202004.09

Coty v. Amazon: the CJEU’s missed opportunity

On April 2, 2020, the Court of Justice of the European Union (CJEU) rendered one of the most expected IP-related decisions of the year (CJEU, Coty v. Amazon, April 2, 2020, C‑567/18). By not following the recommendations of Advocate General Manuel Campos Sánchez-Bordona (CJEU, Coty v. Amazon, C ‑ 567/18, concl. M.C. Sánchez-Bordona, November 28, 2019), the court missed the opportunity to confront certain market platforms with their responsibilities.

Coty, which holds licenses for many “luxury” cosmetic products, including “Davidoff Hot Water”, made a test purchase on Amazon.de. This purchase concerned a “Davidoff Hot Water” perfume flask sold by a third party and shipped by Amazon. It turned out that the perfume flask was not a counterfeit, but a genuine product. Coty sent the seller a formal notice on the grounds that the rights conferred by the trademark in question were not exhausted. The seller has committed to cease sales of the product concerned. To this end, Coty could legitimately rely on the Coty I decision of the CJEU (CJEU, December 6, 2017, Coty Germany GmbH/Parfümerie Akzente GmbH, C-230/16), in which the court held that luxury brands could prevent members of a selective distribution network from selling their products via third-party online platforms, provided that this was necessary to maintain the luxury image of the products concerned.

After that, Coty requested Amazon to return all the “Davidoff” flasks stored on behalf of the seller. Amazon sent Coty a package containing 30 bottles of perfume, declaring that 11 of them came from another seller. Coty urged Amazon to disclose the information necessary to identify this other seller. However, Amazon responded that it was able to satisfy this request. Again, the issue of identifying trading partners is at the center of the debate (iptwins.com, 2020-03-16; iptwins.com, 2020-03-09).

Consequently, Coty brought Amazon before the German courts with the view of prohibiting Amazon from storing or shipping “Davidoff Hot Water” perfumes. The case was finally heard before the Bundesgerichtshof. Lastly, the German federal court referred the following question to the CJEU for a preliminary ruling:

Does a person who, on behalf of a third party, stores goods which infringe trade mark rights, without having knowledge of that infringement, stock those goods for the purpose of offering them or putting them on the market, if it is not that person himself but rather the third party alone which intends to offer the goods or put them on the market?

On the merits, the CJEU recalls that the regulations of 2009 and 2017 do not define the concept of use (see para. 36). However, the court has modelized it in several previous decisions (paras. 36 to 43).

Finally, the CJEU adopted the following solution:

“Article 9(2)(b) of Council Regulation (EC) No 207/2009 of February 26 2009 on the [European Union] trade mark and Article 9(3)(b) of Regulation (EU) 2017/1001 of the European Parliament and of the Council of June 14 2017 on the European Union trade mark must be interpreted as meaning that a person who, on behalf of a third party, stores goods which infringe trade mark rights, without being aware of that infringement, must be regarded as not stocking those goods in order to offer them or put them on the market for the purposes of those provisions, if that person does not itself pursue those aims.”

In so doing, the court bluntly dismissed the legally rigorous, economically sound, and ethically fair reasoning that Advocate General Sánchez-Bordona had proposed in his conclusions (CJEU, Coty v. Amazon, C‑567/18, concl. M. C. Sánchez-Bordona, November 28 2019). More precisely, the court took into consideration only the first branch. As a reminder, M. Sánchez-Bordona’s argumentation was constituted on two criteria: an objective criterion (possession of the products); and a subjective criterion (the will to offer or put on the market the products stored or held). He had come to the following conclusion:

“Article 9(2)(b) of Council Regulation (EC) No 207/2009 of February 26, 2009, on the Community trade mark, and Article 9(3)(b) of the regulation (EU) 2017/1001 of the European Parliament and of the Council of June 14, 2017, on the European Union trade mark, should be interpreted as meaning that:

“- A person does not store for a third party (seller) products infringing a trademark right for the purposes of their offer or their placing on the market when he is not aware of this infringement and that it is not not itself, but the third party, which alone intends to offer the products or place them on the market.

– It is, however, possible to consider that this person stores these products for the purposes of its own offer or its own placing on the market if it is actively involved in their distribution, within the framework of a program having the characteristics of the “Fulfilment by Amazon’ scheme”, to which the seller subscribes.

– The fact that this person is unaware that, within the framework of such a program, the third party offers or sells the products in contravention of the right of the owner of the trademark does not exonerate this person from its responsibility, when one can reasonably demand that it implements the means to detect this impairment”.

By referring only to the first branch, the court pretends to ignore Amazon’s business model and, in particular, its “active behavior in the sales process, which is precisely the behavior illustrated by the provision in question when it lists acts such as ‘offering the products’, ‘placing them on the market’ or ‘detaining them for these purposes’ (CJUE, Coty v. Amazon, C‑567/18, concl. MC Sánchez-Bordona, November 28, 2019, para. 51).”

This Coty II decision is all the more disappointing because it conveys a perception of EU law incapable of making a company responsible, whereas its “active behavior and control, direct or indirect, of the ‘act constituting the use of [the mark]’ (CJEU, Coty v. Amazon, C‑567/18, concl. MC Sánchez-Bordona, November 28, 2019, para. 57), within the meaning of Daimler ( CJEU, March 3, 2016, Daimler, C ‑ 179/15) should be admitted (CJEU, Coty v. Amazon, C‑567/18, concl. MC Sánchez-Bordona, November 28, 2019, para. 57).

Finally, as part of the “Fulfilment by Amazon’ scheme” as described by the Advocate General (CJUE, Coty v. Amazon, C‑567/18, concl. MC Sánchez-Bordona, November 28 2019, para. 56), sellers can rely on Amazon’s “active and coordinated involvement” for their goods, since:

Amazon receive them, store them in its distribution centers, prepare them (they can even label them, properly package them, or package them for a gift) and send them to the buyer. Amazon can also advertise and distribute offers on its website. Besides, Amazon provides after-sales service for questions and returns of goods and manages refunds for defective products. It is also Amazon which collects payment from the buyer for the goods, the amount of which it then transfers to the seller’s bank account” (CJUE, C ‑ 567/18, Coty v. Amazon, concl. MC Sánchez-Bordona, November 28, 2019, para. 56).

Also, Amazon does not systematically disclose the identity of the sellers and does not necessarily check the lawfulness of the products (as was the case here). However, the “active and coordinated involvement” of Amazon should reasonably be supplemented by scrutiny of both its trading partners and the goods concerned. In doing so, the CJEU offers the Commission the occasion to impose an obligation to identify the sellers. In case of breach of such obligation, the platform would have to render accounts in lieu of the seller. Intellectual property owners and consumers cannot expect less from online market platforms. Regarding the verification of the lawfulness of products, in particular when they are held in warehouses managed by the platforms, existing and future technologies make it possible to conceive a monitoring obligation. Such a legal regime would bring a dose of ethics and justice to the heart of the functioning of market platforms.