Although the decision appears on its face to be a positive development for online marketplaces, it is does not definitively resolve questions of liability.
On 2 April 2020, the Court of Justice of the European Union (CJEU) delivered its ruling in Coty Germany v Amazon — marking a development for online marketplaces in relation to liability issues. The case had raised the possibility that online marketplaces could be found directly liable for infringing products sold on their platforms.
Currently, if a third party sells infringing products, within the EU, on an online marketplace, the online marketplace has (i) no liability if it does not have actual knowledge of the infringement or where it acts promptly to remove the infringing content once it becomes aware of it: and (ii) only secondary liability where it has knowledge and fails to remove the infringing content.
The German Federal Court had requested a preliminary ruling on the interpretation of Article 9(3)(b) of the 2017, and Article 9(2)(b) of the now-repealed 2009, Trade Mark Regulations (Council Regulation 2017/1001 and Council Regulation No 207/2009 (as amended by Regulation 2015/2424) respectively) asking: Does a person who, on behalf of a third party, stores goods which infringe trade mark rights, without being aware of that infringement, stock those goods in order to offer them or put them on the market for the purposes of those provisions, if that person does not itself pursue those aims?
The CJEU addressed this question by ruling that a person who, “on behalf of a third party, stores goods which infringe trade mark rights, without being aware of that infringement, must be regarded as not stocking those goods in order to offer them or put them on the market for the purposes of those provisions, if that person does not itself pursue those aims” [emphasis authors’ own].
While this ruling, on its face, leads away from the possibility of direct liability for online marketplaces, it is not definitive. The CJEU’s interpretation is subject to national courts’ application of it to specific fact patterns. And, although the CJEU’s judgment takes precedent over the AG’s opinion, it is possible that the national courts may look to the broader and more analytical opinion of Advocat General M. Manuel Campos Sanchez-Bordona (the AG) when considering issues not addressed in the CJEU judgment. The CJEU only responded to the question regarding the Trade Mark Regulations, as referred to it by the German courts. However the AG also (i) analysed whether Amazon could, correctly, be considered to be acting only as a warehouser and (ii) suggested that online marketplaces may not always rely on the eCommerce Directive safe harbor to avoid direct liability (see client alert below for further details).
In applying the CJEU’s interpretation of the Trade Mark Regulations, national courts of Member States could establish liability for online marketplaces, particularly if the national courts apply the AG’s analysis and suggestions. However if a national court does so and finds that online marketplaces must show special care and diligence in matters regarding the legality of the goods which they trade, it is possible that the relevant Member State would be found to be in breach of Article 15 of the eCommerce Directive.
Article 15 of the eCommerce Directive prevents Member States from imposing a general obligation on providers, when offering hosting services (as well as caching services and services where it acts as a ‘mere conduit’) from being required to: (i) monitor the information that the providers transmit or store, or (ii) actively seek facts or circumstances indicating illegal activity. In the event of a direct liability regime, it seems the only way for online marketplaces to then ensure infringing products were not placed on their platforms would be to implement monitoring of the platforms.
This potential for direct liability and the lack of coherence with the eCommerce Directive mirrors the confusion around the liability of online content sharing service providers under Article 17 of Directive (EU) 2019/790 on Copyright in the Digital Single Market and its alignment with the eCommerce Directive. Both developments raise questions as to whether direct liability for service providers is the intended direction of the Digital Single Market.
With regard to Coty Germany v Amazon, the German court’s judgment will hopefully provide some more clarity as, although not binding on other Member States, it is likely to be instructive.
Latham & Watkins will continue to monitor and provide updates on related developments.
For a full client briefing, see Latham’s Client Alert here.