The growth of e-commerce during the COVID-19 pandemic has placed the IP spotlight once again on brand protection on online marketplaces. Markus Rouvinen sets out how recent case law may offer new routes for brand owners to protect their rights on these platforms.
Online marketplaces can be the canary in the coal mine for many brand owners. It is on these platforms that serious issues can first emerge, from the sale of counterfeit or grey market goods to more novel types of infringement and unfair competition.
Indeed, as many online marketplaces have moved from their traditional role (as ‘neutral’ intermediaries) to an increasingly active role in storing, packaging, sending and marketing the products sold by independent sellers on their platforms, new threats have emerged.
Whether caused by the marketplace’s order fulfilment services or the behaviour-based search algorithms it uses to promote product recommendations, not all the IP issues that brand owners encounter on marketplaces can be dealt with through its takedown procedures.
When is the online marketplace the infringer?
The April 2020 ruling by the Court of Justice of the EU (CJEU) in Coty v Amazon clarified that an online marketplace that offers order fulfilment services to sellers on its platform cannot (generally speaking) be considered a trademark infringer under Article 9 (3)(b) of the EU Trademark Regulation (EUTMR), even if the goods they store turn out to be infringing.
However, while not directly relevant to the outcome of the case, the Court nevertheless provided important insights into whether order fulfilment by a marketplace might give rise to direct liability through alternative means. Specifically, the Court pointed out that when an online marketplace has enabled a seller to make use of a trademark in an infringing way, its role must be examined from the point of view of rules of law such as Article 14(1) of the E-Commerce Directive (the hosting provider liability exemption) and the first sentence of Article 11 of the Enforcement Directive (which deals with the issuing of injunctions specifically to an infringer).
The fact that these rules are mentioned together (para 49) points to the possibility that an online marketplace operator that falls outside the liability exemption might be treated as an infringer for the purposes of the Enforcement Directive. (While the possibility of the online marketplace directly infringing a trademark seems excluded, it is possible that a marketplace might be considered a contributory infringer under the national law of an EU member state.)
This is of great interest as Article 13 of that Directive provides an IP owner with the right to receive damages from an infringer who knowingly, or with reasonable grounds to know, engaged in infringing activity. When a platform offers a programme that involves not only storage but packaging, labelling and sending the products (not to mention advertising them and answering any customer queries), it assumes an active role that entails control over, and promotion of, the infringing listings and the associated products. As a result, it seems likely that such an online marketplace can no longer benefit from the E-Commerce Directive liability exemption.
Further, as was pointed out in the AG Opinion given in Coty v Amazon, the degree to which Amazon is involved in the marketing of ‘Fulfilled by Amazon’ products, for example, suggests that it might be reasonable to expect them to exercise special care in confirming the lawfulness of the products they stock. This raises the possibility that where infringing goods are sold on a marketplace employing a programme similar to Fulfilment by Amazon, an aggrieved IP owner might be entitled to claim damages not only from the infringing seller but also from the platform.
Marketplaces and trademark confusion
Another area where online marketplaces may face direct liability is where infringements are caused not by the sellers active on the platform, but rather by the design of the marketplace itself, including its search function. Increasingly, these search engines respond to customer queries not only by matching the search terms with words used in product descriptions, but also on the basis of algorithms designed to present the products ‘most relevant’ to the query. These algorithms rely a great deal on past user behaviour: if a certain number of previous users searched for a particular term but ended up buying a product that was not a ‘text match’, the algorithm will likely deem that product as a relevant product to be presented in future searches for the term.
This is problematic for brand owners, as behaviour-based algorithms may well classify unrelated products as ‘relevant’ products to be displayed in searches for their brand. For example, consumers looking for a particular branded ingredient or a certification mark may well assume that the unrelated products are in fact connected to the brand. The issue is even greater in cases where the online marketplace drives user traffic to the search results via search engine advertising, as consumers clicking on the ads might expect to be presented only with products by the brand for which they searched.
Whether online marketplaces can be liable where their behaviour-based algorithms use trademarks in a confusing way has been examined from a variety of angles by the German courts in recent years. In Ortlieb, for example, the German Federal Court held that where the internal search engine on an online marketplace uses an algorithm to display unrelated products in response to queries containing a trademark, the platform’s liability must be determined with reference to the principles established by the Court of Justice of the EU (CJEU) in relation to keyword advertising.
The platform will face liability, therefore, if the unrelated products are displayed in such a way that the reasonable consumer would have difficulty in determining whether they are affiliated with the trademark owner. Whether this is the case is a question that must be determined separately for each dispute.
It should be noted that following the CJEU ruling in mk advokaten in July 2020, the reasoning adopted by the German Federal Court in Ortlieb I seems fully consistent with EU law. In mk advokaten, the CJEU confirmed that where a trademark is used to trigger listings or advertise promoting goods or services, legally relevant ‘use’ of the trademark exists that can give rise to trademark infringement. When a seller or advertiser instructs a neutral intermediary to use an unrelated trademark to trigger advertising, they will be liable for any resulting infringement, therefore. However, if the triggering has nothing to do with the advertiser but is instead done by an independent operator (e.g. online marketplace) on their own initiative and in their own name, it is the independent operator that is liable.
The German Federal Court has also had occasion to rule on whether it is infringing for an online marketplace to display a trademark in keyword advertising to drive traffic towards their search result lists. In Ortlieb II, it was held that where an AdWords ad that has been taken out by a marketplace promotes the availability of particular trademarked goods, the reasonable consumer clicking on the ad may expect to be presented exclusively with products from the brand advertised. This expectation will be deceived when the consumer is instead presented with a search result list containing unrelated products, evincing that the use of the trademark in the initial ad gave rise to confusion as to origin.
These cases provide brand owners with significant ammunition to challenge online marketplaces, therefore – at least in the German courts – where they feel the value of their trademarks has been diminished due to their use by marketplace search algorithms, in AdWords or on other search engine ads.
In order to make the best use of these possibilities, brand owners are advised to employ online brand protection solutions that are able to see beyond individual listings to identify how their trademarks are employed by online marketplaces in a wider sense. Ideally, this should include sophisticated monitoring methods for AdWords and other keyword advertising services, as well as paying close attention to how online marketplaces use such services in relation to their trademarks.
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. In our next article, we will look in more detail at plans for the EU Digital Services Act.