Web-based infringement: legal aspects, the evolution of case-law and shortcomings that need to be addressed

Internet and distinctive signs: opportunities, threats and the need for a strong European Union initiative

Infringement via the Internet – as well as the sale through these channels of products whose marketing is reserved for regulated channels (such as drugs) – with extremely severe harmful implications both for the owners of the intellectual property rights violated and for the safety and health of citizens (which infringement also endangers, as fakes are often also dangerous or are made in a way that does not comply with product safety requirements) is becoming an increasingly serious problem, reaching more alarming proportions from day to day.

It is a fact under the eyes of everyone that the Internet has become an irreplaceable tool for all market operators, from large multinationals to small and medium enterprises, to which it offers an extraordinary (and unthinkable even just a few years ago) vehicle for the diffusion of their brands and products. This is all the more true for the newly industrialized countries, where the market was often born in parallel with the web and consumers have therefore immediately become accustomed to using e-commerce for their purchases and in any case to find information (and receive evocative messages) and to make comparisons between different brands.

As was inevitable, however, counterfeiters have immediately thought of using this tool, increasing exponentially the risks to which IP rights are exposed: in fact, counterfeiting via the Internet produces devastating consequences, which are certainly particularly evident for the world of fashion, design products and luxury goods, but are no less serious for almost all other products and services, with enormous damage not only for the owners of the rights violated, but for the same reliability of transactions and the consumer’s freedom of choice.

These problems have assumed an importance that sure could not be previewed at the moment of the adoption of the EC Directive no. 2000/31 on the e-commerce and even less in that one of the implementation of it in Italy by means of the legislative decree 9th April 2003, no. 70, issued by virtue of the delegation conferred to the Government by the law 1st March 2002, no. 39 (so called Legge Comunitaria 2001), that has not even taken all the opportunities offered by the Directive, to outline a well-balanced solution to the issue of the responsibility of the Internet service providers, and more in general of the web service providers.

In fact the relentless evolution of the Internet, first with the interactive web (the web 2.0) and then with the semantic web, which allows not only interaction but also content processing (the web 3.0), if on one hand is one of the more evident and striking features of the new digital economy, which the enterprises of all the sectors must adapt to, on the other hand it also poses a series of completely new problems, that involve the interaction of different disciplines and also the necessity to compare and integrate the competences of lawyers and IP attorneys with those of technicians and experts of the net.  This need is all the more pressing, since the law of the network and the innovative technologies that are used in it is often perceived outside in a distorted way and, inevitably, it is from this (imperfect) perception that the legislator’s interventions and also its lack of interventions are born, as in the case of the non-ratification of ACTA by the European Parliament and, even before, the failure to adopt the Community Directive on computer implemented inventions, which would have codified the “European way” to this type of innovation.

Indeed, in the past legislature of the Italian Parliament, the Committee on Internet Rights and Duties established at the Chamber of Deputies proposed to adopt a “Declaration of Internet Rights”, which included the “right to anonymity” of web surfers, which would codify the current situation, in which the protection of the privacy of individuals is always considered to prevail over the rights of third parties, except in the face of very serious crimes, and therefore surfers are effectively protected from the legal actions of the owners of the rights violated by them by illegally downloading pirated materials or knowingly buying counterfeit products. Almost no one has however put in evidence that the mechanism that should guarantee this anonymity is curiously valid only towards the owners of the violated rights: who in fact already today “knows everything” about the surfing of the users, in spite of their “anonymity”, are the Internet Service Providers (ISP) and the managers of the e-commerce platforms and the Social Networks, so that an important revenue of theirs (if not today the most important) comes from the sale of the “profiles” of the users derived from their surfing activities.

This makes it anachronistic the approach underlying the 2001 Directive on e-commerce, i.e. to grant web intermediaries a derogation from the general rules on liability, so as not to impose on them costs that could have slowed down the spread of e-commerce. In November of this year, the European Commission opened two investigations against Amazon for violation of the Antitrust rules of the European Union, in relation to the distortion of competition that it allegedly operated on the B2C (business to consumers) online market for having used the non-public commercial data of independent sellers who sell on its marketplace for the benefit of its direct sales to consumers and for having given preferential treatment to its own retail offers and to sellers who use its logistics and delivery services, to the detriment of all others.

