Luxury and online marketplaces – the next chapter
Coty v Amazon (C-567/18)
The questionIs an innocent third party liable for simply storing third-party goods that it did not know infringed trade mark rights?
Key takeaway
An innocent third party will not be infringing trade mark rights by simply storing goods on behalf of a third-party seller, provided that the storing party does not intend to offer the infringing goods for sale or put them on the market.
The background
Global beauty company, Coty, holds an EU trade mark (EUTM) licence for DAVIDOFF, and distributed the “Davidoff” brand perfume through its German distribution company, Coty Germany GmbH.
Coty claimed that two Amazon companies had infringed its rights in the EUTM by storing and dispatching bottles of “Davidoff Hot Water”, that were offered for sale by third-party sellers via Amazon-Marketplace, as Coty had not consented to the bottles being put on the EU market.
Coty wrote to the third-party seller in question and obtained a cease-and-desist declaration. It then wrote to Amazon, to request the return of all bottles offered by the seller. Amazon sent a package containing 30 bottles to Coty. When Coty learned that some bottles were offered for sale by a different third-party seller, it asked Amazon to disclose their contact details. Amazon declined.
Although contracts for the sale of goods via Amazon-Marketplace are concluded between third-party sellers and end-purchasers, Coty believed that Amazon’s actions infringed the EUTM and that
Amazon should be ordered to cease and desist from storing and dispatching bottles via its “Fulfilled by Amazon” (FBA) service.
The decision
Coty’s claim failed at the German national courts and was appealed to Germany’s Federal Court on a point of law. The Federal Court stated that it agreed with the previous decision that Amazon had not infringed but sought input from the CJEU on the interpretation of EU trade mark law.
An act of infringement under EUTM regulations requires the “use” of a mark in the course of trade. As such, the CJEU was asked to consider whether storing infringing goods for a third party to sell, without knowing about the infringement and without offering to sell the goods or intending to offer to sell the goods amounted to “use” and thus trade mark infringement.
The CJEU held that the answer was no: the provision of storage alone was not enough. For infringement to arise, the storage company must also pursue the aim of offering the goods for sale or putting them on the market. Amazon’s lack of intent to offer the goods for sale meant that it had not used (and had therefore not infringed) the EUTM.
Why is this important?
Even though this decision is the latest in a long line of disputes that have seen brand owners (unsuccessfully) attempt to challenge Amazon’s business practices, it seems likely that we will see further litigation involving online marketplaces for two reasons:
1. Brand owners argue that Amazon plays more than a passive role by providing the platform on which goods are offered and ultimately sold via its Marketplace and that Amazon effectively steps into the shoes of the third-party seller. Brand owners also note that, in the case of FBA, Amazon itself claims to “take care of storage, delivery to customers, customer service and returns handling”.
2. the CJEU referred to other provisions of EU law, which allow proceedings to be brought against intermediaries who have enabled economic operators to use trade marks unlawfully. For example, it accepted that if someone is unable to identify the third party on whose behalf goods are stored, the storing party itself would be offering the goods for sale (and therefore infringing). The mixing of products belonging to different third-party sellers could therefore prove problematic for marketplaces like Amazon.
Any practical tips?
Some brands see real benefit in selling via marketplaces such as Amazon due to its popularity amongst consumers, or the ability to more effectively remove counterfeit goods; but joining forces with Amazon will not be for everyone. The COVID-19 outbreak has also accelerated recent trends, including in the luxury retail sector: consumer habits have shifted (even more) online.
Spending habits indicate that for those wishing to retain a physical store presence (and consumer experience), a clicks and mortar business model will likely be more futureproof. This presents an opportunity for greater collaboration between luxury brands and online marketplaces (whether through the release of more extensive collections or new partnerships) and undoubtedly acts as an incentive for brands to develop and extend their digital presence.