Hosting third-party products could make online marketplaces liable for trade mark infringement

The Court of Justice of the European Union (CJEU) in a recent decision set out factors for national courts to consider when ruling on when an operator of a website incorporating a marketplace can be held liable for trade mark infringement. The case involved third-party merchants on Amazon's marketplace selling counterfeit Louboutin shoes, bearing the designer's distinctive and trade mark-protected red sole.

The court held that the operator of a website that incorporates a marketplace may "use" a trade mark for infringement purposes under article 9(2)(a) of the Trade Mark Regulation when a well-informed and reasonably observant user establishes a link between the services of the operator and the use of the trade mark. The link and "use" may be found when the well-informed and reasonably observant user may have the impression that the operator is marketing the goods bearing the trade mark in its own name and on its own account.

The decision provides useful guidance for online platform providers, especially those that have the dual purpose of selling directly and operating as a platform for third-party sales. Platform providers need to consider how their marketplaces will be perceived by the well-informed and reasonably observant user and it should be clear when products are being sold directly and where they are being sold by a third party.

Dispute background

In the autumn of 2019, Louboutin brought actions for trade mark infringement against Amazon in Luxembourg and Belgium. Since 2016, Louboutin has had EU trade mark protection for the distinctive red colour (Pantone 18-1663TP) when applied to the sole of a high-heeled shoe. Louboutin claimed that, by displaying on its website, advertising and shipping goods bearing the trade mark without consent, Amazon is liable for trade mark infringement.

Both national courts requested a preliminary ruling from the CJEU. In essence, they referred the following question to the court: is article 9(2)(a) to be interpreted to mean that the operator of an online marketplace is using a trade mark by advertising goods bearing that trade mark, even if those goods are being offered for sale by third parties?

CJEU decision

The court held that, although merely creating the technical conditions necessary for the use of a sign does not constitute use, Amazon was not precluded from being held to have "used" the trade mark in this case. It is now for the referring national courts to decide on the facts whether Amazon is "using" the Louboutin trade mark. 

The CJEU helpfully gave the following guidance for national courts to consider:

• The courts must assess whether a well-informed and reasonably observant user of the website incorporating a marketplace will establish a link between the operator's services and the sign in question.
• In the case of advertisements placed on the website by third-party sellers, the court must determine whether a well-informed and reasonably observant user might believe that the website's operator is marketing the goods for sale in its own name and on its own account.
• The method of presenting the advertisements is of particular importance. EU legislation sets out that advertisements should allow users to clearly distinguish between offers originating from the operator of the website and from third party sellers. This distinction is blurred where the advertisements are presented in a uniform way, and when they contain labels such as "bestseller" or "most popular" without distinguishing between their origin.
• The nature and scope of services offered by the website operator may also establish a link with the infringing goods offered by third parties in the eyes of the user.

Osborne Clarke comment

This decision marks an important development in EU case law around online platform liability when dealing with intellectual property rights infringement. It signals a departure from the approach taken in L'Oréal v eBay, where the operator of an online marketplace was considered not to be "using" infringing signs. These cases show the diverging approaches taken between cases where an operator is solely running a marketplace and where it is also selling its own products on this marketplace.

This is also in line with the EU Digital Services Act (most of which provisions will enter into force on 17 February 2024) where article 6.3 provides that the exemption from liability from which the online platforms benefit “shall not apply with respect to the liability under consumer protection law of online platforms that allow consumers to conclude distance contracts with traders, where such an online platform presents the specific item of information or otherwise enables the specific transaction at issue in a way that would lead an average consumer to believe that the information, or the product or service that is the object of the transaction, is provided either by the online platform itself or by a recipient of the service who is acting under its authority or control".

The decision is of particular significance to online marketplaces that have a dual role – those that are both a marketplace and a distributor of goods. Online marketplaces should carefully consider the layout and presentation of their platforms to ensure consumers can distinguish between goods offered and sold under their own name and those offered and sold by third parties but distributed by the marketplace.

The case will also be of interest in the UK, in light of the upcoming appeal to the Supreme Court in Lifestyle Equities v Amazon. If the Supreme Court approves the Court of Appeal's approach, which was similar to that of the CJEU in this case, this could have a significant impact on the way platform providers are required to operate as they attempt to mitigate the risk of trade mark infringement.

Sam Bluteau-Tait, a Trainee Solicitor with the IP Disputes team at Osborne Clarke, co-authored this Insight.