The Louboutin/Amazon cases (C-148/21 and C-184/21) and primary liability under EU trade mark law

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Last year The IPKat reported on a new referral to the Court of Justice of European Union (CJEU) from Luxembourg’s Tribunal d’arrondissement, asking whether the operator of a hybrid marketplace could be considered directly liable for trade mark infringement due to the presence of third-party listings of infringing goods on its platform.

That referral (C-148/21) has now been joined to another one (C-184/21) made in separate but highly similar proceedings pending between the same parties (Louboutin and Amazon) before the Tribunal de l’entreprise francophone de Bruxelles.

In a nutshell, these joined cases are asking the CJEU to determine whether and, if so, at what conditions the operator of an online marketplace may be found liable under Article 9(2) of the EU Trade Mark Regulation 2017/1001 (EUTMR) for the display of advertisements and the delivery of infringing goods that are offered for sale and placed on the market upon the initiative and under the control of independent sellers that avail themselves of that operator’s services.

I have now written a longer article on these referrals, which will be published later this year by European Intellectual Property Review and can be in the meantime read on SSRN here (the article was written at the request of one of the parties to the proceedings, but the views expressed are solely mine).

The broader relevance of the referrals

The importance of these referrals to trade mark law and, more generally, IP cannot be overstated.

The answer to the questions whether the operator of an online marketplace like the one described by the referring courts may be held directly liable for trade mark infringement because of advertisements of third-party infringing goods displayed on such a marketplace and delivery thereof to end customers will define who can be held liable for trade mark infringement and on what basis (primary/direct or secondary/indirect).

The CJEU might also clarify whether the approach recently adopted under copyright law with regard to the right of communication to the public and the liability of internet platforms is to be applied to other areas of IP.

In any event, it would be inappropriate to draw any superficial parallel between the situations at issue in YouTube [here] and the one at stake in Louboutin/Amazon: while the former required the CJEU to determine liability under copyright law as arising from the breach of duties of care of platform operators (YouTube and Uploaded) relating to specific user uploads, the latter relates to the question whether direct liability under trade mark law could arise not because of specific acts or omissions of a platform operator, but rather because of the economic model behind the hybrid marketplace at issue in the background proceedings.

The trade mark framework

Insofar as trade mark law is concerned, Article 9(3) EUTMR refers to a non-exhaustive list of situations which are to be regarded as trade mark use. What they have in common is the direct undertaking of those acts, that is – in the words of the CJEU – a comportement actif, which consists of affixing the sign, advertising under it, etc.

This said, a distinction is to be made between, on the one hand, independent sellers who advertise for sale and sell goods on which a third-party trade mark is affixed using the services of the operator of an online marketplace and, on the other hand, the operator itself:

• Insofar as the sellers are concerned, there is no doubt that they use such a trade mark in accordance with Article 9(3) EUTMR. Their ultimate objective is to realize the full value underlying the economic operation that consists of offering goods for sale and placing them on the market.
• Turning to the operator of the online marketplace and the type of liability which could be imposed on it because of such third-party sellers’ own uses of a registered trade mark without authorization, a distinction is to be made between primary (or direct) liability and secondary (or indirect) liability: while the former is formally harmonized at the EU level, the latter is not.

The CJEU has already had the opportunity to consider whether certain information society service providers (ISSPs), including online marketplaces, could be regarded as directly liable for trade mark infringement and so far refused to extend the scope of primary liability for trade mark infringement to acts undertaken by ISSPs, which might contribute to trade mark infringements committed by users of their services.

In the broader IP context, as mentioned, situations falling under the scope of secondary liability have been brought, at certain conditions, within the application of primary liability rules solely in relation to copyright and, more specifically, the exclusive right of communication/making available to the public.

To sum up: the distinction between different types of liability for IP infringements is still very much alive and well. Such a distinction and the core principles of the safe harbour regime (including for hosting providers) are also being maintained in the proposed EU Digital Services Act, currently undergoing trilogue negotiations.

The referred questions

It is against the broader context delineated above that the CJEU will need to undertake its assessment of Louboutin/Amazon. The analysis will now turn to the consideration of the specific issues on which the national courts have sought guidance from the CJEU.

Whether the operator of an online marketplace uses a third-party trade mark itself when it displays advertisements of independent sellers’ listings

In light of consolidated CJEU case law, to determine whether there is use of a trade mark when the relevant sign is used in advertising and, therefore, a potential infringement where such use is unauthorized, two conditions need to be satisfied: first, it is necessary that a person exercises an active behaviour/conduct (comportement actif) and exerts a direct or indirect control over the act constituting use; second, such a situation must entail that the use takes place under that person’s own initiative and in their own name, that is: as their own commercial communication.

