Protecting your intellectual property on online marketplaces in the EU

Jannik Skou, Markus Rouvinen,[Trademark]

 

In a world that has (for obvious reasons) increasingly turned to e-commerce to buy even the most rudimentary products, ensuring that their intellectual property is fully protected on online marketplaces is a key priority for many brands. Online marketplaces are often the primary fora for well-known serious issues such as the sale of counterfeit or grey market goods, as well as more novel types of unfair competition, and an effective monitoring and enforcement strategy can substantially lower the risk of these issues getting out of control. In the EU, the regulatory environment for online marketplaces is on the cusp of major change thanks to the new Digital Services Act likely to be adopted in the not too-distant future, which will have important consequences for brand protection. In particular, the reforms proposed are likely to lead to online marketplaces only accepting takedowns that provide detailed explanations of the legal nature of the alleged infringement – something that should prompt brand owners to evaluate whether the takedown templates they currently use are fit for purpose. Aside from the regulatory framework, the manner in which online marketplaces operate has also undergone rapid change. Online marketplaces increasingly take an active role in storing, packaging and sending the products sold by independent sellers on their platforms. Further, to increase sales, online marketplaces may use advanced search and product recommendation algorithms that may lead to trademarks being shown to consumers in confusing ways. These practices have in recent years come under the scrutiny of the courts, leading to important developments that brand owners should be aware of when planning their online brand protection strategy.

 
Following a brief introduction to the liability framework currently applicable to online marketplaces in the EU, the remainder of this article will explore some aspects of the coming Digital Services Act reform from a brand protection perspective, followed by a discussion of how the EU and German courts have approached the more active role played by marketplaces in order fulfilment and direct trademark use.
 
Current legal framework: The E-Commerce Directive
 
In the EU, the basic liability framework applicable to online marketplaces is contained in the E-Commerce Directive[1] first adopted in 2000, the key provisions of which have never been amended. Motivated by a desire to create a free and open online environment favourable to the development of online services, the E-Commerce Directive contains a set of liability exemptions regarding illicit online content for the benefit of various categories of Internet Service Providers (ISPs), with the extent of the exemption depending on the degree of involvement the ISP has with the illicit content. While ISPs that provide services that consist merely of the transmission of information and storing this information as an automatic cache (e.g., teleoperators) are generally speaking always protected from liability for the content they merely transmit and store, the situation is different where an ISP stores information on a more permanent basis (hosting providers). Article 14 of the E-Commerce Directive provides that a hosting provider remains protected from liability only so long as they do not have “actual knowledge” of the illicit content, and act expeditiously to remove such content when actual knowledge is obtained. Effectively, the import of this provision is that a hosting provider will lose the protection afforded by the liability exemption if they do not remove or disable access to illicit content when notified of the presence of such content on their servers.
 
Traditionally, online marketplaces provide an environment for content that they themselves had no hand in creating as they merely provide a platform that allows independent sellers to reach consumers with greater ease than they could have by themselves. As a result, they are, as a general rule, treated as hosting providers, as long as they do not assume an active role with respect to the products sold through, for example, advertising them or optimising it for display.[2] The effect of this is that online marketplaces are generally protected from being liable for third-party listings that infringe IP rights, provided that they take action when properly notified of infringing content. It is important to note that under Article 15 of the E-Commerce Directive, a hosting provider such as an online marketplace cannot be obliged to take on a general obligation to monitor the content that they host, or to actively seek facts or circumstances indicating illegal activity. This has been held to mean that while a hosting provider may be obliged (e.g., through a court order) to prevent the reappearance of known illicit content, they cannot be obliged to carry out an independent legal assessment of the legality of the content they host.[3] 
 
The effect of the rules concerning active knowledge on the one hand, and of the prohibition of general monitoring obligations on the other, is that brand owners must take a proactive role in notifying infringing content. In other words, an effective brand protection strategy on European online marketplaces has required brand owners to put in place solutions that identify infringements to a high degree of accuracy and provide cost-effective means of notifying these infringements through takedowns.
 
For many brand owners, what constitutes an effective brand protection solution has thus far been determined mostly by cost-related considerations and the ability to file large quantities of fairly rudimentary takedown notifications – the quantity of takedowns has often prevailed at the expense of quality. This is because the liability set-up for online platforms has incentivised marketplaces to err on the side of accepting potentially dubious takedowns, given that not doing so would risk the platform losing the protection of the safe-harbour provided by the E-Commerce Directive. Conversely, removing legitimate content has carried little risk as individual sellers are less likely than a brand owner to have the financial resources to bring a legal claim against the platform, and liability can in any case be passed on to the sender of the takedown. Indeed, the low quality of takedowns and over-removal of content has been recognised as a problem by the European Commission[4], and understandably so, as it leads to sellers not being able to correctly identify the violations they are accused of, thereby risking false positives and diminishing trust in platforms.
 
