Intellectual Property and Commercial Court defines criteria for determining whether e-commerce platforms are liable for online sellers' trademark infringement
When an online seller sells a product that infringes a third-party trademark on an e-commerce platform, an important and controversial issue is whether the e-commerce platform:
- should bear joint and several liability with the seller in accordance with the Trademark Act and the Civil Code; or
- must undertake separate infringement liabilities under the Trademark Act .
The Intellectual Property and Commercial Court proposed identification standards for a specific civil tort damage compensation case in 2021.
The Court clarified the current situation with regard to online commodity marketing. Due to the rapid development of mobile communication and network technology, the primary mode of transactions has changed from the traditional brick-and-mortar storefront, to mail orders, direct sales, TV shopping and, finally, e-commerce transactions. Four general categories of e-commerce transactions exist:
- consumer to consumer (C2C);
- business to business to customer (B2B2C);
- business to customer (B2C); and
- business to business (B2B).
In a C2C transaction, e-commerce providers are responsible for providing platform and transaction services by:
- managing confluence information;
- matching each transaction and charging fees; or
- charging sellers advertising fees.
Store sellers conduct transactions directly.
In a B2B2C transaction, suppliers provide and sell goods directly to consumers through platforms and services provided by platform providers. The platforms charge handling or advertising fees.
The term "B2C" refers to enterprises in the business model of direct-to-consumer transactions. The supplier supplies the enterprise and the enterprise helps the supplier display the goods and sell them to the consumer. The supplier shares the product with the enterprise by splitting the revenue with it.
The term "B2B" refers to a trading platform between enterprises. Due to the emergence of the Internet, various enterprises are connected with upstream and downstream products, which makes the exchange of information more convenient and the supply chain better integrated. The B2B model has also become more convenient and transparent. Through a B2B e-commerce platform, enterprises can find upstream and downstream products more easily.
Based on the above, the Court concluded that whether an e-commerce platform should be jointly and severally liable for damages where a seller sells a product that infringes a third-party trademark should depend on:
- the e-commerce transaction model adopted;
- the degree of intervention in the sales practices; and
- the degree of attention to whether the damage can be foreseen or avoided.
An assessment of the above factors would enable the Court to establish whether the platform violated its due diligence obligations under the Civil Code and the Trademark Act.
The Court reviewed the facts of the case and determined that the e-commerce transaction model between some e-commerce platform companies and platform sellers was B2B2C, while the e-commerce transaction model between others was C2C. None of the e-commerce platform companies had intervened in the sales activities between the platform sellers and consumers, nor had they intervened or participated in the product pages published by the sellers.
It was objectively difficult to know whether the platforms had infringed third-party trademarks by browsing the product pages published by the sellers. They had clearly informed the sellers not to publish or sell infringing products that infringed the IP rights of third parties, and had provided a mechanism for the rights owner to report infringements so as to avoid situations such as the occurrence and expansion of damage.
The e-commerce platform companies should have performed their duty of care, but it was difficult to establish any intentional or negligent infringement of trademark rights. Therefore, the Court decided that such e-commerce platform companies did not need to be jointly or severally liable for damages with the sellers.
Source : lexology.com