Hague Court provides first judgment on online marketplace IP infringement liability following Louboutin v Amazon

In a recent judgment, the District Court of the Hague (the Court) found that Fruugo, an online marketplace, was not directly liable under trade mark law for the advertisement and sale, on its platform, of products which infringed the trade marks of Audi and Volswagen.

Background

The avid IPKat reader may recall that late last year, the IPKat reported on a somewhat surprising decision of the Court of Justice of the European Union (the CJEU), which held, disagreeing with the Advocate General’s opinion, that Amazon could in fact be directly liable for trademark infringement in respect of counterfeit shoes which were being offered for sale on its website by third party retailers (Louboutin v Amazon C-148/21 and C-184-21).

The similar set of facts in this case involved Audi and Volkswagen (VW), both very well-known car manufacturers which own a number of registered EU and national trade marks in respect of their logos.

Fruugo was founded in the United Kingdom in 2008, and operates an online marketplace which is available in 42 countries through various domain names. More than 2,000 third-party retailers operate on the platform, together offering around 40 million different products worldwide. Fruugo offers the retailers various services, including (automatic) data processing services, and in turn the retailers pay Fruugo a fee consisting of a percentage of the transaction value of every sale.

It came to Audi and VW’s attention in 2020 that a large number of products (including hub-caps and badges) featuring their registered marks were being offered for sale on Fruugo’s online platform, as shown below:

Further, some of these products were being advertised on third-party websites, including on Google:

Having obtained a number of these products, Audi and VW were able to establish, based on incorrect markings and inferior quality, that they were in fact counterfeits, upon which Audi and VW’s marks had been affixed without their consent (the Infringing Products).

Audi and VW consequently wrote to Fruugo demanding that it cease all infringement and compensate Audi and VW for the Infringing Products. Although Fruggo did, promptly, block access to the Infringing Products traded on its platform, it did not offer Audi and VW any compensation, on the basis that it was simply a neutral online sales platform, and the Infringing Products were being sold by independent retailers.

Audi and VW brought a claim before the Court seeking, summarily, injunctive relief, sales information and damages.

The Court’s judgment

It was not in dispute between the parties that the Infringing Products did bear Audi and VW’s logos, without their consent, and were traded on the Fruugo platform. The question was: (a) whether Fruugo could be directly liable for the infringement pursuant to Article 9(2) of the EU Trade Mark Regulation 2017/0001 (EUTMR), and the equivalent provisions of Dutch/Benelux law; and (b) whether Fruugo could benefit from the exemption for hosting providers under Article 14(1) of the Ecommerce Directive 2000/31/EC (ECD).

Direct liability for Fruugo

In respect of whether Fruugo could be liable for the purposes of Article 9(2) EUTMR, the Court’s analysis mainly revolved around the concept of “use”, which has not been defined in EU legislation but has evolved through case-law, and notably the CJEU’s decisions in L’Oreal v eBay (C‑324/09) and Coty v Amazon (C-567/18).

The CJEU’s settled case-law, as established in such decisions, is that the use by a third party of a sign identical or similar to one’s trade mark implies that such third party uses the sign in its own ‘commercial communication’.

By way of reminder, one of the key factors leading to the CJEU’s decision that Amazon could be liable in Louboutin v Amazon was its assessment of whether consumers perceived the relevant sign as forming an integral part of Amazon’s commercial communication, thus creating a link in the mind of the ‘well-informed and reasonably observant user’ between Amazon’s services and the sign at issue. The particular factors informing that decision were:

1. the fact that that Amazon used a uniform method of presenting the offers published on its website, regardless of whether the goods advertised were its own or third party retailers’;
2. the fact that it placed its own logo on all those advertisements; and
3. the fact that it offered third-party sellers additional services consisting of the storing and shipping of their goods.

In the present case, the Court held that the Louboutin v Amazon decision did not establish a general rule to the effect that consumer perception is relevant, in all circumstances, to the analysis (for trade mark infringement purposes) of who is offering the allegedly infringing goods for sale. The Court held that whether or not such analysis was called for would depend on the context, and was not required on the present facts, in which Fruugo did not sell products in own name, nor did it have any intention of doing so, and did not dispatch products on behalf of retailers.

The Court consequently found that the ‘main rule’ established in the CJEU’s case-law applied and Fruugo as not directly liable under Article 9(2).

Article 14 ECD

As for the exemption under Article 14(1) ECD, which remained relevant because of Audi and VW’s lesser allegations of wrongful conduct, the Court noted that one of two limbs must be satisfied in order for the exemption to apply, namely that:

a) the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent; or 

b) the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information.

In respect of the first limb, the Court noted that settled CJEU case-law established that this would not apply where the service provider has an ‘active role’, giving it knowledge or control over the information being stored on its platform. In the present case, it was relevant that:

1. Fruugo did not have any control over the content or placement of advertisements featuring retailers’ products, it simply displays the information uploaded by retailers on its platform in a uniform format following technical and automatic processing;
2. whereas Fruugo offers retailers advertising services, the Court found that these do not constitute Fruugo’s own commercial communications, as it is for the retailer to decide whether to take up this option, for the retailer’s own benefit;
3. the mere fact that Fruugo provided retailers with general guidelines as to how to prepare an advertisement did not mean it should be considered to have knowledge or control over the advertisements prepared in adherence with such instructions; and
4. the Court did not consider that the offering of various ancillary services by Fruugo (including customer services, the handling of returns, automatically generated translations of product offers, affixing Fruugo’s logo on invoices, and the use of Audi and VW’s marks in its website indexing) pushed it outside of the category of a ‘neutral intermediary’ for the purposes of Article 14(1) ECD.

Finally, the Court found that there was no general rule in EU or national law for taking into account consumer/user perception as a factor in determining whether a hosting provider can invoke the protection of Article 14(1) ECD.

As for the second limb of the exception, the Court noted that Fruugo had acted expeditiously in blocking access to all Audi and VW products on its platform the day after Audi’s notification to it, and there was no evidence that an effective notice and take-down procedure was lacking. Consequently, Fruugo could benefit from the exception under Article 14(1) ECD.

Comment

Whereas this decision appears to be consistent with the CJEU’s settled case-law pre-Louboutin v Amazon, distinguishing Louboutin primarily on the basis that Amazon operates a ‘hybrid’ model where it sells its own products as well as third parties’, it’s not necessarily clear what the policy rationale for drawing such a distinction in trade mark law might be.

It is also questionable whether the Court was correct in stating that consumer perception will only be relevant in certain circumstances, when the CJEU stated at least twice in Louboutin (at least in the English translation – see paras 43 and 48) that it was ‘necessary’, in order to determine whether a marketplace operator makes ‘use’ of a sign, to assess consumer perception.

In any event it appears that we will have to wait a bit longer for a CJEU or national court decision specifically in respect of a ‘hybrid’ Amazon-style business model to see what the impact of Louboutin may be in such cases.