Image: Coty

Early this month, the Court of Justice of the European Union issued its decision in a closely-watched trademark-centric case involving Amazon and the German arm of cosmetics giant Coty. Holding that storage and distribution of third-party products orders consisting of infringing goods by e-commerce platform operators, such as the $1 trillion titan that is Amazon, to merely store, is, alone, not enough to give rise to trademark infringement liability on the part of the platform operator, the decision was swiftly deemed by the media to be a “big victory” for Amazon. In reality, the court’s decision may be a bit less straightforward than that.

Simply heralded the CJEU’s decision as a victory for Amazon fails to address fully the impact of the “Fulfilment by Amazon” program on Amazon’s potential liability for the offering and sale of infringing products on its platform. And as a result, it leaves online retailers and marketplaces facing an uncertain risk of liability in the future.

The case got its start in 2014 after a Coty investigator ordered the company’s Davidoff Hot Water fragrance from Amazon’s marketplace, only to receive an allegedly infringing product, in furtherance of the order, which was “Fulfilled by Amazon,” prompting Coty to ultimately sue Amazon for trademark infringement, and it arises in the context of increasing difficulties faced by luxury goods companies in controlling the prevalence of counterfeit and/or otherwise infringing products online. 

Brand owners are increasingly struggling to police the market for outright fakes but also for authentic goods sold through channels or in geographic markets – such as outside the brand owner’s selective distribution network or in countries outside the European Economic Area – without authorization to do so (the latter type of goods are commonly referred to as gray market)

In the case at hand, Coty says it discovered that gray market bottles of its Hot Water perfume were being sold by an Amazon marketplace seller in Germany, and distributed by way of Amazon’s in-house “Fulfilment” service. Coty took the view that Amazon was responsible for the sale of alleged infringements and sought an order requiring it to stop stocking and dispatching perfumes that had been put on the market without Coty’s express consent. 

Coty filed a trademark infringement lawsuit against Coty in the Bundesgerichtshof Federal Court of Justice, a regional court in Germany, which referred questions centering on the extent of a marketplace operator’s liability to the CJEU, the EU’s highest court. In particular, the CJEU was tasked with answering the question of whether a company that stores infringing goods for a third-party seller for the purpose of offering them or putting them on the market can be held liable for infringement.

Unsurprisingly, the CJEU came to the general conclusion that simply storing goods on behalf of another party – without any additional activity – does not give rise to infringement liability for the entity storing them, and then remanded the caseback to the district court in Germany.

Implications of the decision

While Amazon welcomed the CJEU’s decision, brand owners and online retailers, alike, would arguably have been better served by clear guidance from the court about the level of fulfilment activity that is likely to result in intermediaries, such as Amazon, eBay and others, being liable for infringement being offered up on their platforms. The CJEU failed to provide such specifics. Although, we can expect future cases to be filed on this important point in the future. 

In the meantime, a particularly interesting point in the case at hand – and one that might not bode well for the likes of Amazon in the future – is that fact that when Coty requested that Amazon send it all of the allegedly infringing products, Amazon could not identify the relevant sellers for particular bottles of perfume. This suggests that Amazon may have mixed up batches of perfume being sold by different sellers within the Fulfilment by Amazon service. 

This seemingly harmless issue might prove to be significant in the future. The Court indicates in its discussion that if platform operators cannot readily identify the suppliers of the products being offered, as was the case here, the products may be regarded as being sold by Amazon, itself, rather than on behalf of the individual sellers, thereby, leading to liability for Amazon in connection with the infringements on this basis. 

It seems inevitable that Amazon will have to make changes to its Fulfilment by Amazon service if and when a court makes a finding on that basis, but for now it looks like business as usual.

Tom Lingard is a partner at Stevens & Bolton LLP.

Astrid Arnold is a member of the Intellectual Property team at Stevens & Bolton LLP. (Edits/additions courtesy of TFL)