The big data generated in this way do not only involve the profiling of surfers and commercial operators of the network and are not only used for advertising, but also for purposes of scientific research in all fields, disease and crime prevention and, at least potentially, also for filing, with political purposes, manipulation of consensus and more. Who owns these data and has the technical tools to collect and manage them, has therefore one of the most important keys to build (or to destroy) the future of the world: therefore, deciding who owns them and what are the limits within which they can be used and sold is a topic of decisive importance for the fate of the planet. This is all the more true today, after the changes deriving from the struggle against the pandemic, with the necessary spread of smartworking, with the increase in the use of data transmission and with the new priorities (health, environmental sustainability, quality of life) that are establishing themselves in the perception of consumers, all of which are likely to become structural data in many fields even after the end of the emergency.

Therefore, today more than ever before, it is more necessary and undeferrable a strong initiative of the European Union, which, within the framework of the measures to relaunch the economy, outlines a new point of balance, as Europe can no longer bear either the overwhelming power of the big multinational monopolies that have become the real “masters of the net”, or that the surfers of the web can wear a sort of “telematic bandit hat”, which allows them to violate the rights of others with impunity. And it will have to be an initiative not only at the level of EU regulation – which though is imperative -: in the face of a global phenomenon, it must promote the adoption of likewise global solutions, involving first and foremost the four great nation-states of our time (the United States, China, Russia and India), which Europe must be able to join, becoming in turn a nation-state, of course federal, capable of bringing its heritage of values and tradition of individual, political and economic freedom to the new “constituent” season of the international economic order.

 

The tools that already exist for the fight against web infringement: the role played in Italy by AGCOM and AGCM and that of the Associations

Faced with copying phenomena that often take on gigantic proportions, the temptation of surrender, as if faced with a natural cataclysm, is certainly strong, but it is completely out of place: The major legal systems – and first of all the European and American ones, but today more and more also those of the emerging markets, starting from the Chinese one – offer already today tools of defense to the rights holders, provided that they are willing to play an active role in the fight against infringement, both by putting in place appropriate preventive tools to warn the public, and with an “intelligent” monitoring and the subsequent fight against illegal activities.

Despite the already mentioned shortcomings of the system, the case law, and in particular the Community case law, but also some significant national rulings, has outlined, if not yet precise boundaries, certainly guidelines to set the limits of the liability of the players of e-commerce, coordinating the rules of the aforementioned Directive on e-commerce with those of the Directive on trademarks and the Regulation on the EU trademark.

In these law enforcement actions, Italy is in the front line, both at the judicial level, also with the granting, in a very short time, of cross border measures, in particular to protect EU trademarks and Community designs, and therefore with pan-European effects; and on the administrative level, where effective action has been taken by the Italian Competition and Market Authority – AGCM, which in Italy has competence not only in Antitrust matters, but also in the fight against unfair competition practices – and, on the other hand, by the Italian Telecommunications Authority (AGCOM), which has developed methods to counteract on-line infringement that can be qualified as best practices and therefore be a model at European level.

Since 2014, first of all, the AGCM is increasingly active in taking down websites that systematically offer copy products, often imitating even the look of the original websites: in order to counter the spread of unfair and deceptive commercial practices through telematic or telecommunication networks and to protect consumers and the market, the AGCM carries out the blackout ( of course limited to Italy and implemented through the Italian Postal Police, but still effective) of clone websites; in particular, a series of reports by INDICAM, the Institute of Centromarca for the Fight against Counterfeiting, has led to put “offline” hundreds of clone websites, and other interventions have followed and still continue at a fast pace.

If the focus of attention of AGCM are mainly the websites that offer clone copies of original products protected by trademarks and registered design, AGCOM has instead pointed fingers on the violation of copyright. The Regulation issued by the Authority with Resolution No. 680/13/CONS of 12 December 2013 and available on the AGCOM website provides a simple, inexpensive and fast (especially in cases of urgency) procedure for the removal from the net of content that violate the copyrights of others.

Of course these procedures, if they are particularly attractive for the rights holders, also because the steps after the notice are carried out “ex officio” and therefore have very low costs and charges, have their limits, especially in terms of follow-up. It is in fact very common that websites and illegal content, once removed, often reappear in identical form, simply “moving” under other web addresses. In many cases, moreover, the infringer does nothing more than remove (often only temporarily) the copy of the products of the manufacturer who reported the infringer’s activity or obtained an injunction against him from the civil judge, keeping on line (and continuing to sell) all the other clones, with a sort of “copy rotation”. That allows him to continue to earn enough money to make the violation of the IP rights of others worthwhile, which in many cases becomes a real fake industry, which is sourced in the Far East and works literally on demand, manufacturing and importing in Europe all and only the copies actually ordered by consumers sometimes unaware of the forgery, but very often convinced that they have just made a “good deal”, even if at the expense of the real creator of the copied work.

