One of the benefits of the advancement in information and communication technology is the emergence of online markets, otherwise known as e-commerce websites. Over time, these websites have become the preferred choice of shopping for many since it is perceived that purchasing desirable products online is much more convenient. The products and services provided by e-commerce websites have also advanced from just offering electronics and household products to virtually all products and services that humans require. The attractiveness of e-commerce websites to the people, which has led to its popularity and high patronage, has also attracted several sellers online. The influx of various online stores on e-commerce websites has also increased the counterfeit products on websites. By facilitating the sale of products that may be counterfeit, can the e-commerce website be held liable for Trademark Infringement?

Such e-commerce platforms fall under the category of ‘intermediaries.’ The question of their liability for any unlawful act or infringing content has been widely debated under the concept of ‘intermediary liability.’ Intermediary liability, which is based on the legal principle of vicarious liability, means that the service providers shall be held accountable for any illegal act of the user on their platform. Intermediary liability means that the intermediary, a service that acts as an ‘intermediate’ conduit for the transmission or publication of information, is held liable or legally responsible for everything its users do.

To answer the perplexing question regarding intermediary liability, specifically e-commerce websites, various jurisdictions have laid down innumerable legislation and guidelines and are constantly re-examining and reframing them. It is observed that the governments and courts worldwide are becoming more ‘consumer-friendly’ owing to the rise in the complaints of the rights holders and are adopting the stricter approach and demanding more accountability from intermediary websites.

Assessing the Infringement

Assessing trademark infringement can be a difficult task. Not just concerning which court has jurisdiction, but as to who is behind the infringement itself. As the primary act can often be hard to identify or take action against, trademark owners sometimes turn towards third-party intermediaries who may somehow be involved in the infringement. For instance, they might be hosting the infringing content or providing a platform from which counterfeit goods have been sold. Liability of e-commerce websites can be of two kinds – Direct Liability or Secondary Liability. 

A) Direct or Primary Liability

The first step is to enquire whether or not the e-commerce website is itself potentially performing direct acts of infringement. For instance, in the European Union, the assessment follows ordinary principles flowing from harmonized European legislation, as developed by case law. The question of whether an online intermediary may itself be responsible for ‘using’ a trademark has been analyzed in the case of L’Oréal vs. eBayL’Oréal took action against eBay for infringement of its trademarks occurring through various listings that infringed L’Oréal’s trademarks. Among other things, L’Oréal pointed to the fact that eBay was bidding on keywords containing L’Oréal’s registered trademarks and producing advertisements that linked to items for sale on the eBay website that infringed L’Oréal’s trademarks. The UK court referred several questions to the CJEU as to the ‘use’ that eBay was making of the L’Oréal trademarks and its ability for that ‘use.’

The CJEU held that in the context of liability for trademark infringement under the Trade Mark Directive and Trade Mark Regulations, an online marketplace is not ‘using’ a trademark in circumstances where an end-user has placed an offer for sale on the marketplace, and that offer includes the rights holder’s trademarks. It was the seller who was ‘using’ those signs, rather than the website operator. In those circumstances, the online marketplace did not have primary liability. There might be questions of secondary liability, but eBay would be shielded from that if it came within the ‘hosting defense.’ Hosting defense means that an operator of an online marketplace would be shielded from liability where the online marketplace had not played ‘an active role’ concerning a particular listing of such a kind as to give it knowledge or control of that listing. Even if the online marketplace has not played an active role concerning a given infringing listing, if it subsequently becomes aware of the infringement and fails expeditiously to remove it, then the online intermediary could lose the benefit of the defense.

The CJEU also explained that injunctions could be ordered against intermediaries, notwithstanding that the intermediaries may not have any liability and/or may benefit from a safe harbor defense. Online intermediaries could be required not only to stop the infringement but also to ensure that further infringement was prevented, provided the injunction was effective, proportionate, dissuasive, and did not create barriers to legitimate trade.

In the case of Louboutin vs. Amazon, the Brussels commercial court held that Amazon’s advertising and storing activities constitute direct use of the applicant’s trademarks (in this case, Christian Louboutin), and therefore, held Amazon liable for trademark infringement. Amazon’s shipping and dispatching activities were also covered by Louboutin’s claim but were excluded from the scope of the injunction due to lack of evidence.

