Determination of joint liability for trademark infringement in online trading

A network trading platform service provider (NTPSP) provides a virtual online trading platform allowing network trading platform service users (NTPSU), including individuals and legal entities, to publish information about goods or services and trade goods. A network trading platform generally has the following characteristics:

1. The goods or services are traded between user of the platform and consumers, where the user enters into sales contracts in its own name with consumers and is responsible for sales of the goods, and warranty and after-sale services;

2. The publication of information of goods or services is conducted and controlled the NTPSU; while the NTPSP does not take part in the publication and edition of such information;

3. The NTPSP provides information storage space allowing for publication of goods or services by others;

4. The NTPSP mainly makes a profit by collecting fees from NTPSU's in their use and operation of virtual online stores, and providing keyword-related advertising services.

The NTPSP trademark infringement differs from the traditional infringement, which has been a newly emerged issue in recent years regarding whether the NTPSP should be held jointly liable for acts of NTPSU's in publication of contents that infringe trademarks on the platform. This Article will make an analysis on the basis of relevant cases.

I. Direct infringement and indirect infringement

China's Trademark Law does not clearly define concepts of direct infringement and indirect infringement. Article 52 of the Trademark Law sets forth five acts of trademark infringement as follows: (1) use of a trademark identical with or similar to a registered trademark on identical or similar goods without permission of the trademark registrant; (2) sale of any goods infringing the exclusive right to use any registered trademark; (3) counterfeiting or unauthorized production of the label of another's registered trademark, or sale of any such label that is counterfeited or produced without authorization; (4) change of any trademark of a registrant without the registrant's consent, and sell goods bearing such replaced trademark on the market; or (5) other acts that have caused any other damage to another's exclusive right to use a registered trademark. Article 50 of Implementing Regulations for the Trademark Law serves as a supplement to the above five acts, providing that acts of "intentionally providing storage, transportation, mailing, concealment, or other conditions that can facilitate infringement of another's exclusive right to use a registered trademark" shall constitute "infringement upon the exclusive right to use a registered trademark."

In the aforesaid provisions, only Article 50 (2) of Implementing Regulations for the Trademark Law lists "intention" as an ingredient of infringement. In this regard, it can be inferred that Article 52 of the Trademark Law sets out acts of direct infringement, while Article 50 (2) of Implementing Regulations for the Trademark Law lays down acts of indirect infringement. An NTPSP does not directly publish or edit information on the online trading platform, nor take part in the online trading process. As a matter of fact, NTPSUs have independent virtual shops with introductions of their identification; therefore, customers will not mistake NTPSUs as the NTPSPs as they shop and trade, which is different from circumstances where a shopping center leases stores and operates in its own name.

In the trademark infringement case of 2005, Puma AG Rudolf Dassler Sport v. Taobao.com and a store owner Chen Yangrong, Puma named Taobao.com as the first defendant for infringement upon its PUMA trademark and blamed Taobao.com for activities of Taobao's NTPSU in publishing and selling goods that infringed upon its exclusive right to use the PUMA trademark, on the basis that Taobao.com's relationship with the NTPSUs was similar to that of a shopping center with a store, and that an internet service provider ("ISP") had the same duty as the shopping center to check infringement. The court found that a shopping center, in its sales of goods, collects payment and issues receipts in its own name, and the sales can be deemed as an act of the shopping center, while Taobao.com users would not consider sales of online stores as an act of the ISP, and that sales of online stores would not be legally considered as an act of the ISP. In this regard, the court has rendered a correct ruling.

In the recent L'Oréal SA v. eBay Inc. case, Advocate General of the Court of Justice of the European Union held that in the doctrine and caselaw of the United States the position of electronic markets can be fairly analogized to flea markets, and that in court cases of the member states there is to his knowledge not a single judgment where the NTPSP would have been found to be a primary infringer of third party trademarks.