In order to deal effectively with these phenomena, making sure that really “counterfeiting does not pay”, a possible solution is probably that of groups of rightholders who are victims of copying taking legal action, through a sort of class actions aimed at obtaining judicial measures with pan-European effects and, above all, wide-ranging, i.e. referring to all or almost all clones made by a single imitator, so as to inflict significant damage on him in one fell swoop and above all to make it no longer convenient for him to insist in his illicit activity. Legal actions of this kind are feasible in almost all sectors, as long as they are carried out in an extremely rigorous way and are preceded by a serious work of both legal approach and intelligence aimed at reconstructing as much as possible the counterfeit chain and identifying the subjects involved and the bases of the infringers in Europe (and if possible also their bank accounts).

 

The activity of pure players and defense opportunities for the IPRs owners

Compared to traditional infringers, e-commerce websites, and especially those that only trade online, without any physical space accessible by consumers (and for this reason they are precisely defined as pure players), make it more difficult to distinguish genuine products from fake ones, often even shown with “official” pictures (and we will come back to this), taken from the manufacturer’s catalogs. Hence consumers do not know whether or not the products actually sold by the pure player meet the features of the shown products, and even their origin is usually ignored, in particular the public being unaware of whether they are EU or non-EU (or rather: extraneous to the European Economic Area, which also includes three countries of the ex-EFTA, Liechtenstein, Norway and Iceland; in perspective, in a similar condition could also be found the United Kingdom post-BREXIT). As a result, it is difficult to establish, even when they are really “original”, whether or not the rules on exhaustion of IP rights apply to them or not, and always the real “physical” location is ignored, with a consequent practical difficulty (when not impossibility) for the IPRs owners to hit them with legal measures of description or seizure.

The issue is particularly sensitive for products that are indeed of EU origin, but are intended for markets outside Europe. Since, as mentioned, the principle of exhaustion operates only within the EU, any original products reimported into Europe from countries outside the EU and the EEA. are considered to all intents and purposes as counterfeit goods. Instead in the EU and EEA context, exhaustion operates automatically as an effect of the sale, so that «any stipulation, in the act of sale effecting the first putting on the market in the EEA, of territorial restrictions on the right to resell the goods concerns only the relations between the parties to that act» and «it cannot preclude the exhaustion provided for by the Directive» (to quote the exact words used by the European Court of Justice in its well-known judgment of 30 November 2004, in case C-16/03).

Again in relation to exhaustion, it should also not be neglected that it also involves advertising, in the sense that, although if the products are original and of Community origin, the retailer has the right not only to sell such products, but also to use the brand to promote the further marketing of the products themselves. However, it is not without limits. In another well-known judgment (the one of November 4, 1997, in case C-337/95) the European Judges, after recalling with approval the general teaching whereby «the damage done to the reputation of a trade mark may, in principle, be a legitimate reason (…) allowing the proprietor to oppose further commercialization of goods which have been put on the market in the Community by him or with his consent», stated that « It follows that, where a reseller makes use of a trade mark in order to bring the public’s attention to further commercialization of trade-marked goods, a balance must be struck between the legitimate interest of the trade mark owner in being protected against resellers using his trade mark for advertising in a manner which could damage the reputation of the trade mark and the reseller’s legitimate interest in being able to resell the goods in question by using advertising methods which are customary in his sector of trade». In particular, in the case of luxury products (in the case decided by the European Court it was Dior brand products), the EUCJ stated that retailer must «endeavour to prevent his advertising from affecting the value of the trade mark by detracting from the allure and prestigious image of the goods in question and from their aura of luxury», however adding it cannot be per se prohibited  «However, the fact that a reseller, who habitually markets articles of the same kind but not necessarily of the same quality, uses for trade-marked goods the modes of advertising which are customary in his trade sector, even if they are not the same as those used by the trade mark owner himself or by his approved retailers, does not constitute a legitimate reason, … unless it is established that, given the specific circumstances of the case, the use of the trade mark in the reseller’s advertising seriously damages the reputation of the trade mark». The Court of Justice exemplified this latter case by writing that «for example, such damage could occur if, in an advertising leaflet distributed by him, the reseller did not take care to avoid putting the trade mark in a context which might seriously detract from the image which the trade mark owner has succeeded in creating around his trade mark». Nowadays, however, there is no doubt that web sales can only be considered a “current mode” in all sectors, and especially for fashion and luxury goods, so that they cannot be indiscriminately banned and even less considered discrediting per se.