The Digital Services Act and its impact on online brand protection
 
The picture presented above is set to soon change in a drastic way. On December 15th 2020, the Commission formally proposed a new Regulation on a Single Market in Digital Services (the Digital Services Act, or “DSA”)[5] The DSA, which is the culmination of much policy work on the part of the Commission and already enjoys significant support in the European Parliament and Council, would replace the liability exemptions contained in the E-Commerce Directive and represents a major overhaul of the regulatory environment in which online marketplaces operate in Europe. It should be noted that much like the GDPR, the DSA will likely apply not only to online marketplaces operating out of the EU, but also to marketplaces located elsewhere but which have a substantial connection to the EU.[6] 
 
One of the core aims of the DSA is to clarify the online intermediary liability exemptions so as to resolve existing ambiguities and to increase the transparency of the takedown process. For instance, Article 14(1) of the proposal would oblige all hosting providers (including online marketplaces) to set up easy to access and user-friendly takedown mechanisms. Further, Article 14(2) effectively harmonises the information that takedown notifications must provide[7]; for good measure, Article 14(3) provides that notifications containing the mentioned elements would give rise to actual knowledge on the part of the hosting provider, leading to a loss of their liability exemption. Perhaps more importantly, Article 15 of the proposal would oblige hosting providers to provide a “statement of reasons” to the person whose content has been removed pursuant to a takedown, which would need to contain a reference to the legal ground relied on to find the content illegal and an explanation of why the content is considered illegal on that ground. Further, these statements would be subject to publication in a public database maintained by the European Commission.
 
The DSA would also oblige the majority of online marketplaces[8] to allow internal complaints against accepted takedowns, and force them to accept the outcomes of independent out-of-court dispute settlements. Article 17 of the proposal provides that for a period of 6 months after content is removed following a takedown, online marketplaces would have to allow the seller affected to file a complaint against the removal. If the complaint causes the marketplace to consider that the content taken down is not illegal, they would be obliged to allow the content back online. Additionally, Article 18 of the proposal would force online marketplaces to submit to special out-of-court dispute settlement mechanisms allowing sellers that maintain their content was not illegal to seek redress. Crucially, if the platform loses the procedure, it must compensate the seller for the reasonable expenses they incur, while the seller has no corresponding obligation.
 
It seems likely that the increased accountability and financial risks for removing non-infringing content contemplated by the DSA would lead online marketplaces to be far less likely to accept low-quality takedowns. Thus, brand owners will need to ensure that any takedowns sent are properly researched and detailed in explaining the grounds relied upon to identify a particular listing as infringing. This is clearly positive from the perspective of increasing the transparency of the takedown system, but it is also likely to complicate the filing of automated takedowns with generic descriptions. This might, in turn, lead to sub-optimal enforcement by brand owners.
 
Luckily, the DSA proposal also contains measures that are conducive to the efficient removal of “obvious” infringements. First, under Article 19 of the proposal, online marketplaces would be obliged to ensure that takedowns received from “trusted flaggers” are treated “with priority and without delay”. The Article envisages that these “trusted flaggers” would be specifically certified by Digital Service Coordinators from the Member States, and would in particular need to represent a “collective interest”. Recital 46 to the DSA specifies that when it comes to intellectual property rights, industry organisations or IP rights holder associations could be awarded trusted status. While an individual brand owner or a brand protection provider would thus likely not qualify for trusted status, it is important to note that Recital 46 specifically contemplates that platforms may give notices received from entities and individuals the same treatment as to notices from trusted flaggers. There is thus a clear possibility that online marketplaces might themselves confer a status similar to that of “trusted flagger” to brand owners and brand protection providers that have demonstrated their reliability when it comes to takedowns.
 
Second, in order to prevent multiple takedowns having to be filed regarding what is essentially the same conduct, Article 20(1) of the proposal would oblige online marketplaces to cease hosting sellers that frequently post manifestly illegal content. Conversely, however, under Article 20(2) marketplaces would also be obliged to suspend processing takedowns from those persons that frequently submit notifications that are manifestly unfounded. While brand owners can take comfort in the fact that under the DSA, takedowns are likely to remain efficient thanks to “trusted flagger” programmes and the removal of repeat offenders, they need to take care to ensure that unfounded notifications are not sent on their behalf.
 
