In this post, we will explore the implications of the recent CJEU judgment in response to the preliminary reference request of the Bundesgerichtshof (Federal Court of Justice, Germany).  When looking into the liability ramifications of the storage of infringing products by Amazon FC Graben, the following question was referred to the CJEU, regarding the interpretation of Article 9(2)(b) of Regulation 207/2009 and Article 9(3)(b) of Regulation 2017/1001:

‘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, 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?’

Background

The background of this case is one that many brand owners will be familiar with. Coty Germany GmbH, as the licensee of the DAVIDOFF brand, became aware of infringing ‘Davidoff Hot Water EdT 60 ml’ brand perfumes for sale on Amazon.  Coty subsequently sent a letter to the third party seller requesting cessation of the sale of the goods, which the seller cooperated with.  The goods, that were stored in the Amazon FC Graben warehouse as part of the “Fulfilment by Amazon” scheme, were subsequently sent to Coty by Amazon. Some of the stock sent to Coty by Amazon belonged to a different seller, and Coty requested disclosure of the name and address of this seller, which Amazon refused.

Fulfilment by Amazon Scheme

At its core, this scheme essentially allows sellers who sign up to store their products at an Amazon warehouse.  However, there is a lot more to the scheme than this.  In the words of Amazon themselves, “FBA helps your business grow while doing the heavy lifting for you”.  Amazon can provide support in relation to storage, delivery, customer service, and returns.  Amazon also provide pricing optimisation, business analytics tools and business recommendations, as well as boosting visibility of products, far more than mere storage.

The Case

Coty argued that the “Fulfilment by Amazon” scheme, in itself amounted to infringing use of a trade mark (through storage in this case).  However, Coty’s falling point was showing use in relation to Amazon’s own commercial communication and control by Amazon.  The referring court accepted that the argument turned on whether a person who, on behalf of a third party, stores goods which infringe trade mark rights, stocks those goods in order to offer them for sale, even if it is only the third party who intends to sell those goods.

The Judgment of the CJEU was a clear and unsurprising response to the question asked.  The Court felt in short, that what Amazon did, based on the question asked, was not use for the purposes of infringement.  This is an issue that has been explored many times before and boils down to the fact that any infringing activity must be carried out in relation to one’s own commercial communication, not the creation of “technical conditions” necessary for a third party to use.

Implications

This decision is not necessarily a defeat for brand owners.  The question referred by the German court was very narrow, and a significant amount of Amazon’s fulfilment service was not scrutinised by the CJEU.

Looking at the Opinion of the Advocate General, who explored the issue in a wider context, it seems clear that there is hope yet for brand owners.  If the additional elements of the “Fulfilment by Amazon” scheme were scrutinised (beyond storage), it is far more likely that the issue of control and commercial communication would have been less problematic.  In fact, the answer to the question provided by the Advocate General, in the context of the whole Amazon offering, is far more favourable for brand owners.  The Advocate General felt that the Articles should be interpreted as follows:

- A person does not store for a third party (seller) products infringing a right of brand for the purpose of their offer or their placing on the market when it is not aware of this infringement and that it is not itself, but the third party, which, alone, intends to offer the products or put them on the market.

- It is however possible to consider that this person stores these products for the purposes of their offer or their placing on the market if it is actively involved in their distribution, within the framework a program with the characteristics of the program called "Fulfilled by Amazon", to which the seller subscribes.

- The fact that this person is unaware that, under such a program, the third party offers or sells the products that contravene the right of the trademark owner does not exempt him from his responsibility, when it can reasonably be expected to use the means to detect this violation.

If one can show that an online marketplace is “actively involved” in the sale of the infringing products, perhaps through the provision of pricing advice or customer service, then the marketplaces themselves could be liable for infringement.

The Advocate General also looked at the Directive on Electronic Commerce, which the CJEU did not as it did not form part of the question.  He confirmed that under this directive, it is still the case that once the marketplace becomes aware of the infringement, they must act or face secondary liability.  This is a confirmation that there are still clear steps to take regarding infringing content on marketplaces.

So, whilst this judgment may seem like a victory for Amazon, brand owners should not see this as a loss.  It seems that there are still areas of the “Fulfilment by Amazon” scheme to be scrutinised, and if done so, it is possible that a new route to enforcement on Amazon could be established.  At any rate, there is still clear routes to remove infringing content on marketplaces. 

Points to take away

1.       This case does not spell the end of the possibility of bringing Amazon into infringement action in relation to products sold under their “Fulfilment by Amazon” scheme;

2.       If you can find evidence of a marketplace’s active involvement in the sale of products beyond mere storage, it is possible that said marketplace could also be liable for infringement;

3.       Under the Directive on Electronic Commerce, marketplaces are still obligated to remove infringing content once they have been notified.  We can work with marketplaces by running programs to search marketplaces and notify them of infringing content.  Marketplaces are obliged to act, so it is important to monitor the situation to ensure they are doing so.

Case Link: http://curia.europa.eu/juris/document/document.jsf?text=&docid=224883&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=2761328