Court of Appeal holds Samsung liable for trade mark infringement by third-party apps

The question

Can online platforms be liable for trademark infringement by third-party apps?

The key takeaway

The Court of Appeal has upheld a first instance decision which found Samsung liable for trade mark infringement by third-party apps. The infringement involved the hosting on Samsung’s app store of third-party watch-face apps that used Swatch Group’s trade marks. The Court determined that Samsung could not rely on the defence of “hosting” under Article 14 of the e-Commerce Directive. This decision provides guidance on what constitutes “use” of a sign by an online app store and the applicability of the hosting defence.

The background

Swatch Group (Swatch), which owns well-known watchmaker brands such as Swatch, Omega, Longines and Tissot, brought claims against Samsung for the purported infringement of 23 of its registered trade marks between 2015 and 2019. Swatch alleged that the trade marks were infringed by apps on Samsung’s Galaxy [app] Store, in which users could download digital recreations of Swatch’s watch-faces to use on Samsung smartwatches. Swatch claimed that Samsung was “intimately involved in, and controlled, the whole process by which the apps were made available”.

The development

The High Court decision found in Swatch’s favour, ruling that:

• Samsung had taken more than a passive role in relation to the distribution of the watch face apps (eg by reviewing all apps for functionality and content before they were made available in the app store);
• whilst the watch-face apps were not identical to the goods covered by Swatch’s registered marks, they were similar goods as each was essential for the other’s operation;
• the marks were being used in relation to the goods as smartwatches are at least highly similar to watches; and
• Samsung should have identified the illegality through its content review process.

Samsung challenged the High Court’s findings on the three key grounds listed below, all of which were rejected by the Court of Appeal:

• it did not use the signs, but was merely a vehicle for the app developers;
• the use of the signs did not include use in relation to smartwatches; and
• it could rely on the hosting defence under Article 14 of the e-Commerce Directive.

The Court of Appeal’s decision focused on the fact that Samsung, through: (i) its marketing of a wide range of smartwatch faces; (ii) its encouragement of app developers to create watch faces; (iii) its commercial interests in hosting third-party apps; and (iv) review of all apps for both functionality and content before they were made available on the app store, had taken an active role that meant that it did “use” the signs. Further, these “active” steps gave Samsung knowledge of, and control over, the content on the app store, such that Samsung could not rely on the Article 14 hosting defence (where the app store provider cannot have “actual knowledge of illegal activity or information”). Given that UK law currently allows an intermediary service provider to avoid undertaking content review so long as they implement a notice-and-take down process, Samsung had argued that they were being penalised for doing the right thing in reviewing the content. Whilst the Court did note that they recognised this as an issue, it stated that this was a risk that app store providers would have to face if they chose to review content.

Why is this important?

This judgment follows recent decisions where online platforms have been held liable for infringing third-party IP. It suggests that the courts are redressing the balance between rights holders and online platforms, by shifting the burden onto online platforms to take greater responsibility for illegal content. Online platforms will need to weigh up whether to implement a content review process or rely on a notice-and-take down process, and accept the risks and benefits of either option, which in the case of not reviewing content will include the risk of potential reputational damage that may result.

Any practical tips?

Online platforms should review their policies and procedures for hosting and distributing third-party content and assess the risks and benefits of implementing a content review process or relying on a notice-and-take-down process. They should also monitor the developments in incoming regulation targeting online platforms and content, such as the Online Safety Act 2023. Further, companies should be aware of the potential trade mark implications of creating and promoting digitalised version of real world goods, such as NFTs, and seek legal advice if in doubt.

Spring 2024