AG Campos advises CJEU to rule that Amazon might be potentially liable for trade mark infringement

Last week, Advocate General (AG) Campos Sánchez-Bordona delivered an important Opinion in Coty Germany v Amazon, C-567/18 [not yet available in English]. 

He advised the Court of Justice of the European Union (CJEU) to rule that, for the sake of applying Articles 9(2)(b) and 9(3)(b) EUTMR (stocking of goods for the purpose of offering of putting them on the market):

• if a subject (a) has no awareness/knowledge of the infringing character of the goods which they stock and (b) does not intend to offer or put the goods on the market themselves, then there is no liability for the purpose of this provision. However,
• if a subject (eg, Amazon) actively contributes to the distribution of said goods, eg through a programme like Fulfilment by Amazon (which allows the stocking of the goods sold by traders through Amazon and their subsequent delivery to purchasers), then they are deemed to stock the goods within the meaning of the provisions. In this sense, it does not matter whether they possess awareness or knowledge of the infringing character of the goods, insofar as it could have been reasonably expected from them to act to detect the infringement.

If the CJEU follows its AG, then - similarly to what has happened in the copyright field - we could have a significant development in the scope and application of direct liability to online platforms, well beyond the classic approach 'safe harbours: YES' / 'safe harbours: NO'.

Let's see more in detail how the AG reasoned.

Background

In 2014, a Coty (licensee of the 'DAVIDOFF' trade mark) ‘mystery shopper’ purchased a ‘Davidoff Hot Water EdT 60 ml’ perfume (in relation to which the trade mark rights had not been apparently exhausted) from a seller who had joined the Amazon programme.

Subsequently Coty requested Amazon to provide all perfumes stocked on behalf of the seller. 11 of the 30 perfumes delivered by Amazon to Coty had been stocked on behalf of another seller, whose identity Amazon was not able to confirm.

Coty sued Amazon for trade mark infringement in Germany, but without success. In fact, both at first instance and on appeal, the German courts found that Amazon had not directly used the trade mark or stocked the goods to sell them; rather, it had just stocked them on behalf of third parties and was unaware that the trade mark rights had not been exhausted.

On appeal to Germany’s Federal Court of Justice (BGH), a question arose: Does a person who, on behalf of a third party, stores goods which infringe trade mark rights, without having knowledge of that infringement, stock those goods for the purpose of offering them or putting them on the market under Article 9(3)(b) EUTMR, if it is not that person himself but rather the third party alone which intends to offer the goods or put them on the market? 

The BGH was unsure, though it was inclined to answer in the negative in light of what happens in Germany in the patent field. The court also excluded that Amazon’s behaviour would amount to a ‘use’ of the trade mark within the meaning of Article 9(2) EUTMR. 

Despite all this, a referral was made to the CJEU.

The AG Opinion

AG Campos noted at the outset that, in its observations, the European Commission had considered that Amazon would not ‘use’ the trade mark: this would mean that Article 9(2) could not find application and, because of that, neither would Article 9(3). He opined that the Commission’s approach is the correct one in light of earlier CJEU case law. However, he deemed it necessary to consider what the consequences would be if the conditions in Article 9(2)(b) were satisfied instead.

To this end, he considered the various language versions of the EUTMR, and concluded that the meaning of ‘stocking’ implies the possession of goods for commercial goals. Hence, for a trade mark owner to be able to prohibit this activity, two cumulative requirements need to be fulfilled:

• a material element, that is the possession (posesión) of the infringing goods;
• a subjective element, that is the intention to offer the goods on the market through a contract, which includes an offer for sale

IPKat-approved perfume

On the material element: the possession

According to the AG, it is necessary to distinguish the situation of warehouse keeper from that of an online marketplace.

With regard to the former, it appears from TOP Logistics (at [45]) that the “provision of a warehouse service for goods bearing another’s trade mark does not constitute use of a sign identical to that trade mark for goods or services identical or similar to those in respect of which the mark is registered. Inasmuch as such a service provider permits such use by its customers, its role cannot be assessed under Directive 89/104 but must be examined, if necessary, from the point of view of other rules of law.”

Turning to the latter, from L’Oréal it follows that an online marketplace is not even comparable to a warehouse keeper if the activities are of an intermediary nature only.

In a scenario like the one described by the referring court, Amazon would not stock goods for sale within the meaning of Article 9(3)(b) EUTMR.

However, based on the parties’ observations and the CJEU hearing, it might be possible that the scenario be actually more complex than the one described by the referring court: the model could actually be an ‘integrated store’ in which Amazon plays an active role in the selling process. The corollary would be that Amazon has an absolute control over said process.

In such scenario, it is necessary to distinguish between external elements, that is those elements that the average consumer perceives, and internal elements, that is those elements that relate to the relationship between the seller and Amazon. 

From the point of view of an end consumer who buys a product from an Amazon seller, it is not always easy to discern whether the relevant goods come from the trade mark owner, from an undertaking linked to it or an unrelated third party. “This way, a prejudice is caused to the essential function of a trade mark, that is the indication of the origin of the product.” [at [54], my own translation from Italian].