Meanwhile, the High Court of Justice of England and Wales also considered, on the basis of the Opinion of the Advocate General ("Opinion"), that the sale or offer for sale of goods bearing trademarks in the online market does not constitute use of the trademark within the meaning of the trademark law by the NTPSP which will in no way commit direct infringement.

II. Application of Safe Harbor Principles and exceptions

Although a NTPSP is not directly liable for NTPSU's trademark infringement, it does not mean that it should not bear any responsibility at all. According to Article 50 (2) of Implementing Regulations for the Trademark Law, a NTPSP which "intentionally provides storage, transportation, mailing, concealment, or other conditions that can facilitate infringement of another's exclusive right to use a registered trademark" has committed trademark infringement. Article 36 of the Tort Liability Law of the People's Republic of China provides that the Internet users and ISPs shall assume tort liability if they utilize the Internet to infringe upon civil rights and interests of others. If an internet user commits tortious acts through internet services, the victim shall be entitled to inform the ISP to take necessary measures, including, inter alia, deletion, blocking and disabling the hyperlinks. If the ISP fails to take necessary measures in a timely manner upon notice, it shall be jointly and severally liable with the said internet user for the extended damage. Article 36 also provides that if an ISP is aware that an internet user is infringing on the civil rights and interests of others through its services and fails to take necessary measures, it shall be jointly and severally liable with the said internet user for such infringement.

Article 36 of the Tort Liability Law puts in place the well-known safe harbor principles which originated from U.S. Digital Millennium Copyright Act, shielding ISPs from online infringement liability. With the development of the Internet, Directive 2000/31/EC on e-commerce also sets forth similar principles. However, practical application of the safe harbor principles is rather complex, relating to interpretation of purposes of the principles, freedom of expression and balance of interests between intellectual property proprietors and ISPs, which will not be touched upon here. This Article will make a preliminary analysis on the basis of several cases.

In 2010, Shanghai Huangpu District People's Court issued a first-instance judgment in the trademark infringement case that pitched E-Land (Shanghai) Fashion Trading Co., Ltd. ("E-Land Shanghai") against Xu (an individual) and Zhejiang Taobao Network Co., Ltd. ("Taobao"), finding that Taobao had not committed contributory infringement on the ground that the plaintiff had for five times complained of Xu's offer for sale or sale on Taobao of goods bearing trademark "E-LAND" licensed to the plaintiff, but authenticity of the plaintiff 's evidence could not be verified, and that even if the authenticity could be verified, the evidence was unable to show that the complaints against Xu related to the registered trademark or the goods at issue; that Taobao, upon receipt of the complaints and at the request of the plaintiff, temporarily kept access to the information of the goods at issue and provided identification of the defendant Xu; that Taobao removed access to the goods at issue after the plaintiff filed the lawsuit; furthermore, Taobao had taken a series of measures, including real name verification and drafting of IP protection measures. Therefore, by conducting a takedown upon notice, Taobao fulfilled its reasonable duty of care as an ISP.

Also in 2010, in the lawsuit filed by E-Land Shanghai against Du (an individual) and Taobao, Shanghai Pudong District People's Court ruled, on the contrary, that removal upon notice of information by an ISP is a necessary condition, but not a sufficient condition, for exemption from compensation liability; that if online users continue to commit infringement via the Internet, the ISP should take further measures to stop the continuing infringement; that if Taobao can penalize infringing users in strict accordance with its rules, which cannot eliminate infringing activities completely, but can increase the difficulty level of infringement and reduce infringing activities accordingly; that Taobao should be aware of Du's sale of counterfeit goods on the online trading platform upon notice of seven complaints from the plaintiff of Du's sale or offer for sale of goods that infringed the plaintiff 's exclusive right to use the "TEENIE WEENIE" trademark; Taobao was able to and in a position to take action against specific infringers, but it did not; Du was still able to publish information of the infringing goods without any restrictions, and Taobao committed contributory infringement with subjective fault, and thus should be jointly liable. In April 2011, Shanghai Intermediate People's Court upheld the first-instance ruling and found that Taobao had the knowledge of the trademark infringement committed by others through its internet services, but Taobao only passively deleted infringing links upon notice of the proprietor and failed to take necessary measures to prevent the occurrence of the infringing acts, promoted and encouraged the infringement, and it erred subjectively and helped objectively others commit infringement, as a result, Taobao was jointly liable for the trademark infringement and should assume the joint compensation liability.

