Trade in counterfeit goods is a major risk for today's global economy. The harmful impact of illicit trade in fake goods on consumers, economic growth and innovation should not be underestimated, with the EU Intellectual Property Office reporting that trade in counterfeit and pirated goods amounted to up to 2.5% of world trade in 2019.
The definition of trade mark use, especially in the case of platforms that are used by third parties to sell infringing goods, continues to give rise to legal discussions. Previous decisions have confirmed that the mere operation of an online marketplace is not sufficient to amount to trade mark use. However, questions have been raised in particular in relation to Amazon's 'hybrid' business model whereby it advertises and sells both its own goods (sold and shipped under its own name), alongside those of third party sellers. Whilst the Court of Justice of the European Union (CJEU) had decided in the Coty case that Amazon's acts of storing goods for third party sellers could not be regarded as 'using' the trade mark (as discussed in our article here), the CJEU's recent decision in a case involving Christian Louboutin and Amazon is likely to have far-reaching implications for Amazon's business model.
Pursuant to the CJEU's assessment, online sales platforms could be held liable if they display their own advertisements alongside those of third-party sellers, and if additional services are offered by the platform (for example, shipping, handling returns or addressing user enquiries). It is the impression of the consumer and how they perceive the operator marketing the goods that is key. Whilst the CJEU's decision must now be applied by the national courts to the facts of the case, it has given a very clear steer as to the relevant factors that should be taken into account in determining whether a platform is liable for third party infringements.
Louboutin issued proceedings against Amazon in both Belgium and Luxembourg for trade mark infringement, arising from Amazon regularly displaying advertisements for goods which infringed Louboutin's famous red-soled shoe trade mark, which is registered as both an EU and a Benelux trade mark.
As is well-known, Amazon operates a hybrid business model: it advertises and sells both its own goods (which it sells and ships under its own name), alongside those of third-party sellers. It also offers third-party sellers additional services of storage and shipping.
Louboutin claimed that, because Amazon regularly advertises red-soled shoes offered by third party sellers, it had infringed its trade mark. It argued that consumers using Amazon would think that the adverts for the infringing goods came from Amazon, rather than a third party.
The Courts in both Luxembourg and Belgium asked the CJEU to consider whether, given Amazon’s hybrid business model, it (and other operators of similar online sales platforms) could be directly liable for trade mark infringements on its platform under the EU Trade Mark Regulation. This required an assessment of whether Amazon was 'making use' of the Louboutin trade marks, or whether it was only the third party seller who was 'using' and therefore infringing the trade mark.
The referring courts asked, in particular, whether it was relevant that Amazon presented the potentially trade mark infringing goods on its platform in the same manner as goods sold in its own name and on its own account. Also, whether it was pertinent that Amazon offered third-party sellers additional services, such as storing and dispatching the goods. In contrast to the cases of L’Oréal v. eBay (C-324/09) and Coty v Amazon (C-567/18), the CJEU was asked about the fact that Amazon's platform included sales both from the third party and Amazon (in Coty, Amazon was only providing storage of the goods, whereas in the present case Amazon was also shipping the goods).
In its decision, the CJEU set out various factors to consider when determining whether an online marketplace should be liable for trade mark infringements on its platform:
- Advertisements must be presented in a way that an internet user may readily distinguish between offers made by the marketplace operator and those of third-party sellers.
- Marketplace operators must make ‘a clear distinction’ between offering marketplace services and using a trade mark for its own commercial purposes.
- The question is whether the average consumer might get the impression that the marketplace operator is marketing the infringing goods in its own name and on its own account. However, providing the marketplace per se does not amount to use of the mark by the operator.
- The CJEU noted that Amazon displays its own advertisements alongside those of third-party sellers, and displays its own logo as a renowned retailer on all of those advertisements.
- Another relevant factor was Amazon's provision of additional services to third-party sellers such as storing and shipping third-party products, handling returns and answering customer queries.
The CJEU ruling (which may be taken into account by the UK Courts) provides useful guidance on when online marketplace operators, such as Amazon, may be liable for trade mark infringements by third party sellers. Brand owners will welcome this decision in their ongoing fight against counterfeit goods online.