It is clear, therefore, that the practical application of these principles to traders who offer their goods via the web can be particularly difficult, even if careful application of the general principles can offer rights holders substantial opportunities for their defence. Just think of the teaching of the Italian case-law according to which, even in the case of  goods originating from the EU, it is always considered illegal the behavior of the person who resells original products by abusing the reputation of the trademark, for example by giving it an absolutely disproportionate importance in his advertising. This principle clearly applies also to the web, and indeed it can be particularly important to invoke it to get ruled as illegal web advertising, even of original products, used in combination with texts or searches related to other’s trademarks or designs.

Likewise illicit is the so-called gachage, i.e. the use (and advertising) of products of strong appeal, usually available in small quantities, sold at very low prices as a “mirror for larks” for customers, who are thus induced to go to the store, physical or – today – virtual and perhaps to buy the other products available in the store: in the case of the Internet are common mixes between (a few) original products and (many) non-original products or products from outside the EU and therefore in any case not allowed. In this perspective, it can also be useful to invoke the prohibition of misleading advertising, referable to Article 2598, no. 3 of the Civil Code: the Italian case law, in some cases, has in fact had the opportunity to apply this prohibition also to hypotheses in which the deception derived from the omission of data (for example, the circumstance that the products offered for sale are stocks of previous years, as frequently happens also on the web). Nor should the frequent violation of copyright or related rights carried out in these cases be neglected: for example the use of “official” iconographic material taken from the catalogs or websites of the owners of the violated rights, who can invoke the relevant exclusive right to stop or at least hinder “parallel” sales.

In all these cases it is therefore essential to be able to control the circulation of original products as much as possible, in particular by providing them with identification tools that allow buyers to easily identify fakes, and to communicate as much as possible, even on the web, the existence of these tools, by possibly using certification tools for reliable sites, and even by regulating Internet access by retailers, requiring them to comply with specific rules to protect the reputation of the brand. Once again, it is the mix between prevention and repression, protection and communication that makes the difference.

This is what happened, in fact, in the well-known case that saw Sisley, world leader in high-end cosmetics, prevail against Amazon, which sold directly and let third parties sell the products of the first one, even though it was not part of Sisley’s selective distribution network, that, among other things, requires to have physical stores in which to provide specialized advice to customers and allows the use of e-commerce by retailers, but only on their own and not on the marketplaces of the web). The Court of Milan, with an order dated July 3, 2019, inhibited Amazon from this activity, as it was considered by the Court “detrimental to the prestige and reputation of the Sisley brand”. A landmark decision, which forced even e-commerce and its giant to follow the rules that apply in the “real world” (and which derive from EU law, first of all of competition). In particular, it states that the “business model” of Amazon, which “mixes”, for the purpose of maximizing its profitability, any kind of product, of any quality level, is not allowed to infringe the rights of those who have made a choice of “absolute quality”, legitimately resorting to systems of “selective distribution”, which this mix are precisely intended to avoid, in order to safeguard the reputation of the brand.

 

Techniques for putting their products to the towing of competitors’ brands on the web: keywords, pirate sites and counterfeiting “facilitators” and tools to defend against them

All this, however, represents only one side of the problem, important but not the only one. On the Internet, alongside the activities of the gray market, which put in difficulty the distribution systems of original products, particularly challenging (especially for fashion and luxury goods, but today in actual fact for virtually every productive sector) are on the one hand the massive supply of fake products passed off as original products that the web makes easier through the substantial anonymity – a real telematic bandit mask – that it provides; and on the other hand, the linking in favor of products or services that are openly different from the authentic ones, but in any case are offered for sale through forms of parasitic appeal to the celebrity of the most famous brands.

Use of other companies’ trademarks in domain names or in any case in websites, real and proper clone websites, taking of copyrighted pictures, online “auctions”, links to other companies’ trademarks, either sponsored or not, or obtained through systems comparable to metatags and the other more advanced forms we will talk about later. Of course fashion and luxury, characterized by the very strong symbolic value of their distinctive signs – brands and not only: think of the style of many of our “creators of taste and fashion” – are the ideal candidates to be the victim of these operations, which, however, today rage in all fields.