As regards the first two cases with the same plaintiff and similar circumstances, different courts have delivered contrary opinions. In the first case, the court held that the plaintiff failed to provide detailed and informative notices, and Taobao had removed the infringing links upon notice and taken a series of IP protection measures, thus Taobao was entitled to benefit from the safe harbor principles. While in the second case, both the first-instance court and the appeals court ruled that Taobao would not benefit from the safe harbor principles because Taobao failed to take necessary measures to prevent infringing activities of which it was aware or should have been aware.

Different judgments and specific circumstances of the two cases may have something to do with the independence of the courts, but it also implies that China's judicial practice is continuously examining circumstances where the NTPSP should be liable for trademark infringement and gradually tightening the NTPSP's liability. As a matter of fact, prior to the second case, Taobao had been successful in relying on the safe harbor principles to enjoy exemption from trademark infringement. In the face of countless infringing activities on its website, Taobao has been hiding behind the shield of safe harbor principles and passively removes upon notice infringing links, whether its acts accord with the development of e-commerce or are in the interests of the trademark proprietors and consumers should lie in constant alterations of laws in accordance with the growth speed and modes of e-commerce in a bid to balance the interests of all parties.

Similarly in July 2011, the High Court of Justice of England and Wales ruled, on the basis of the Opinion, to make a more detailed and powerful decision in connection with the limitation of liability of Information Society Service (including the NTPSP in this Article).

The aforementioned Opinion and ruling held that NTPSPs that play an "active role" shall not benefit from a limitation of liability as set forth in Article 14 of Directive 2000/31/EC. "Active role" includes assistance in optimizing presentation of the online offers for sale or promoting those offers, while the eBay window played an "active role" in the electronic marketplace.

According to the Opinion, in cases in which the NTPSP has not played an active role of that kind, it cannot rely on exemption from liability if it was aware of facts or circumstances of infringement; the NTPSP cannot rely on the limitation of liability if the proprietor has notified a NTPSU of the trademark infringement and the NTPSU continues with infringing activities.

The High Court of Justice of England and Wales, based on the Opinion, rendered a verdict upholding the above Opinion and considered that even though the proprietor's notice is not detailed and accurate, the courts should also examine in the hearing whether a qualified NTPSP can be aware of the infringement upon such a notice.

Because eBay's business model is very similar to that of a number of ISPs in China, such as Taobao, Eachnet and PaiPai, we cannot rule out the possibility that China's judicial practice may learn from aforesaid cases such as L'Oréal SA v. eBay Inc. and set more stringent limits on acts of ISPs. As a matter of fact, releases of Interim Measures for the Administration of Online Commodities Trading and Relevant Services (promulgated by the State Administration for Industry and Commerce in June 2010) and Notice on the Implementation Plan For the Special Campaign to Crack Down on the Infringement of Intellectual Property Right and the Manufacture and Sales of Counterfeit and Shoddy Goods in the Online Shopping Area (jointly issued in July 2011 by the State Administration for Industry and Commerce, the Ministry of Public Security, the Ministry of Commerce and other 6 ministries and administrations) demonstrate that governmental departments are strengthening management responsibilities for NTPSPs from the administrative perspective, which will finally become a process to legally regulate the e-commerce in China regardless of whether administrative responsibilities are reasonable or not.

(Translated by Wang Hongjun)

Source: China IP

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