Liability of intermediaries for trademark infringement | In Principle

The amendment to the Industrial Property Law in force since 16 March 2019 provides that a person whose services were used in an infringement is also liable for infringement of the protected right to a trademark. A trademark owner may demand that such a person refrain from infringing the trademark, turn over unjustly obtained benefits and repair the damage (where the infringement is culpable). Thus the new regulations introduce the intermediary’s own liability for trademark infringement.

Who are intermediaries?

According to the explanatory memorandum to the amendment, the introduction of liability for persons whose services are used in infringement results from the need to take into account the ruling of the Court of Justice of the European Union of 7 July 2016 in Tommy Hilfiger Licensing LLC v Delta Center a.s. (Case C-494/15). The court found that a lessee of market halls subleasing commercial stands to sellers, some of whom sell counterfeit goods, is an intermediary whose services are used by a third party for infringement of intellectual property rights. Such an intermediary may be subject to the same injunctions as those imposed on the direct infringer.

Therefore, the new Art. 296(3) of the Industrial Property Law applies to owners and lessors of halls, shopping centres and market places who make commercial stands available to persons trading in counterfeits. This should also cover entities providing other services used in trademark infringement. It seems that a condition for considering a service to be “a service used in trademark infringement” should be whether the provision of the service is accompanied by trademark infringement by the direct infringer.

Among other things, it is trademark infringement to place a counterfeit mark on goods, to offer and sell such goods, as well as to import, export or store such goods for the purpose of offering them for sale. Therefore, the rental of warehouses and halls where counterfeit goods are stored or produced could be considered a service used in the infringement, and the persons renting warehouses and halls as well as various online purchasing platforms to offer and sell products may be considered intermediaries. Courier or postal services should not be considered services used in infringement, since the transport of goods in principle does not constitute trademark infringement. However, the catalogue of intermediaries who can be held liable for trademark infringement is open.

Have intermediaries gone unpunished so far?

The inclusion in the Industrial Property Law of liability of intermediaries for trademark infringement does not mean that they have not incurred any liability so far. They could have been held liable under general rules set out in the Civil Code, i.e. as an accessory to infringement or as a person who knowingly benefited from the damage caused by the infringement. However, the trademark owner could only demand compensation for the damage it suffered. In practice, the liability of the intermediary was difficult to prove.

The main problem was to demonstrate the amount of damage caused by the intermediary and to prove a causal link between its activities (e.g. renting shop space) and the trademark infringement. In such a case, it was necessary to convince the court that a normal consequence of renting the shop space was trademark infringement.

Trademark owners who wished to attribute liability to the intermediary for the damage caused by trademark infringement could also have difficulty proving that the service provider benefited from the trademark infringement. In practice, this meant that it was necessary to prove that the sellers in rented trade stands sold only counterfeits, so that the rent was a benefit for the property owner from such a sale.

It seems that these difficulties of proof, and in particular the very limited number of available claims (compensation only), have been effective in preventing trademark owners from suing intermediaries. The new rules give proprietors the opportunity to enforce their exclusive rights more easily and effectively. They supplement the implementation of the IP Enforcement Directive (2004/48/EC) (Art. 11, third sentence).

What will the owner of a trademark have to prove at trial?

The new rules essentially eliminate the previous difficulties in holding liable intermediaries whose services are used in trademark infringement. There will be no need to prove a causal link between the intermediary’s action and the trademark infringement. The law establishes such a link.

The trademark owner will have to prove that the trademark has been infringed, e.g. that counterfeit goods are sold at the market stalls. Although the new regulations do not set out the grounds for exclusion of liability of an intermediary (lack of knowledge of the infringement), it seems that the mere sale of infringing goods on its premises will not automatically result in the liability of the hall owner or lessor. Under the current legislation, it is difficult to defend the claim that the owner of a market hall or shopping centre is obliged to supervise the activities of all persons running market stalls on its real estate and react to infringements found.

As the court pointed out in the Hilfiger case, the intermediary cannot be required to exercise general and continuous supervision over its customers. On the other hand, the intermediary may have to provide for measures to avoid further infringements of the same type by the same trader. Therefore, it seems reasonable to take the approach that the trademark owner will have to notify the intermediary (e.g. the owner of the hall) of the infringing activities of its customers (e.g. sellers) and call upon the intermediary to prevent the sellers from further infringing, or otherwise demonstrate that the owner was aware of such activities. At trial, the trademark owner will try to show that despite such knowledge, the intermediary did not take steps to end the trademark infringement. However, it is clear that the decisions by the courts will ultimately determine the conditions that will have to be demonstrated.

Effects on the digital world

The new provision states that it does not apply to a person whose liability is excluded under Art. 12–15 of the Electronic Services Act of 18 July 2002. This means that if they meet the conditions set out in that act, persons providing services by electronic means will not be liable for the transmission or storage of data infringing a trademark. However, if service providers do not meet the conditions for exclusion of liability under the Electronic Services Act, it should be assumed that they may be held liable under the new regulation.

Summary

The premises for liability of intermediaries for services used in trademark infringement are not clear. Undoubtedly, these premises should be determined taking into account the indications of the Court of Justice of the European Union and the objectives of the IP Enforcement Directive. Although it is only the practice that will ultimately determine how the new provisions should be applied, their introduction should be assessed positively.

The new rules eliminate the existing evidentiary difficulties and should be a more effective tool in combating infringements where suing the direct infringer is difficult or completely ineffective. The new regulations may also encourage the service providers most frequently used in trademark infringement to tighten their policies towards such customers.

This particularly relates to owners of shopping centres or market halls, who can no longer be indifferent to what the people who rent from them actually sell at their commercial stands. This may mean introducing appropriate rules (or taking decisions under existing rules) prohibiting trade in infringing goods and introducing sanctions for such violations, as is already the case for many intermediaries providing electronic services (e.g. owners of online shopping platforms).

The upcoming year should show whether the new rules change the approach of providers of services used in trademark infringement.

Katarzyna Pikora, attorney-at-law, Intellectual Property practice, Wardyński & Partners