgian court essentially asked the CJEU to clarify whether a shipping operator’s knowledge that an unauthorised sign has been affixed to counterfeit goods is a necessary pre-condition to hold the shipper liable.
The referral raised two scenarios in which the shipping operator’s actions may be deemed to constitute a unauthorised use attributable to the shipper, even if there is no express knowledge at play:
if the shipper “stocked the goods”; and/or
if the shipper has “made an active contribution to the display, in the course of trade, of an advertisement for the goods bearing that sign”.
Possible outcomes of the case
Eleonora Rosati, Intellectual Property Law Professor and Director of the Institute for Intellectual Property and Market Law at Stockholm University, has written about the possible outcomes of case Case C-148/21 – not with the upcoming DSA in mind, but rather with regards to past jurisprudence delivered on the matter, which may be just as important in determining the outcomes of the case at hand.
Regarding the ‘advertisement’ piece of the referral, Rosati cites a prior decision rendered on August 9th 2019 by the Tribunal de l’Entreprise de Bruxelles, in another dispute opposing Louboutin and Amazon over third-party advertisements for counterfeit goods: here, the Tribunal de l’Entreprise had ruled that Amazon could be held liable... only to be reversed by the Brussels Court of Appeal, in a later judgement delivered in June 2020.
As for the shipping and delivery part of the referral, Professor Rosati cites the Brussels Court of Appeals’ reasoning, as made explicit in the same June 2020 judgement: there, the Brussels Court of Appeals had relied on the prior Coty Germany GmbH v Amazon Services Europe (case
C-567/18, which opposed a perfume distributor and number of Amazon entities).
The Court had concluded that Amazon could not be held liable for the stocking of counterfeit goods.
Most strikingly though, Rosati draws our attention to Advocate General Campos’s Opinion, delivered in the case resulting in the June 2020 judgment: in this Opinion, the Advocate General had offered a more nuanced interpretation, proposing that if an online marketplace provider actively contributes to the distribution of infringing goods - that is, if an online marketplace provider does not merely store and ship the counterfeit products, but actually plays an active role in the sales process - then it should be expected that such a provider acts to detect such infringement, irrespective of its knowledge of such infringement.
Rosati notes that this ‘active role’ criteria is one which would most likely be met in the case of Amazon’s Fulfillment by Amazon programme, which is widely considered more than just a delivery service and is likened to an integrated store” in which Amazon plays a central role.
Summary and next steps
Online marketplace providers’ liability for the advertisement, storing and shipping of counterfeit goods is a complex topic, with many moving parts.
While one of the objectives of the DSA is to clarify the liability regime, this latest referral before the CJEU in the Louboutin / Amazon case will most certainly be necessary to clarify the EU’s position on the topic.
The EU’s highest court will have the difficult responsibility of clarifying whether the post-DSA world will be one in which intermediary service providers will be able to operate from the comfort of the ‘safe harbour’, much like they do currently; or whether the future will be one which is more favorable to trademark owners in their fight against counterfeit goods. Indeed, it seems that as online marketplaces seek to differentiate themselves from competitors and offer added-value services above and beyond the traditional platform offering; such as Amazon’s fulfillment offering, this may result in such online marketplaces being on the hook for liability that their business model may not have initially anticipated. Therefore, if you operate or sell goods via an online marketplace, it is important to look at the agreements in place and the specific services that are included in any arrangements you have.
As always, should you have any questions or queries regarding this topic or your latest business undertakings, please do not hesitate to contact us!
Article by Leila Saidi @ Gerrish Legal, June 2021