Online brand protection strategies and the EU Digital Services Act

In the second of our articles focusing on brand protection on online marketplaces, Markus Rouvinen explains how the forthcoming Digital Services Act offers both opportunities and risks for brand owners seeking to protect their IP online.

As we previously covered, online marketplaces are a bellwether for brand owners, with many new trends and challenges first emerging on such platforms. While an effective monitoring and enforcement strategy is critical to identifying and policing such issues, the regulatory environment also has a major role to play. This is on the cusp of major change in the EU as a result of the new Digital Services Act.

Where are we now?

In the EU, the basic liability framework applicable to online marketplaces is contained in the E-Commerce Directive that was first adopted in 2000 and whose key provisions have never been amended. In short, it contains a set of liability exemptions regarding illicit online content for the benefit of various categories of Internet Service Providers (ISPs), with the extent of the exemption depending on the degree of involvement the ISP has with that content. 

This is also the framework in which online marketplaces also work. In providing a channel for content that they had no hand in creating, there is no general obligation on them to monitor the content that they host, or to actively seek facts or circumstances indicating illegal activity (Article 15). They are protected from liability so long as they do not have ‘actual knowledge’ of the illicit content, and act expeditiously to remove such content when actual knowledge is obtained (Article 14). 

As a result, the onus has fallen on brand owners to take a proactive role in monitoring for and notifying the marketplaces of infringing content via their takedown procedures. Here, the story has been very much one of quantity over quality, in the sense that marketplaces have chosen to err on the side of caution (i.e. accepting potentially dubious takedowns) rather than risk losing the protection of the safe harbour provisions in the E-Commerce Directive. 

This picture is set to change soon – and drastically – following the European Commission’s formal proposal for a new Regulation on a Single Market for Digital Services (Digital Services Act or DSA) in December 2020. Of particular note for brand owners are the steps taken to address ‘low-quality’ takedown requests. 

What will the Digital Services Act change?

The proposed reforms represent a major overhaul of the regulatory environment in which online marketplaces operate in Europe and, much like with the General Data Protection Regulation (GDPR), will likely apply not only to online marketplaces operating out of the EU, but also to those located elsewhere but which a substantial connection to the EU.

The changes include the replacement of the liability exemptions contained in the E-Commerce Directive to resolve existing ambiguities and to increase the transparency of the takedown process. This covers, for example, the obligation on all hosting providers (including online marketplaces) to set up easy to access and user-friendly takedown mechanisms (Article 14(1)); harmonisation of the information that takedown notifications must provide (Article 14(2)); and the provision that such notifications would give rise to actual knowledge on the part of the hosting provider, leading to a loss of their liability exemption (Article 14(3)).

Perhaps most important, the DSA provides new rights for sellers to challenge the removal of content that is not actually infringing third-party rights. In particular, it will:

• Oblige online marketplaces to provide a ‘statement of reasons’ to the person whose content has been removed via a takedown, including reference to the legal ground for that removal (Article 15). These statements would be subject to publication in a public database maintained by the European Commission.
• Enable affected sellers to file a complaint against the removal for a period of six months after content is removed following a takedown (Article 17). If they win, the marketplaces would be obliged to allow the content back online. 
• Allow complaints against accepted takedowns, so that sellers that maintain their content was not illegal can seek redress via independent out-of-court dispute mechanisms (Article 18). Crucially, if the platform loses the procedure, it must compensate the seller for the reasonable expenses they incur, while the seller has no corresponding obligation. (NB: under Article 16, small-scale marketplaces are exempted from some of these requirements). 

It seems likely that the increased accountability and financial risks for removing non-infringing content contemplated by the DSA would lead online marketplaces to be far less likely to accept low-quality takedowns. Thus, brand owners will need to ensure that any takedowns submitted are properly researched and detailed in explaining the grounds relied upon to identify a particular listing as infringing. This is clearly positive from the perspective of increasing the transparency of the takedown system, but it is also likely to complicate the filing of automated takedowns with generic descriptions. This might, in turn, lead to sub-optimal enforcement by brand owners.

Risks and opportunities

Fortunately, the DSA proposal also contains measures that are conducive to the efficient removal of ‘obvious’ infringements. First, under Article 19 of the proposal, online marketplaces would be obliged to ensure that takedowns received from ‘trusted flaggers’ are treated ‘with priority and without delay’. The Article envisages that such ‘trusted flaggers’ would be specifically certified by Digital Service Coordinators from the EU member states, and would, in particular, need to represent a ‘collective interest’. 

Recital 46 to the DSA specifies that when it comes to IP rights, industry organisations or IP rights holder associations could be awarded trusted status. While an individual brand owner or a brand protection provider would thus likely not qualify for trusted status, it is important to note that Recital 46 specifically contemplates that platforms may give notices received from entities and individuals the same treatment as to notices from trusted flaggers. There is thus a clear possibility that online marketplaces might themselves confer a status similar to that of ‘trusted flagger’ to brand owners and brand protection providers that have demonstrated their reliability when it comes to takedowns.

Second, to prevent multiple takedowns having to be filed regarding what is essentially the same conduct, Article 20(1) of the proposal would oblige online marketplaces to cease hosting sellers that frequently post manifestly illegal content. Conversely, however, under Article 20(2) marketplaces would also be obliged to suspend processing takedowns from those persons that frequently submit notifications that are manifestly unfounded. While brand owners can take comfort in the fact that under the DSA, takedowns are likely to remain efficient thanks to ‘trusted flagger’ programmes and the removal of repeat offenders, they need to take care to ensure that unfounded notifications are not sent on their behalf.

In particular, brand owners should favour online brand protection solutions that offer dedicated, marketplace-specific takedown workflows and detailed, takedown letters tailored to the specific legal issue encountered. Further, as it is likely that many marketplaces will eventually offer ‘trusted flagger’ status to reliable online brand protection providers, brand owners may increase the efficiency of their brand protection by relying on these providers.

For further information or tailored advice, please contact our online brand protection specialists.

Markus Rouvinen is an IP Lawyer at Thomsen Trampedach, a NovumIP company, and a specialist in online brand protection and corporate domain name services for large international brands. 

This is an edited version of an article that first appeared in China IP magazine in March 2021.