In both cases today there is no doubt about the illicitness of these conducts, at least in Europe and the United States: In Europe, in particular, we have already seen that since the adoption of the first EU Directive on trademarks in 1988, the idea of infringement as inclusive of all forms of parasitism has been gradually affirmed and the subsequent legislative interventions over the years have led to the adaptation of the various legal instruments, both substantive and procedural, in order to fight it effectively, increasingly aware of the fact that, in the market reality, the likelihood of confusion is more and more a thing of the past, or in any case a situation affecting mainly less famous trademarks, while the “new frontiers” of infringement, and therefore also of the protection of the most famous distinctive signs, concern rather the parasitic exploitation of the “communication value” of these signs by unauthorized third parties. And the Internet, which is the heart of communication in today’s world, was in fact also the first test bed and the forefront of this new and more real protection of intellectual property rights.

The European Court of Justice has investigated these issues in depth in a series of decisions that have dictated the key principles to be followed by the national judges of the European Union to address the relevant problems, dealing in particular with the use of the trademark of others as a keyword. On this issue, the end point of EU case law is probably represented by the ruling in the case Interflora v. Marks & Spencer in 2011, which for the first time explicitly referred to “parasitism” as a form of trademark infringement, identifying it «in particular» in the «cases where, by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation  ». On the web the «parasitism» is thus identified first and foremost in the case in which «  the advertiser rides on the coat-tails of a trade mark with a reputation in order to benefit from its power of attraction, its reputation and its prestige, and to exploit, without paying any financial compensation and without being required to make efforts of its own in that regard, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark». According to this ruling, a space of permissibility for the use of other companies’ trademarks as keywords can exist only when the advertiser intends to offer «an alternative to the goods or services of the proprietor of the trade mark with a reputation » and does it «which put forward – without offering a mere imitation of the goods or services of the proprietor of that trade mark, without causing dilution or tarnishment and without, moreover, adversely affecting the functions of the trade mark with a reputation – an alternative to the goods or services of the proprietor of that mark», thus identifying the cases of lawful use essentially in the ones where there is a “due cause” for the use of the trademark of others, that is, in practice, only in cases where it is necessary to use the trademark of others in a descriptive function to allow effective competition..

The EU Judges also addressed the key issue of the territorial profile of infringement through the Internet. On the net, in fact, the problem is essentially to establish whether the simple accessibility to the surfers in a given country of a website whose domain name or content is in conflict with the intellectual property rights existing in that country can be considered as a harmful event occurred (also) in the country in question. In our country, a well-known decision of the Court of Rome had considered that the mere accessibility in our country of a website (distributed by the United States) marked with a domain name corresponding to a trademark protected in Italy was sufficient for this purpose, but against the conclusion reached by this order it seems that a practical rather than legal consideration plays an important role: in fact, if the mere uploading from abroad of a website marked by a domain name that, in the country to whose courts the case is brought, would violate a trademark right of others, i.e. would be considered as a harmful event occurred (also) in that country. In our country, a well-known decision of the Court of Rome had considered that the mere accessibility in our country of a website (distributed by the United States) marked with a domain name corresponding to a trademark protected in Italy was sufficient for this purpose, but against the conclusion reached by this order it seems that a practical rather than legal consideration plays an important role.  In fact, if the mere diffusion from abroad of a website marked by a domain name that, in the country whose courts one turns to, would violate a trademark right of others, were an infringement in that State, this would  entitle the trademark owner to obtain an injunction (i.e. a judicial order to cease the illegal conduct) in that State; and if it were then possible to request recognition and enforcement of this injunction in the country where the server is located (which, at least in Europe, seems to be allowed by the current EU Regulations on the effectiveness in other Member States of court orders rendered by the courts of an EU country), the system would risk being paralyzed. In these cases, therefore, it seems logical, at least in the absence of a desirable internationally agreed solution, to consider that the only activity that can be considered as infringement in a country other than the one where the server from which a website is spread is located is the one specifically directed also to surfers in that country: in order not to incur sanctions in the country in question, the owner of the foreign website should avoid making commercial offers to the subjects of that country, or spreading messages directly addressed to them, as in the case where they are written in the language spoken in that country (provided that it does not coincide with that of other countries where there are no problems of infringement: and in the latter case it is reasonable to believe that the adoption of special disclaimers may be required).

