Image: Coty

In a highly-anticipated decision involving Amazon and the German arm of cosmetics giant Coty, the European Union’s highest court sided with Amazon, holding that it is not enough for an e-commerce platform operator, such as the $1 trillion titan that is Amazon, to merely store and distribute orders consisting of unauthorized or infringing goods in order to be found liable for trademark infringement. Filed by Coty Germany in 2014, the case got its start after a Coty investigator ordered the company’s Davidoff Hot Water fragrance from Amazon’s third-party marketplace, only to receive an allegedly infringing product, in furtherance of the order, which was “Fulfilled by Amazon.”

Coty filed a trademark infringement lawsuit against Coty in the Bundesgerichtshof Federal Court of Justice, a regional court in Germany, taking issue with Amazon’s sweeping fulfillment program, under which Amazon enables its third-party sellers to store their products in its fulfillment centers, and after a sale takes place on its marketplace platform, Amazon “packs, ships, and provides customer service” in connection with that item.

Amazon argued that it should not be held liable because it was simply an intermediary and the seller of the fragrance. Following two favorable rounds for Amazon, in which the lower court and the court of appeal determined that it was legally in the clear, as it had not merely stocked the infringing goods on behalf of third parties, the case was referred to the Court of Justice of the European Union (“CJEU”). 

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. In its decision on Thursday, a panel of judges for the CJEU held that an operator is not regarded as an “infringer” in accordance with EU trademark law when the operator “on behalf of a third party, stores infringing goods in order to offer them or put them on the market … [but] does not itself pursue those aims” itself.

In other words, storage, alone, is not enough to give rise to infringement liability; a company “must pursue, like the seller, the aim of offering the goods for sale or putting them on the market.” 

With the larger question of storage-related liability out of the way, the case will now go back before the district court in Germany, as CJEU Advocate General Sanchez-Bordona stated in his advisory opinion late last year, a question that is not on the table for the CJEU to decide – but instead, for the German court which initially heard the case before referring it to the CJEU for guidance: whether the defendants in the case, including Amazon, are civilly liable for trademark infringement in connection with that sale  of the fragrance at issue.

Nonetheless, as World Trademark Review asserted on Thursday, “The decision appears to clarify the scope of responsibility for online marketplaces when it comes to the sale, or storage, of counterfeit goods. The opinion of Coty, and the view of other major brands (especially in the luxury fashion space), is that online platforms like Amazon and eBay should be held liable for fake goods they are warehousing and delivering. However, today’s decision suggests that the argument – at least in the EU – will not hold up.”

The latest development in the case comes as Amazon and other online marketplace and resale websites continue to face pushback from rights holders in connection with the sale of counterfeit and otherwise infringing goods on their platforms, with Reuters reporting that the case at hand “underlines the tension between luxury goods companies seeking to preserve their exclusivity and branding and online platforms, such as Amazon and eBay, fighting against online sales curbs.”

More than merely a fight about outright fakes, though, sites like Amazon continue to face off against brands over the sale of authentic but unauthorized products, given how significantly digitally-native companies and third-party marketplaces have disrupted the ability that brands once had to control almost exactly how and where their products were sold, and at what prices.

In response to claims that the Jeff Bezos-founded company was not doing enough to eradicate counterfeits on its site, Amazon’s Vice President of Public Policy Brian Huseman asserted in the 4-page letter he wrote to Acting Assistant U.S. Trade Representative for Innovation and Intellectual Property Daniel Lee this fall that while brands may be calling foul – or better yet, calling “fake!” – in connection with products that are actually fake (and there are plenty of those on Amazon’s crowded marketplace), they are also putting that very same label on authentic goods being sold on Amazon’s marketplace without their explicit authorization.

According to Huseman, at least some brands are “conflating concerns about counterfeits with … the ‘unauthorized’ distribution of authentic products” in an attempt to control how/where their products are sold.