UK Court of Appeal confirms Samsung is liable for third-party content on app store

The Court of Appeal has recently upheld the first instance finding that Samsung was liable for third-party digital watch face apps available in the Samsung Galaxy App Store (SGA) that infringed various Swatch group trade marks. Samsung was not able to rely on the hosting defence in article 14(1) of the eCommerce Directive because its activities were active in nature, which gave it knowledge and control over the infringing content.

Samsung had carried out a content-review process to try to identify and prevent illegality and it argued that it should not be penalised for having done so. Importantly, the court rejected this argument, holding that, as the law stands in the UK, intermediary service providers are not obliged to undertake content review. If they choose to do so for their own commercial reasons then they have to "accept the risk" that they may not be able to rely on the hosting defence in article 14(1).

This decision has broad implications for platform providers, places the UK at odds with the EU's approach to the hosting safe harbour and is likely to bring an increase in claims against platforms in the UK.

High Court decision

In the first instance decision, Mrs Justice Falk (as she then was) held that most of the third-party digital watch face apps in question infringed Swatch's trade marks and that Samsung was primarily liable for those infringements. She held that the activities undertaken by Samsung amounted to use of Swatch's trade marks, the use was in relation to smartwatches and Samsung was not able to rely on the article 14(1) hosting defence.

The appeal

Mrs Justice Falk did, however, grant Samsung permission to appeal on three grounds. Firstly, Samsung argued that the judge was wrong to hold that Swatch's trade marks had been used by Samsung (as opposed to just being used by the relevant app developers). Secondly, it maintained that the judge was wrong to hold that the use related to smartwatches (as opposed to in relation to apps only). And, thirdly, it alleged that the judge was also wrong to reject Samsung's defence under article 14(1).

Trade mark use in relation to smartwatches

In the Court of Appeal, the leading judgment was given by Lord Justice Arnold (with agreement from Lady Justice Elizabeth Laing and Lord Justice Lewison). With respect to Samsung's first ground of appeal, the court rejected Samsung's argument that the judge had taken an "overly broad approach" to the issue of whether or not Samsung had used the infringing signs "in its own commercial communication" (the relevant test as repeatedly held by the Court of Justice of the EU (CJEU)).

Lord Justice Arnold disagreed and held that the factors that had been taken into account were all relevant to the context in which the marks were used and the average consumer's perception of the use of the marks. This was held to be consistent with the CJEU's approach in Louboutin v Amazon, which, although not binding and which didn’t come out until after the first instance decision in this case, was held to be persuasive authority.

As for the second ground of appeal, Lord Justice Arnold held again that the judge had been entitled to and was correct to find that the use was in relation to smartwatches and not just apps. A broad approach to use was taken – even though the infringing signs were not permanently fixed to the smart watch but were just displayed on the digital watch face it was enough that the marks were used in relation to smartwatches "in some way".

The hosting defence

The judge at first instance had found that Samsung was “aware of facts or circumstances from which the illegal activity…is apparent” and, therefore, could not rely on the article 14(1) hosting safe harbour.

Samsung appealed this finding but the Court of Appeal decided that Samsung's acts did not fall within article 14(1) at all because its role was an active one rather than “merely technical, automatic and passive” with “no knowledge of or control over the content it stores”.

Samsung had sought to argue that its app store should not be excluded from the article 14(1) safe harbour by its necessary involvement in determining whether an app can appear in its store and undertaking a review to prevent illegality. Lord Justice Arnold held that this argument was not on point as Swatch had not argued that app stores can never benefit from the hosting defence. The Court of Appeal made it clear that article 14(1) concerns the acts undertaken, not the type of business carrying out those acts.

Samsung also maintained that it shouldn’t be penalised for carrying out content review as opposed to just taking down illegal content when notified. This was described as a "familiar conundrum" with the eCommerce Directive exemptions. But Lord Justice Arnold held that it was clear that, on the current law in the UK, if intermediary service providers carry out a review process then they might not be able to rely on the hosting defence.

Osborne Clarke comment

The question of platform liability for third-party infringing content or products is a focus of debate at the moment and this judgment follows other recent decisions in the UK and the EU. Crucially, this decision makes it clear that there are now different approaches in the UK and the EU on the hosting defence.

In the EU, article 7 of the Digital Services Act stipulates that providers of intermediary services are not ineligible for the hosting exemption solely because they undertake "voluntary own-initiative investigations" in good faith and in a diligent manner to identify and remove illegal content. However, the Digital Services Act is not applicable in the UK. This judgment makes clear that, under the currently applicable article 14(1) of the eCommerce Directive, intermediary service providers are not obliged to carry out content review and therefore run the risk of not being able to rely on the hosting defence if they choose to do so.

This decision may well have the dual effect of increasing the number of infringement claims brought against platforms and simultaneously encouraging some platform providers to reduce the extent of their content review process in the UK to minimise the risk that they are found to be playing an active role.