A very similar conclusion was in fact reached by the European Court of Justice, which in its 2011 judgment in the case L’Oréal v. eBay stated that the rules of the Trademark Directive and the Regulation on the Community trademark (now the EU trademark) «apply as soon as it is clear that the offer for sale of a trade-marked product located in a third State is targeted at consumers in the territory covered by the trade mark», because «if it were otherwise, operators which use electronic commerce by offering for sale, on an online market place targeted at consumers within the EU, trade-marked goods located in a third State, which it is possible to view on the screen and to order via that marketplace, would, so far as offers for sale of that type are concerned, have no obligation to comply with the EU intellectual property rules». However the Court also exactly specified that «the mere fact that a website is accessible from the territory covered by the trade mark is not a sufficient basis for concluding that the offers for sale displayed there are targeted at consumers in that territory» and that «when the offer for sale is accompanied by details of the geographic areas to which the seller is willing to dispatch the product, that type of detail is of particular importance in the said assessment». That appears to be consistent with what we wrote above.

Nor should it be forgotten that, as already mentioned, the Community trademark (today the EU trademark) is effective throughout the entire territory of the Union and therefore, as likewise the European Court of Justice has clarified, injunctions, even issued on an urgent basis, by a national judge of an EU country normally have effect throughout the entire territory of the European Union, which allows you to act in a single court, saving time and costs of several parallel actions.

 

“Facilitators” of web infringement and cases of liability of the ISP or e-commerce marketplaces

Nowadays, therefore, the problem is not so much to establish if the parasitic conducts put in place on the net are illegal, but to identify which subjects have to be responsible for them, in order to avoid that the anonymity and anyway the lack of detectable physical places make the net a safe harbour for counterfeiting. The web, as it was the testing ground of the new “extended” protection of IP rights, is today the place where attempts are made to find a limit to this extended protection, which balances the effective protection of these rights, in what they concretely represent in the market and even before that in the “world of life”, with the pro-competitive needs of the market.

In particular, the European Court of Justice already in its 2010 ruling in the Google AdWords case specified that the possibility for the operator of online sales services to make use of the so-called safe harbour, i.e. the limitations to the liability of Internet Service Providers (ISPs) provided for by EC Directive No. 31/2000 on e-commerce, depends on the fact that its activity «is of a mere technical, automatic and passive nature, which implies that the information society service provider has neither knowledge of nor control over the information which is transmitted or stored». The Court has therefore excluded that this case would occur whenever the provider plays a role «in the drafting of the commercial message which accompanies the advertising link or in the establishment or selection of keywords is relevant».

In their aforementioned 2011 ruling in the case L’Oréal v. eBay, then, the EU judges reiterated and clarified that «the proprietor of a trade mark is entitled to prevent an online marketplace operator from advertising – on the basis of a keyword which is identical to his trade mark and which has been selected in an internet referencing service by that operator – goods bearing that trade mark which are offered for sale on the marketplace, where that advertising does not enable reasonably well-informed and reasonably observant internet users, or enables them only with difficulty, to ascertain whether the goods concerned originate from the proprietor of the trade mark or from an undertaking economically linked to that proprietor or, on the contrary, originate from a third party». In particular, the Court of Justice has pointed out, in relation to the case at issue, but with remarks of general scope, that «next, in so far as eBay used keywords corresponding to L’Oréal trade marks to promote its customer-sellers’ offers for sale of goods bearing those marks, that use related to goods or services identical with those for which those trade marks are registered». Likewise it pointed out that even when it only allows its clients to make use of these keywords, or other linking techniques, it may be liable for them, within the limits of the 2000 E-Commerce Directive.

From this last point of view, first of all the European Judges stated that, when the manager of an online marketplace «as provided assistance which entails, in particular, optimising the presentation of the offers for sale in question or promoting those offers, it must be considered not to have taken a neutral position between the customer-seller concerned and potential buyers but to have played an active role of such a kind as to give it knowledge of, or control over, the data relating to those offers for sale. It cannot then rely, in the case of those data, on the exemption from liability referred to in Article 14(1) of Directive 2000/31»

Secondly, the Court found that, even outside of this hypothesis, the operativeness of the derogation is in any case barred in «they must be interpreted as covering every situation in which the provider concerned becomes aware, in one way or another, of such facts or circumstances» that make it evident the illicitness of the activity or information, and therefore «that in which the operator of an online marketplace uncovers, as the result of an investigation undertaken on its own initiative, an illegal activity or illegal information, as well as a situation in which the operator is notified of the existence of such an activity or such information. In the second case, although such a notification admittedly cannot automatically preclude the exemption from liability provided for in Article 14 of Directive 2000/31, given that notifications of allegedly illegal activities or information may turn out to be insufficiently precise or inadequately substantiated, the fact remains that such notification represents, as a general rule, a factor of which the national court must take account when determining, in the light of the information so transmitted to the operator, whether the latter was actually aware of facts or circumstances on the basis of which a diligent economic operator should have identified the illegality». In this way the standard of diligence required to the manager of the online marketplace is identified at a level not substantially different from that applicable to any other intermediary.

