In a significant development, the Court of Justice for the European Union (CJEU) handed down a decision which places greater responsibility on online marketplace sellers offering counterfeit goods.
Background
French luxury brand, Christian Louboutin brought two sets of proceedings against Amazon in the Luxembourg Courts for infringement of its registered EU trademark, its distinctive, red-soled shoes. The registration of an EU trademark gives the holder exclusive rights to its use and prevents third parties using the trademark in relation to other goods or services, without consent from the holder.
Christian Louboutin alleged Amazon was liable for trademark infringement for regularly advertising red soled shoes from third-party sellers on its website. This was defended by the e-commerce giant who argued liability rests with the seller.
Part of the complication around liability lies with Amazon’s business model. Amazon operates an online marketplace, selling goods which it offers both directly, in its own name and on its own behalf, and indirectly, by providing a sales platform and marketing services for third-party sellers. The shipping of goods can be handled either by those sellers or by Amazon who stocks those goods at its distribution centres. The general legal position is that online marketplace operators, such as Amazon and eBay, will not be liable for trademark infringement provided they do not knowingly offer counterfeit goods on the market and act only as a neutral intermediary.
The question referred by the Luxembourg Courts to the CJEU was whether an online marketplace operator can be held liable for trademark infringement for advertising goods on behalf of a third-party seller.
Decision
The Court ruled that Amazon could be directly liable for advertising infringing goods (such as counterfeit Louboutin shoes) on its website on behalf of third-party sellers. Through the act of advertising, Amazon was more than a neutral intermediary.
The court was particularly swayed by the fact that Amazon does not distinguish between its own products and those of third-party sellers in adverts on its website or ‘pop-ups’. Instead, Amazon sells/ presents all products under the same branding and company logo. Under such circumstances, a reasonably well-informed user may well have difficulty ascertaining whether the goods originated from Amazon or sold by a third-party.
The decision will now be passed to the Luxemburg court who will apply the CJEU’s reasoning in its own jurisdiction.
What is the significance of this ruling?
Whilst this case is fact specific, the CJEU decision has added an important distinction to trademark infringement liability. Brand value, and the associated trademark, is a highly prized commercial asset. The rise of e-commerce has made it easier for counterfeit goods to be sold worldwide and it is increasingly difficult for brand owners to locate third-party sellers who are often based overseas. The shift in responsibility to marketplace sellers is therefore a small but welcome step for trademark owners seeking to protect its brand identity. However, time will tell whether this is part of an overall trend towards greater responsibility for marketplace operators to control counterfeit goods.
For businesses operating the same or a similar advertising model, it is important to distinguish between their own goods/offers from that of third-party sellers, to ensure customers are clear who exactly they are buying from.
What are the implications for UK based businesses post Brexit?
In accordance with the Withdrawal Agreement, EU trademarks registered on or before 31 December 2020 will automatically be incorporated into UK law. This means an EU trademark registered before this period will have the same legal status as if the proprietor applied and registered it in the UK.
However, any EU trademark registered on or after 1 January 2021 will no longer be automatically protected under UK law. Today, if a business wants exclusive rights of its trademark in the UK and the EU, it will need to make two separate applications under the relevant legal process. The converse also applies, as a UK based sales platform cannot be sued over an EU trademark registered after 1 January 2021 unless the proprietor has registered a comparable trademark in the UK.
Does this judgement apply to the Courts of England and Wales?
Whilst the UK is no longer bound by CJEU’s decisions made after 31 December 2020, the UK courts and tribunals can look to the CJEU’s judgements as persuasive precedent when handing down decisions. The extent to which UK courts will follow this decision remains to be seen but it will likely have a persuasive force on future judgements given this is a developing area of Intellectual Property law.
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Nick became the firm’s Senior Partner in 2019, having been with Aaron & Partners for over 20 years, and he sits on the firm’s management board. He also leads the Dispute Resolution team.