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While there is no doubt, as stated, that sellers who use an online marketplace to offer for sale and place on the market infringing goods fulfil both requirements above, such a conclusion cannot be automatically extended to the marketplace operator.

What is required under Article 9(2) EUTMR is that the activities referred to therein are carried out by a person themselves and for themselves, not as aid/support to third-party uses. The rationale of that provision is to allow the trade mark proprietor to prohibit any unauthorized use of their trade mark by a third party that is effectively able to stop such use and therefore comply with that prohibition.

It follows that the operator of an online marketplace shall be regarded as using a third-party trade mark itself if the advertisements that it hosts of independent sellers’ goods are something over which that operator has direct/indirect control and qualify as its own commercial communication.

Applying the guidance above to the factual circumstances as presented by the referring courts, an operator like the one described by such courts would not be using a third-party trade mark itself when it displays advertisements, including sponsored ones that serve to enhance the visibility of sellers’ own advertisements, relating to independent sellers’ listings on the online marketplace that it operates.

Whether the perception of internet users/consumers is relevant to determining whether there is use of a trade mark

The referring courts have asked the CJEU if “the perception of a reasonably well informed and reasonably observant internet user” is relevant to determining whether there is use of a trade mark by the operator itself in the context of advertisements of independent sellers’ goods on the online marketplace that it operates.

Established case law indicates that the infringement test requires, first, to decide whether there is use of a trade mark in the course of trade. If that is the case, the next step is to assess whether the use is liable to have an adverse effect on the trade mark’s functions. It is solely during this second phase that the perception of the relevant internet users/consumers is to be taken into account, for example to determine whether the use at hand creates a risk of confusion/association on the side of such consumers.

On the contrary, determination of whether there is use of a trade mark must be carried out on an objective basis. In other words: the perception of internet users and consumers is irrelevant to the first prong of the infringement analysis.

It follows that the referred question relating to the relevance of the perception of internet users/consumers must also be answered in the negative.

Whether the operator of an online marketplace uses a trade mark itself when it delivers goods to end customers at the request of independent sellers

Existing CJEU case law already provides an answer – in the negative – to the question whether the same marketplace operator that is at issue in Louboutin/Amazon is to be regarded as using a third-party trade mark itself when it stores infringing goods at the request and on behalf of independent sellers who intend to offer such goods or put them on the market.

Since the operator of an online marketplace does not use a third-party trade mark itself – whether when it displays advertisements on behalf of such sellers (in accordance with what has been stated above), stores infringing goods on behalf of third-party sellers or transports them – the question whether it uses such a trade mark when it delivers such goods to end customers must be also answered in the negative.

In the circumstances described by the referring courts, at the request of sellers themselves, the marketplace operator assists them in fulfilling the commercial operation that consists of putting goods on the market. It is not the operator that uses the third-party trade mark affixed on such goods. As a result, the question whether the operator of an online marketplace, like the one described by the referring courts, uses a trade mark itself when its delivers third-party goods to end customers, also needs to be answered in the negative.

Conclusion

Louboutin/Amazon calls upon the CJEU to determine what the foundational requirement for establishing prima facie trade mark infringement – that is: use of a trade mark – entails and how far the borders of primary liability can be pushed, including on the internet.

These joined cases also present an opportunity to the Court to reflect on whether the boundaries between harmonized primary/direct and unharmonized secondary/indirect liability under trade mark law should be blurred up to the point that the former is to encompass situations which ordinarily would fall within the remit of the latter.

With specific regard to the questions raised by the referring courts, the CJEU should answer all of them in the negative: the operator of an online marketplace like the one considered by the referring courts does not in itself use the trade mark in relation to advertisements and delivery of infringing goods that are offered for sale and placed on the market by unrelated third-party sellers who avail themselves of the services of such a marketplace. As such, Article 9(2) EUTMR does not find application in a situation like the one described by the referring courts in Luxembourg and Belgium.

All the above is without prejudice to the circumstance that the operator of a hybrid marketplace would qualify for the application of Article 9(2) EUTMR in relation to the goods that it directly offers for sale and places on the market (that is, its own listings in accordance with the hybrid marketplace model), as well as the circumstance that liability might be established on a secondary basis in relation to third-party listings. The latter would be however a matter of national, not EU, law. Hence, it would be for the referring courts, not the CJEU, to undertake such an assessment.

For those interested, the full text article can be read on SSRN here.