In India, in the case of Christian Louboutin SAS vs. Nakul Bajaj & Ors., the defendants, i.e., luxury goods e-commerce portal Darvey’, which provides its users access to luxury products upon the payment of non-refundable membership fees, was held liable for infringement. Christian Louboutin argued that the products sold on the e-commerce platform bearing Louboutin’s trademarks were not authorized for sale by Louboutin and were not genuine products. The fact that Louboutin’s trademarks were used as ad-words and meta-tags for promoting the website was a significant factor and was also impugned as infringing use. The Delhi High Court ruled in favor of Louboutin and was of the view that the e-commerce portal was also assuring the genuineness of the products hosted therein. Thus, it was not merely acting as a conduit but was equally responsible for infringement in the present suit.

B) Secondary Liability

If there is no primary liability, the next step is to consider whether the intermediary has nevertheless bound itself up in the acts of the primary infringer to be jointly liable with that infringer (secondary or joint liability).

The first theory of secondary liability to emerge was a contributory liability. In the United States, the Supreme Court, in the case of Inwood vs. Ives, set forth the two-part test for contributory infringement. To establish contributory liability, a plaintiff must show that the defendant either (1) “intentionally induced another to infringe his or her trademark” or (2) “continued to supply its product to one whom it knows or had reason to know was engaging in trademark infringement.” Today, courts have begun to find this test inappropriate in situations where the plaintiff can neither allege intentional inducement nor point to a specific product, but where the defendant has contributed in some way to trademark infringement. In these cases, a modified version of the Inwood standard has evolved in which the court considers the “extent of control the defendant has over the infringing activity.” Specifically, courts have held that direct control or monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark allows for expansion of Inwood’s ‘supply of a product’s requirement for contributory infringement.

In Tiffany vs. eBay, it was held that “more than six million new listings are posted on eBay daily, and at any given time, some 100 million listings appear on the website.” In this case, Tiffany brought an action against eBay after noticing that thousands of counterfeit pieces of silver ‘Tiffany’ jewelry had been sold on eBay. The parties mainly disagreed on the role eBay should play in curbing infringement. While Tiffany expected eBay to take preventive filtering measures to avoid infringement, eBay insisted that its legal liability was limited to taking down content that it was expressly notified of. In June 2004, Tiffany, therefore, brought an action against eBay for direct and contributory trademark infringement, trademark dilution, unfair competition, and false advertising, on the ground that eBay would have knowingly facilitated the sale of counterfeit items on its website while exercising control over and deriving profit from, these sales. The Southern District of New York, affirmed by the Second Circuit in April 2010, dismissed all of Tiffany’s claims and held that eBay was neither directly nor indirectly liable for third parties’ sales on its website. Concerning eBay’s potential direct liability, the court held that eBay’s use of Tiffany’s trademark in its advertising, on its homepage, and in the sponsored links purchased through Yahoo! or Google was a protected, nominative fair use of Tiffany’s trademark, in that it was necessary to describe Tiffany’s pieces of jewelry offered on its website. As for eBay’s potential contributory liability for ‘facilitating’ third parties’ infringing sales, the court determined that the relevant standard to assess eBay’s liability was the Inwood testUnder this test, the court had to determine whether eBay continued to supply its services to sellers when it knew or had reason to know that it was engaging in trademark infringement, rather than whether it could have prevented it. Because Tiffany was not able to show that eBay had specific knowledge of specific items infringing its rights, the court ruled that eBay did not have any affirmative duty to remedy the situation.

In the United Kingdom, intermediaries can potentially be joint tortfeasors with the users of their services who have conducted the infringing activity. Such liability requires that the intermediary has acted with another under a common design or has procured the other to do the infringing act. The mere knowledge that a service is being used, or could not be used, to infringe third-party rights is not necessarily sufficient. It has historically been arduous to show that an online intermediary was acting in a common design with an infringer.

In Germany, there is a doctrine of Stroerhaftung, which translates as ‘interferer liability.’ Under this doctrine, knowledge is not required; the question of liability is one of harm and causation.

Takedown Notices: A Precautionary Measure?

