A recent decision handed down by the Court of Justice of the European Union (CJEU) in the Christian Louboutin v Amazon case sees a prospective increased risk of liability for marketplace operators where they permit counterfeit goods to be sold on their platforms.
Having previously benefitted from the security of “safe harbour” provisions, marketplace operators and other intermediary businesses may now need to rethink their marketing designs, while brand owners could see more success in bringing infringement claims against large operators rather than individual counterfeiters.
So, is Amazon now liable for hosting counterfeit product listings?
Background
The liability of marketplace operators (like Amazon) and other intermediary businesses in connection with listing counterfeit goods or displaying unlawful content, has been subject to multiple legal challenges over the years.
The basis of dispute generally lies in the application of the EU’s E-Commerce Directive (applicable in the UK pre-Brexit), which affords a host-provider exemption from liability in connection with the listing of unlawful content where the host merely publishes the information supplied by a user; a so-called “safe harbour” provision for online intermediaries.
Hosts are able to rely on the safe-harbour provision to exempt them from liability for the unlawful actions of a service user, but only in circumstances where the host does not have actual (or constructive) knowledge of the unlawful activity or, upon obtaining such actual or constructive knowledge, the service provider acts expeditiously to remove the unlawful content. A number of cases have been brought before the CJEU to seek to clarify the extent of this safe-harbour provision.
- In 2010, the CJEU handed down a significant decision in the Google France (AdWords) case, which held that an intermediary business (such as Google) does not itself infringe a third party’s trade mark by merely enabling its customers to display on its website a sign that corresponds to a trade mark. However, the decision confirmed that the hosting exemption is not available where an intermediary business plays an “active role” (rather than simply passive data storage) in relation to the content supplied by a user.
- In 2011, the CJEU further clarified the application of the hosting exemption in the L’Oreal v eBay case, holding that a marketplace operator may not rely on the exemption if it was aware, or a diligent economic operator would have been made aware, of the infringement and it failed to act expeditiously to remove or disable access to the infringing content. While the ruling did not go so far as to require marketplace operators to monitor user activity, it did serve to strengthen the requirements for marketplace operators to make effective take-down facilities available.
- In 2020, the CJEU followed the precedents set by its earlier decisions and in the case of Coty v Amazon held that they did not consider marketplace operators to be “actively using” a trade mark by simply storing and distributing goods on behalf of a third party.
- The recent decision handed down by the CJEU in the Louboutin v Amazon case now serves to help clarify the circumstances in which an online intermediary might be held to be “actively using” a third party trade mark and thereby face an increased risk of liability for unlawful activity.
Louboutin case
In 2019, Louboutin brought cases against Amazon before the national courts of Belgium and Luxembourg in connection with the matter of red-soled shoes being sold by third-party sellers via Amazon’s marketplace platform, allegedly infringing Louboutin’s trade marks.
The national courts referred the cases to the CJEU in order to seek guidance on whether Amazon could be held directly liable for “actively using” Louboutin’s trade marks where a third party had listed the infringing goods for sale on Amazon. The key issue being, Amazon provided distribution, storage and, crucially, advertisement of those goods alongside its own goods. In other words, it operates by way of a hybrid business model.
Louboutin asserted that the nature of Amazon’s advertising services was likely to confuse consumers into thinking that the infringing goods originated from Amazon, not the third party seller and that, as such, Amazon’s activities constituted an infringement of Louboutin’s trade marks.
Until this point, established case law afforded Amazon the safety of the hosting exemption, relying on the Coty position that marketplace operators were not held to be “actively using” a trade mark by simply storing and distributing goods on behalf of a third party. However, the key difference on this occasion is related to the additional support that Amazon provides to third party sellers, namely storage and shipping solutions (using Amazon-branded packaging) and advertisement of the goods, alongside Amazon’s own products by virtue of its hybrid business model.
In a departure from the earlier position, the CJEU held that Amazon could potentially be held liable for infringing Louboutin’s intellectual property rights through advertising counterfeit red-soled shoes where, upon seeing the advertisement, a reasonably well informed and reasonably observant consumer could establish a link between the trade mark and the marketplace services. In other words, where the advertisement may lead a consumer to believe the infringing products were being sold by Amazon in its own name.
Implementation of the decision
The CJEU’s guidance now paves the way for hybrid marketplace operators, such as Amazon, to be held liable for listing counterfeit products on its platform, especially where it plays an active role in the shipping and advertisement of such products. In turn, this affords brand owners an opportunity to enforce their rights and pursue actions against large (financially secure) marketplace operators, rather than individual counterfeiters.
While the CJEU’s decision is significant, the case now needs to return to the courts of Belgium and Luxembourg for them to implement the guidance and to make a final decision as to whether, on the facts, Amazon did infringe Louboutin’s trade marks. If the answer is in the positive, then this is likely to invoke a significant change in the manner in which marketplace operators, particular hybrid models, function in the future.
In any event, the decision is considered a step in the right direction so far as Louboutin is concerned, with Louboutin’s Chief Executive Officer, Alexis Mourot, exclaiming it is a “victory for all the brands that defend their expertise”.
What next for marketplace operators?
The guidance set out by the CJEU in the Louboutin case marks the dawn of change for marketplace operators and other intermediaries, by limiting the scope of the safe-harbour provisions and establishing a route for brand owners to better enforce their rights.
Across the EU, the guidance will be preserved even in light of the implementation of the Digital Services Act, which was published in October last year. While the new regulations will still provide a hosting exemption defence, marketplace operators will remain liable for unlawful actions where the “average consumer” believes that the infringing goods or services derive from them or are provided with their authority or under their control. The Louboutin case will prove critical in defining the “average consumer” and the instances where such confusion may arise.
In the UK, the Online Safety Bill, which was introduced to Parliament last year, seeks to introduce a new regulatory framework for online service providers. The Bill seeks to significantly reduce the scope of the host exemption defences with respect to unlawful content and, further, seeks to introduce more stringent obligations on online intermediaries with respect to improving user safety. The protection of the “average consumer” from confusing or misleading content will again remain critical in achieving those aims.
While the decision in the Louboutin case is not directly binding in the UK, it will likely prove persuasive in future cases. In any event, the outcome of this case may have repercussions for how Amazon and other online marketplace providers (particularly hybrid models) proceed to operate in practice.
While the CJEU’s decision brings Louboutin one step closer to success, the Intellectual Property Team will be following with interest the implementation of the guidance by the national courts of Belgium and Luxembourg to see whether Amazon will, in fact, be held to have infringed Louboutin’s rights.