Even more meaningful is the part of the L’Oréal v. eBay ruling in which the Court considered the scope of the injunctions that may be issued against the Internet service provider or manager of an e-commerce platform, expressly acknowledging that they may also be aimed at the prevention of further offences. In this regard, the EU Judges have in fact clarified that the measures that may be imposed on the operator of such services «cannot consist in an active monitoring of all the data of each of its customers in order to prevent any future infringement of intellectual property rights via that provider’s website», and «cannot have as its object or effect a general and permanent prohibition on the selling, on that marketplace, of goods bearing those trade marks». However it may be ordered to «suspend the perpetrator of the infringement of intellectual property rights in order to prevent further infringements of that kind by the same seller in respect of the same trade marks» and also to «take measures to make it easier to identify its customer-sellers». The Court stated in general terms that «although it is certainly necessary to respect the protection of personal data, the fact remains that when the infringer is operating in the course of trade and not in a private matter, that person must be clearly identifiable» and concluded that said measures «must be effective, proportionate, dissuasive and must not create barriers to legitimate trade» e «must strike a fair balance between the various rights and interests».

With another ruling, issued in 2014 in the Telekabel case, the European Court then established the important rule according to which «the fundamental rights recognised by EU law must be interpreted as not precluding a court injunction prohibiting an internet service provider from allowing its customers access to a website placing protected subject-matter online without the agreement of the rightholders when that injunction does not specify the measures which that access provider must take and when that access provider can avoid incurring coercive penalties for breach of that injunction by showing that it has taken all reasonable measures, provided that (i) the measures taken do not unnecessarily deprive internet users of the possibility of lawfully accessing the information available and (ii) that those measures have the effect of preventing unauthorised access to the protected subject-matter or, at least, of making it difficult to achieve and of seriously discouraging internet users who are using the services of the addressee of that injunction from accessing the subject-matter that has been made available to them in breach of the intellectual property right, that being a matter for the national authorities and courts to establish». This in essence means that the web service provider may be imposed a non-systematic, but “targeted” filtering, in the presence of specific offences, such as the one that was ultimately imposed on Amazon to adopt with the order of the Court of Milan in the Sisley case, mentioned above.

On this basis, in fact, always in 2014 the English High Court of Justice held guilty a number of very important ISPs on whose platforms some infringers’ websites operated, ordering them to prevent users from accessing them, because among their rights, the English Judges said very clearly, there is no right to counterfeit and violate the rights of others.

Even in this case, however, it is not only in Europe that you can be successful in defending your IP rights. In this sense it is particularly significant a ruling made in 2011 by the First Intermediate Court of Shanghai, which in a case concerning the infringement of a trademark of a Korean company carried out through the online platform Taobao (the largest e-commerce platform in the world, with more than 60 million visitors per day), ruled that the latter has a real obligation to take action to prevent the commission of further offences. This conclusion was reached by the Chinese judges, who found that Taobao was aware of the repeated infringement of the plaintiff’s IP rights and, despite this, still kept on providing Internet services to the infringer, not taking appropriate measures to curb the counterfeiting phenomenon. In other words, the Court did not disregard the safe harbor rule, but held that in the case at hand the prerequisites required for the exemption not to operate were met and therefore it held that Taobao was jointly and severally liable for the infringement of the exclusive right of others carried out by an advertiser, since it knew or should have known that that advertiser was using internet services to commit an infringement of another company’s IP right and, nevertheless, it did not intervene apart from the mere deletion of the link to the infringing product upon specific notification of the legitimate owner of the right. Therefore, not having acted in this situation to try to prevent the continuation of the infringement meant that Taobao’s activity was considered by the Shanghai courts as a form of contributory infringement. With this ruling the judges of Shanghai have outlined a real burden of prevention of the manager of the e-commerce platform who is aware (or should be aware) of the infringing activity carried out through its services, not unlike what the European Court of Justice considers that exists for ISPs under the E-Commerce Directive. Worthy of note is also the indication made by said ruling of the factors to be taken into account to determine whether the platform manager is aware of the infringing activity: (i) the high number of complaints filed, followed by as many cancellations by Taobao, which, according to the Shanghai Court, undoubtedly allowed Taobao to become aware that the illegal activity was still ongoing and that the mere cancellation of the link following the complaint by the trademark owner was not sufficient to stop the infringing activity; (ii) the accuracy and completeness of the complaints, that in the case at hands had been prepared in an accurate manner, indicating and providing proof of the right and of the infringement, so that Taobao could not have been unaware of the violated exclusive right; (iii) the lack of reaction of the vendor/infringer to the many cancellations of its links, as the judges considered that if the vendor had had the right to legitimately sell such products, he would have opposed such cancellations by Taobao, so that from such repeated lack of reaction it could not fail to e abware of the illegal nature of the activity; and (iv) finally, the fact that the vendor in his advertisement openly declared that “part of the goods sold are high quality imitations”.