Most nations do not have any statutory rules regarding takedown notices. In some countries, takedown notices are only binding on the online platform if confirmed by a court or administrative body, for instance, Italy. In the UK, a takedown notice is only one form by which ‘actual knowledge’ of the e-commerce platform may be established. Switzerland relies on self-regulation internet platforms. None of these rules explicitly provide for counter-notices by the affected seller.

The takedown notice mechanism is well established in some countries such as the US and also by the online platforms themselves. The takedown notices are inefficient tools, however, against repeat infringers that  refile their offerings immediately after a takedown, do so under a different name, or keep offers on the website open only for a very limited time (e.g., overnight offers). Moreover, individual takedown notices are outrun by the utter number of sellers and dealings conducted over the Internet and caught up in a massive load of infringement proceedings.

The best method is the development of the court and enforcement systems in the home countries of the important sellers. Also, alternative legal remedies should be considered, such as measures by the customs authorities or measures directed at credit card organizations and other financial intermediaries.

Grey Market Goods: A Grey Area?

Amazon Europe gives sellers the option to list their products for sale on the ‘Amazon-Marketplace’ and to use Amazon’s fulfillment center to store and ship the products once sold. A test buyer for Coty Germany, which holds the license to sell Davidoff perfumes and cosmetics, identified perfumes for sale on by an unauthorized seller. The Trademark Rights for the products (Davidoff Hot Water EDT 60 ml) had not yet been exhausted, and Coty took action against Amazon.

EU Trademark Regulation (EUTMR) allows a trademark owner to take action against any party that uses the trademark in an infringing manner. The inquiry before the courts in the case was whether or not the storage and shipping of the products should also be regarded as infringing use. First, the CJEU opined that the trademark owner has the right to prohibit others from offering infringing goods, putting them on the market, or stocking them for sale under the EUTMR. However, it remarked that Amazon has neither offered nor marketed the products itself, nor does it intend to do so. Amazon merely takes care of the technical provisions and receives compensation for those services. According to the CJEU, therefore, the fact that Amazon had the products in its warehouse in stock does not constitute infringing use. Keeping the products in-stock can only be prohibited if the company markets them or intends to do so. As a result, there has been no infringing use of the trademark by Amazon. This decision is good news for e-commerce websites in the EU, but it does not mean that trademark owners are left helpless. There are options for taking action through some nationally implemented directives. Besides, the different online marketplaces have also established their methods and takedown procedures for enforcing the Intellectual Property Rights (IPRs).

Conclusion and the Way Forward for E-Commerce Platforms

The business of an e-commerce website by its nature is likely to facilitate and multiply Intellectual Property (IP) Infringement. This is why today, all major e-commerce platforms have set up complaint systems to facilitate takedown procedures, and their rules must be observed if brands are to enforce their rights on them. The online platforms may also avoid liability by installing a system for eliminating from or at least containing the number of infringing offers on their platforms that are both efficient and economically and financially reasonable; for instance, YouTube’s Content ID Filtering System. Concerning reactive measures, the e-commerce websites should apply to all types of IP infringement a notice and counter-notice mechanism. The websites should apply varying proactive measures depending on its involvement in the offering process: A passive trading platform may use mechanical filtering for the IP of which it has been informed is likely to be infringed. A virtual store that sells goods both in its name and through other shops has to stop infringing offers through its initiative. Intermediaries worried about their liability should examine what products/services they offer, how they describe those services/products in advertisements and contracts, how much control they exercise over the users’ activity insofar as the use of trademarks is concerned, how much involvement they have in putting goods on the market, and so on. Seller verification is also a brilliant way of ensuring that the sellers have the requisite authority to deal with the goods they are planning to offer on the website.

In a world without borders, owing to the Internet, the liability of e-commerce platforms for third-party content is necessarily a global question. As platforms like Alibaba and Amazon are acquiring exponential market shares in online distribution, and as international brands, notably in the luxury, cosmetics, and wine and food worlds, are gaining more and more traction in the various online markets, the question is no longer whether a particular country’s domestic laws can offer protection to its national platforms or rights holders, but rather what practices should e-commerce websites and trademark owners adopt to limit their liability and protect their rights in the best possible manner, respectively.