To summarise, if accepted by the EU legislature, the DSA is likely to force brand owners to adapt their online brand protection efforts on European online marketplaces. While the Commissions proposal may well be amended to a significant degree during the legislative process, the final version of the DSA will doubtless include measures that require platforms to set up dedicated takedown procedures and incentivise them to set a high bar when it comes to the quality of takedowns. As a result, brand owners should favour online brand protection solutions that offer dedicated, market place specific takedown workflows and detailed, takedown letters tailored to the specific legal issue encountered. Further, as it is likely that many marketplaces will eventually offer “trusted flagger” status to reliable online brand protection providers, brand owners may increase the efficiency of their brand protection by relying on these providers.
 
When is an online marketplace itself an infringer? Marketplace order fulfilment services and trademark use by behaviour-based search algorithms
 
While taking the impact of the DSA reform into account is essential for brand owners seeking to optimise their use of takedown mechanisms, not all IP-issues on marketplaces can be dealt with through takedowns. As mentioned, the fundamental premise underlying the liability set-up for online marketplaces is that they act as mere neutral intermediaries, and as a result, maintain a certain “distance” from the content they host. This prevents them from having actual knowledge of any intellectual property infringements pursued by platform sellers and thus escape direct liability. However, the notion that online platforms are mere neutral intermediaries is brought into question by the realities of how online marketplaces currently operate. This is particularly the case for two phenomena that have been accorded relevance by courts in the EU. First, online marketplaces increasingly manage logistics and marketing functions on behalf of their sellers. Second, online marketplaces increasingly employ advanced, algorithmic advertising techniques based on consumer behaviour, which use brand names in potentially confusing ways. As a result, brand owners eager to make the best use of their intellectual property rights should be aware of the possibilities of challenging an online marketplace directly where this presents advantages in comparison to takedown procedures, or where the value of a particular IP right is negatively impacted by the manner in which the marketplace operates.
 
Online platforms, far from solely providing independent sellers with an online environment to advertise and sell their products, have moved into offering sellers services such as product storage and order fulfilment. Perhaps the best-known example of this is the “Fulfilment by Amazon” programme, where sellers send their goods to Amazon, which proceeds by taking care of all aspects of warehousing, sale and shipping.
 
This service was touched upon recently in Coty v. Amazon[9], decided by the CJEU in April 2020. That case concerned the issue of whether Amazon could be characterised as a neutral provider of storage services, which had previously been held not to use the trademark for the purposes of offering goods for sale, and thus not “use” the trademark for trademark purposes.[10] The Court held that this was indeed the case, given that for a party to use a trademark for the purposes of putting goods on the market, it must itself be pursuing that aim.[11] The judgment thus clarified that an online marketplace offering order fulfilment services to sellers on its platform cannot (generally speaking) be considered a trademark infringer under Article 9 (3)(b) of the EU Trademark Regulation if the goods they store turn out to be infringing.
 
However, while not directly relevant to the outcome of the case, the Court nevertheless provided important insights into whether order fulfilment by a marketplace might give rise to direct liability through alternative means. Specifically, the Court pointed out that where an online marketplace has enabled a seller to make use of a trademark in an infringing way, its role must be examined from the point of view of rules of law such as Article 14(1) of the E-Commerce Directive (the hosting provider liability exemption) and the first sentence of Article 11 of the Enforcement Directive[12] (dealing with the issuing of injunctions specifically to an infringer).[13] The fact that these rules are mentioned together points to the possibility that an online marketplace operator that falls outside the liability exemption might be treated as an infringer for the purposes of the Enforcement Directive.[14] 
 
This is of great interest as Article 13 of that Directive provides an IP owner with the right to receive damages from an infringer who knowingly, or with reasonable grounds to know, engaged in infringing activity. When a platform offers a programme such as “Fulfilled by Amazon’, which involves not only storage but packaging, labelling and sending the products (not to mention advertising them and answering any customer queries), the platform assumes an active role that entails control over, and promotion of, the infringing listings and the associated products. As a result, it seems likely that such an online marketplace can no longer benefit from the E-Commerce Directive liability exemption.[15] Further, as was pointed out in the Advocate General Opinion given in Coty v. Amazon, the degree to which Amazon is involved in the marketing of “Fulfilled by Amazon” products suggests that it might be reasonable to expect them to exercise special care in confirming the lawfulness of the products they stock.[16] This raises the possibility that where infringing goods are sold on a marketplace employing a programme similar to Fulfilment by Amazon, an aggrieved IP owner might be entitled to claim damages not only from the infringing seller but also from the platform.
 
