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EU Court finds Amazon’s Marketplace is Safe from Infringement Claims

Reports Trademark

C-567/18, Coty Germany GmbH v Amazon Services Europe Sàrl, Amazon Europe, 2020, ECLI:EU:C:2020:267, (last visited April 6, 2020).

The German arm of beauty company Coty, which owns the Davidoff brand, sells luxury cosmetics in Germany. It markets certain brands in that sector via a selective distribution network enforced by a selective distribution contract.

Coty’s contracts contained requirements that its products be sold in the brick-and-mortar locations maintained by its partners, finding such terms necessary to preserve its branding image. These requirements were revised after the enforcement of Regulation No. 330/2010, which defined new vertical restraints on competitive conduct. The new contracts required that all online sales would be conducted through an “electronic shop window” of authorized stores.

In 2014, Coty found that Parfumerie Akzente, an unauthorized third party, was selling bottles of Davidoff Hot Water perfume on Amazon in Germany. This was in direct violation of its authorized dealers’ contracts, which put a number of restrictions on how such sales are carried out. However, Parfumerie Akzente refused to sign a revised contract with the Amazon ban, leading Coty to sue Parfumerie Akzente in Germany.

Millions of independent sellers use Amazon's Marketplace — under the scheme “Fulfilled by Amazon” — with sellers typically paying a fee to use the online giant's warehouses and logistics. Mark Miller from Quartz has noted that Amazon sells more goods via Marketplace sellers than directly to customers itself. As the Marketplace has grown, so have concerns of it enabling the sale of counterfeit and unsafe goods.

Coty’s case was unsuccessful initially — the trial court found that the contract terms conflicted with Article 101(1) of the Treaty on the Functioning of the European Union (TFEU)— but the Higher Regional Court in Frankfurt sought guidance on appeal from the European Court of Justice (ECJ). A five-judge panel ultimately sided with Coty in 2017, holding that:

(1) Coty’s conduct complies with Article 101(1) TFEU because it uses an objective criteria of a qualitative nature that are laid down uniformly for all potential resellers, do not go beyond what is necessary, and are applied in a non-discriminatory fashion.

(2) Coty’s contractual clauses have the objective of preserving the luxury image of those goods, are laid down uniformly, are not applied in a discriminatory fashion, and are proportionate in the light of the objective pursued, and thus complies with Article 101(1) TFEU.

(3) Coty’s prohibition of certain internet sales imposed on the members of a selective distribution system does not constitute a restriction of customers under Article 4 of Commission Regulation (EU) No 330/2010.

Coty was successful in court against the unauthorized third-party retailer, but its communications with Amazon revealed other unauthorized sellers. Coty asked Amazon to identify the other sellers and then sued Amazon in a German regional court after Amazon did not comply. Coty claimed that Amazon infringed on its trademark rights by storing and delivering Davidoff Hot Water scents on behalf of third-party sellers on Amazon’s Marketplace platform.

The Federal Court of Justice in Germany handling the suit asked the ECJ to interpret the EU trademark regulation, seeking to ascertain whether a company which, on behalf of a third-party seller, stores goods which infringe trademark rights without being aware of that infringement, itself uses that mark.

On April 2, 2020, the fifth chamber of the ECJ comprised of five judges held that “a company which, on behalf of a third-party seller, stores goods without being aware that they infringe trademark rights does not itself use that trademark, so long as it does not pursue, like the seller, the aim of offering the goods for sale or putting them on the market.”

The court noted that the Amazon companies concerned did not themselves offer the goods for sale or put them on the market, and that the third-party seller alone pursued that aim. Thus Amazon did not use the Davidoff trademark.

The court maintains that other provisions of EU law, in particular those on e-commerce and enforcement of intellectual property rights, allow legal proceedings to be brought against an intermediary who has enabled an economic operator to use a trademark unlawfully.