With the Amazon programme, the companies which are part of the Amazon group do not just stock and transport the goods in a neutral fashion: rather, they undertake a much broader range of activities. These include the preparation of the goods for delivery and their delivery, advertising and promotional activities, information to customers, and the refund of the price of faulty goods. Amazon also receives payment for the goods sold, which it then transfers to the seller’s bank account.

According to the AG,

Such active and coordinated involvement of the companies which are part of the Amazon group in the commercialization of the goods entails the undertaking of significant tasks which are typical of a seller, in respect of which Amazon does the ‘heavy work’, as also highlighted on its Internet website. There one can read, as an incentive to sellers to join the ‘Fulfilment by Amazon’ programme, the following phrase: ‘You bring leadership, we'll bring the rest’. In these circumstances, the role of the Amazon group companies “involves active behaviour and direct or indirect control of the act constituting the use.”” [at [57], referring to Daimler, at [39]; my own translation from Italian] 

According to the AG, if it was confirmed that indeed the Amazon group companies had provided these services (or, at least, the most important ones), then the conclusion would be that – indeed – the behaviour falls within the scope of application of Article 9(3)(b) EUTMR.

Importantly (and correctly), the AG also confirmed that, in the event that Amazon was found directly liable for trade mark infringement under that provision, the safe harbours in Article 14 of the E-commerce Directive would not apply. This is nothing new, pointed out the AG: it was clarified by the CJEU as early as in L’Oréal.

On the subjective element

Article 9(3)(b) also requires the fulfilment of a subjective requirement, that is the intention to stock with the purpose to sell/offer. According to the AG, it would be difficult to deny that also the companies of the Amazon group share this intention if their role was not considered a neutral one. 

Playing innocent or actually innocent?

Liability of companies stocking infringing goods without awareness/knowledge of their infringing character

The AG also addressed the issue raised by the referring court that the company that stocks is not aware of the infringing nature of the goods stocked. Knowledge of the infringement is relevant in various context, including with regard to the applicability of the safe harbours and the calculation of damages, as well as in relation to intermediaries.

However, in the case of companies that perform an active role lack of actual knowledge may not be enough to exclude liability:

The fact that said companies are strongly involved in the commercialization of the products through [the ‘Fulfilment by Amazon’] programme implies that they may be required to exert a particular care (diligence) as regards the control of the lawfulness of the goods that they put in commerce. Indeed because they are aware that, without such control, they could easily serve as a means to sell “unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others”, they cannot escape their own responsibility simply by passing it on the seller” [at [82]] 

Comment

Although the Opinion is built through several 'hypotheticals' (including the main one, ie whether Amazon's activity actually falls within the scope of application of Article 9(2) and, so Article 9(3), in the first place), it is relevant well beyond the area of trade marks and seems to actually go beyond the suggestion, by some early reports, that overall “Amazon is not liable for unwittingly stocking trade mark infringing goods for third-party sellers, but should be diligent in checking whether products are legal”.

Despite the seemingly limited factual information provided by the referring court (this being something that the AG appeared to be critical of throughout his Opinion), AG Campos gave two important indications:

1. The first is that a platform that plays an ‘active role’ not only would fall in a L’Oréal-like scenario (a secondary/indirect liability scenarios resulting from the inapplicability of the hosting safe harbour), but could actually be considered as directly infringing trade mark rights;
2. The second is that a platform that is directly liable for IPR infringements is not eligible for the hosting safe harbour in Article 14 of the e-Commerce Directive.

The two points noted above allow the creation of a significant parallel with similar issues that have arisen in the copyright sphere.

With regard to 1., the direct liability of platform operators for copyright infringing-activities has been acknowledged, first, by the CJEU in its Pirate Bay decision [Katposts here] and is now ‘codified’ in Article 17 of the DSM Directive [Katposts here]. In the realm of trade marks, in the context of interim proceedings, a Belgian court has recently considered that Amazon’s advertising and stocking activities qualified as direct use of the applicant’s trade marks. If the CJEU follows the AG when it decides Coty, we’ll likely see more decisions of this kind.

With regard to 2., it is worth recalling that Article 17 of the DSM Directive also spells out that direct  copyright liability makes the hosting safe harbour inapplicable in relation to copyright infringements. The unavailability of the safe harbour limitation in cases of direct liability does not appear surprising. Yet, the majority of academic commentators so far has insisted in suggesting that the safe harbours in the e-Commerce Directive remain available irrespective of the type of liability. Hopefully the CJEU will clarify once and for all that this is not and should not be the case when it decides YouTube and – possibly before that (the issue of safe harbours availability is not among the referred questions though) – Coty.

In all this, the progressively expansive interpretation of what qualifies as direct liability of platforms may not only concern copyright/Article 17 situations. Indeed, if the CJEU follows the Opinion of its AG in Coty, then sophisticated marketplace situations would need to be assessed under lenses other than the one relating to the availability or not of safe harbours, including in trade mark cases.