Thus, while making the best use of the available takedown procedures and dealing with sellers directly should always be the first lines of defence for brand owners faced with intellectual property infringement on online marketplaces, the new developments presented above create additional options for enforcement and recovery. In particular, the possibility of recovering damages directly from a platform may be particularly useful where the primary infringer is unreachable or lacks the financial resources to fully satisfy a claim for damages.
 
Another area where online marketplaces may face direct liability is where infringements are caused not by the sellers active on the platform, but rather by the design of the marketplace itself. Many online marketplaces employ internal search engines to aid purchasers to find the products that best fit their desires. Increasingly, these search engines respond to customer queries not only by matching the search terms with words used in product descriptions, but also on the basis of algorithms designed to present the products “most relevant” to the query. These algorithms rely a great deal on past user behaviour: if a certain number of previous users searched for a particular term but ended up buying a product that was not a “text match”, the algorithm will likely deem that product as a relevant product to be presented in future searches for the term.
 
This is problematic for brand owners, as behaviour-based algorithms may well classify unrelated products as “relevant” products to be displayed in searches for their brand. It is not difficult to come up with scenarios where this would result in consumer confusion, as consumers looking for a particular branded ingredient or a certification mark may well assume that the unrelated products are in fact connected to the brand. The issue is even greater in cases where the online marketplace drives user traffic to the search results via search engine advertising, as consumers clicking on the ads might expect to be presented only with products by the brand mentioned.
 
Whether online marketplaces can be liable where their behaviour based algorithms use trademarks in a confusing way has in recent years been examined from a variety of angles by the German courts. In Ortlieb I[17], the German Federal Court held that where the internal search engine on an online marketplace uses an algorithm to display unrelated products in response to queries containing a trademark, the platform’s liability must be determined with reference to the principles established by the CJEU in relation to keyword advertising. As a result, the platform will face liability if the unrelated products are displayed in such a way that the reasonable consumer would have difficulty in determining whether they are affiliated with the trademark owner. Whether this is the case is a question that must be determined separately for each dispute, but it can be expected that merely the fact that the unrelated product listing display different brand names will not always be sufficient to dispel confusion.
 
It should be noted that following the mk advokaten case[18], decided in July 2020 by the CJEU, the reasoning adopted by the German Federal Court in Ortlieb I seems fully consistent with EU law. In mk advokaten, the CJEU confirmed that where a trademark is used to trigger listings or advertising promoting goods or services, there is legally relevant “use” of the trademark that can give rise to trademark infringement.[19] When a seller or advertiser instructs a neutral intermediary to use an unrelated trademark be used to trigger advertising, they will be liable for any resulting infringement.[20] However, if the triggering has nothing to do with the advertiser but is instead done by an independent operator on their own initiative and in their own name, it is the independent operator that is liable.[21] Thus, where an online marketplace employs an algorithm that, without any input from the sellers in question, triggers the display of unrelated product listings in response to searches with a trademark, it is the platform that must bear liability for any infringement that results.[22] 
 
The German Federal Court has also had occasion to rule on whether it is infringing for an online marketplace to display a trademark in keyword advertising to drive traffic towards their search result lists. In Ortlieb II[23], it was held that where an AdWords ad was taken out by a marketplace promotes the availability of particular trademarked goods, the reasonable consumer clicking on the ad may expect to be presented exclusively[24] with products from the brand advertised. This expectation will be deceived when the consumer is instead presented with a search result list containing unrelated products, evincing that the use of the trademark in the initial ad gave rise to confusion as to origin.[25] 
 
Thus, these cases provide brand owners with significant ammunition to challenge online marketplaces in the German courts when they feel the value of their trademarks diminished due to their use by marketplace search algorithms, especially where AdWords and other search engine ads are used to drive traffic to the marketplace. In order to make the best use of these possibilities, brand owners are advised to employ brand protection solutions that are able to see beyond individual listings to identify how their trademarks are employed by online marketplaces in a wider sense. Further, brand owners should utilise sophisticated monitoring methods for AdWords and other keyword advertising services, and pay close attention to how online marketplaces use such services in relation to their trademarks.
 