Even if this ruling has had a very limited follow up – easily explained by the lack of independence of the Chinese judiciary from the political power -, it confirms that the way to properly address the issue of the liability of the managers of these services and the measures to combat web counterfeiting is to bring it substantially back to the general rules, at least when the infringement is made at a commercial level, with a view to providing effective protection against any activity that interferes with what the distinctive signs actually represent in the “world of life”.

 

The new scenarios: social networks, targeted advertising services and profiles of possible liability of providers in relation to the supply of these services.

However, keywords are not the last frontier of web advertising. More and more widespread are in fact the services of targeted positioning of advertising banners on various Internet sites, placed according to the behavior of the surfer, or based on the pertinence with the content of the website visited ealier by him/her. That in itself is legitimate, but it is no longer so if the positioning of these banners is made not on the basis of the simple content of previous browsing experiences, but by combining references to a famous brand – because searched by the surfer or mentioned, legitimately, in the website – to advertising and links to third party websites that are totally unrelated to that brand’s owner. This necessarily presupposes an analysis, perhaps automated, but in any case targeted, and therefore a control of the contents of the websites, in which banners and links are inserted, i.e. those visited by surfers.  The same happens in social networks, often used as vehicles for advertising copy products, but also coupled, always in a “targeted” way, with banners and links that refer not only to the content inserted by users in the pages in question, but also to the brands of other companies mentioned in them.

In all these cases it is first of all evident the responsibility of the advertiser, who can easily avoid these associations with other companies’ trademarks, exactly as it happens in the case of keywords services, where it is possible to exclude them simply by combining a negative keyword (the minus sign followed by the trademark you do not want to combine), to avoid any risk. It is therefore clear that the unlawfulness exists not only every time the content of the banners and the signs used in them may mislead the consumer as to the actual source of the products or services offered, but also every time these products or services are made more attractive by the reference to the distinctive sign of others. It is likewise clear, however, that even in this case the operator of the service or online marketplace cannot be exempted from liability, to take up the words of the jurisprudence mentioned above, «have played an active role of such a kind as to give it knowledge of, or control over, the data relating to those offers for sale».

In fact, it is clear that in all cases where the service offered includes a positioning that depends precisely on the relationship between the data relating to the infringer’s offers and the references to the trademarks or products of the owner of the IP rights infringed, the service provider cannot hide behind the “automatic” nature of the mechanisms through which the service operates, since they have been arranged by him, and indeed even this arrangement, if it is suitable to create these abusive links, it cannot but qualify as at least a form of contributory infringement, not different, in the substance, from the hypothesis in which the operator of an internet site organised “by means of a search engine or with indexed lists” the information (provided by some users) essential for (other) users to be able to “orient themselves and ask for the downloading of that work rather than another”: a case considered illegal, even criminally, by the Italian Supreme Court of Cassation, in its 2009 judgment concerning a well-known case of illegal downloading of works protected by copyright by means of a peer to peer system.

All this, once again, presupposes an active role for companies to protect their IP rights: with the adoption of the most appropriate preventive tools to warn the public; with the monitoring and reporting of offences to website managers and the request to remove them using the data provided not only in relation to the specific report, but also to those of the same kind that may occur again, as is usually the case, given that infringers only change the colour or shape of their “telematic bandit mask” and start all over again. This is expressly provided for in the E-Commerce Directive, which does not distinguish between the various data, provided that the intermediary actually has got them and which, as we have seen, only prohibits that a general duty of preventive surveillance is imposed on the ISP, but at the same time already requires him to implement, using these data, effective measures not only for repression, but also for the prevention of offences.

 

Cesare Galli

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