Conclusion
 
This article has attempted to highlight two important developments that should be borne in mind by international brand owners seeking to protect their trademarks and other intellectual property on European online marketplaces. Brand owners should pay close attention to the coming reform of online platform obligations through the Digital Services Act, which is likely to raise the bar significantly with regards to the level of detail and legal accuracy required from takedown notifications. Further, brand owners eager to maximise the value of their trademarks should be aware of the possibility that online marketplaces may themselves face liability for trademark infringement, notably when fulfilling orders on behalf of sellers and when allowing trademarks to be used in a confusing manner by their internal search engines. As a key takeaway, brand owners using online brand protection providers should consider whether the solutions they currently employ take these developments into account to a sufficient degree.
 
Jannik Skou, MD at Thomsen Trampedach, is an online brand protection and corporate domain name management expert working with a number of Fortune 500 clients.
He is a member of INTA’s Anti Counterfeiting Committee as well as the ICANN Intellectual Property Constituency.
 
Markus Rouvinen is an IP Lawyer at Thomsen Trampedach (https:// www.thomsentrampedach.com/cn/ brand-protection/), providing online brand protection and corporate domain name services to large international brands in Europe and China.
 
He has vast experience with addressing not only standard counterfeiting and trademark infringement cases on E-commerce platforms in Europe and Asia, but also with dealing with more complicated cases of unfair competition, such as the unfair exploitation of competitors’ trademarks, and with the liability implications of local and EU law on Internet Service Providers and E-commerce platforms. Thomsen Trampedach is an Online Brand Protection provider based in Zurich and Copenhagen, combining smart software and legal tech with legal expertise and human intelligence. Thomsen Trampedach is owned by Novagraaf, a leading legal tech service provider with 300 staff and offices in Europe, US, Japan and China.
 
 
 
 
 
 
1 Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market.
 
2 See Case C-324/09 L’Oréal SA and Others, at para. 123, where it was held that the operator of an online marketplace can no longer be considered a neutral intermediary where it optimises the presentation of product listing or promotes them.
 
3 Case C-18/18 Eva Glawischnig-Piesczek v Facebook Ireland Limited at para. 45.
 
4 European Commission, DG Internal Policies, “Online Platforms' Moderation of Illegal Content Online - Law, Practices and Options for Reform”, PE 652.718 (June 2020), at p. 23.
 
5 “Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on a Single Market for Digital Services (Digital Services Act) and amending Directive 2000/31/EC”, COM/2020/825 final.
 
6 Article 2(d) of the DSA proposal provides that such a substantial connection would exist where the online marketplace has a significant number of users in a Member State, or where it targets a Member State (as shown, for instance, by the language or currency displayed).
 
7 Namely, an explanation of why the content reported is considered illegal, a description of the location of the content such as the URL, the name and email of the person making the notification, and a good-faith declaration by that person.
 
8 Under Article 16 of the DSA proposal, small-scale marketplaces are exempted from most of the requirements going beyond providing a takedown mechanism and providing statements of reasons.
 
9 Case C-567/18 Coty Germany GmbH v. Amazon Services Europe Sàrl and Others.
 
10 Case C-379/14 TOP Logistics and Others.
 
11 Case C-567/18 at para. 45.
 
12 Directive 2004/48/EC on the enforcement of intellectual property rights.
 
13 Case C-567/18 at para. 49.
 
14 While the possibility of the online marketplace directly infringing a trademark seems excluded, it is possible that a marketplace might be considered a contributory infringer under the national law of a Member State.
 
15 Case C-324/09 at para. 123.
 
16 See Case C-567/18, Opinion of AG Sánchez-Bordona, at para. 82.
 
17 BGH, 15.2.2018, Az. I ZR 138/16.
 
18 Case C-684/19 mk advokaten GbR v MBK Rechtsanwälte GbR.
 
19 Case C-684/19 at para. 19.
 
20 Case C-684/19 at para. 22.
 
21 Case C-684/19 at para. 28.
 
22 Case C-684-19 at para. 29, where it was pointed out that a trademark proprietor should be entitled to prevent any infringing use of its trademark. It should be noted that the mk advokaten case concerned the reproduction of a particular ad by referencing websites, which is an automatic process managed by algorithms. The fact that an online marketplace’s does not have active knowledge of the triggering done by its internal search engine would thus seem irrelevant to their liability.
 
23 BGH, 25.7.2019, Az. I ZR 29/18.
 
24 Whether only affiliated products are expected depends on the nature of the ad, but at least some affiliated products would ordinarily be expected.
 
25 This has recently been confirmed by the Vorker case (BGH, 15.10.2020, Az. I ZR 210/18), decided by the Federal Court in October 2020.

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