Intellectual Property

Civil liability of virtual marketplaces in Argentina for the sale of counterfeits

The Federal Courts of Appeal on Civil and Commercial Matters recently ruled on online marketplace liability for trade mark infringements by third parties. In both cases, the Courts of Appeal held the defendants liable for third party trade mark infringements, considering that neither online marketplaces had played a neutral role in relation to users' transactions. InDeRemate, Division I also found the defendant liable for trade mark infringement for purchasing the term ‘ZAPATILLAS NIKES’ as keyword for online advertising and ordered the defendant to cease use of NIKE trade marks as keywords on online advertisement services.


Nike International Ltd v Deremate, Federal Court of Appeal on Civil and Commercial Matters (Division I), Case 2060/2008, 5 May 2015 Nike International Ltd v Compañia de Medios Digitales CMD, Federal Court of Appeal on Civil and Commercial Matters (Division III), Case 3239/2007, 21 May 2015

Legal context

Argentina does not have specific rules governing online marketplace liability for trade mark infringements by third parties. Due to the lack of a safe harbour (such as the one established in the European Directive on Electronic Commerce; s 230 of the Communication Decency Act; or s 512 of the Digital Millennium Copyright Act), the liability of auction sites for trade mark infringement by third parties hinges on the general tort rules of the Argentine Civil Code.

Argentina has no precedents dealing with online marketplace liability for trade mark infringements by third parties or use of third parties' trade marks as keywords by auction sites.

The Argentine Supreme Court has recently issued a decision on search engine liability for third-party infringing content in Rodriguez, Maria Belen v Google Inc (see PA Palazzi and M Rizzo Jurado, ‘Search Engine Liability for Third Party Infringement: A keenly awaited ruling’, (2015) 10(4) JIPLP 244) and held that search engine liability arising from third parties' infringing content must not be determined under a strict liability regime but should be decided on the principles of fault-based liability. Nevertheless, it was not clear that these criteria would be followed by courts in cases regarding auction sites considering the differences that exist between a search engine and online marketplaces with respect to the role they played in connection with third parties content.

Facts

Nike filed a complaint against the auction sites Masportunidades (owned by Compañia de Medios Digitales CMD SA) and DeRemate.com, asking the court to order the defendants to stop all use of the trade mark NIKE, to inform the court the origin of the fake NIKE products and to disclose all data relating to the importer and manufacturer. Nike also requested damages.

The First Instance Court ruled in favour of Nike in Nike International Ltd v Compañia de Medios Digitales CMD and the complaint against DeRemate.com in the Nike International Ltd v DeRemate case was settled. In this settlement agreement, DeRemate undertook to prevent third parties from offering counterfeit or imitation NIKE products on their auction site. The settlement also established fines to be imposed on DeRemate if counterfeit or imitation Nike products were to be found on DeRemate platform.

Nike then filed a complaint stating that De Remate failed to comply with this settlement agreement and to implement a system to prevent trade mark infringements by third parties on the DeRemate auction site. Nike also asked the court to order DeRemate to pay damages. The First Instance Court held DeRemate liable and ordered it to pay damages.

On appeal in DeRemate, Division I upheld the decision of the lower court and ordered the defendant (i) to take down, within 24 hours of notification of the trade mark infringement, all users' offers of products infringing the NIKE trade marks (eg, counterfeits), (ii) immediately to notify the trade mark owner, upon the notification of the infringement, of the complete data of the users infringing those trade marks and (iii) to stop using any term including NIKE trade marks as keywords in online advertisements.

The court also stated that the defendant must keep all data of users selling NIKE products for three years, counting from the date when the product was offered on the DeRemate platform. Moreover, the court specified that users publishing advertisements for products with the trade mark NIKE must be previously informed that their data may be shared with the owner of the trade mark and that they may face sanctions.

DeRemate was ordered to pay damages of AR$ 200,000 (US$ 20,000) plus interest and 90 per cent of the court fees.

In the CMD appeal, Division III upheld the decision of the lower court and ruled in a similar manner to Division I. However, in this case, Division III ordered CMD to pay damages of AR$ 180,000 (US$ 18,000) plus interest and court fees. The Court of Appeal stated that CMD must put in place a system that enables the platform to be easily filtered and eliminate those offers by users that clearly infringe third-party trade marks (such as offers displaying NIKE imitations or replicas). Nevertheless, the court stressed that the obligation to inform the online marketplace of the trade mark infringement is placed on the trade mark owner.

Analysis

In both decisions, the Federal Courts considered that neither DeRemate nor CMD played a neutral and passive role and thus agreed that both online marketplaces were also liable for the trade mark infringements committed by their users. In each case the Courts mentioned that in Argentina there are no specific statutes and regulations regarding online intermediaries' liability for trade mark infringements by their users and that the doctrine developed by the Court of Justice of the European Union (CJEU) in L'Oréal SA v eBay International AG and others, C-324/09, ECLI:EU:C:2011:474) and the e-Commerce Directive 2000/31 could be a useful guide to rule these cases.

In this regard, Division I and Division III stated that neither DeRemate nor CMD had acted in a technically neutral manner and that therefore they were liable for trade mark infringements by their users. In order to determine whether the auction sites played an active role, they followed the CJEU's view that an online marketplace is not sufficiently passive if ‘it provides assistance which entails, in particular, optimizing the presentation of the offers for sale in question or promoting them (paragraph 116 in L'Oreal SA v eBay International AG and others)’.

In DeRemate, Division I stated that this auction site could not be considered as merely passive or neutral because (i) DeRemate purchased keywords to optimize the presentation of offers for sale and (ii) it provided an online payments service to users. In CMD, the court found that this online marketplace played an active role as they offered their users a special service that enabled users to boost their offers.

Regarding the keywords purchased by DeRemate (ie, ‘ZAPATILLAS NIKE’), the Federal Court stated that this caused an association between the keyword and the possibility that consumers would buy NIKE products in DeRemate's online platform. This association provoked the dilution of the trade mark NIKE and confusion among consumers, who could not know for certain whether users were offering original NIKE products offered by Nike or authorized distributors or fake products.

Practical significance

These are the first two cases to analyse the liability of auction sites for trade mark infringement by users in Argentina, as well as the first final ruling of a Federal Court on keyword advertising by auction sites using third parties' trade marks.

These decisions clearly protect trade mark owners but still leave several open questions in connection with the type of conduct or action which an auction site must implement in order not to be liable for trade mark infringement by third parties.

These decisions state that, when auction sites or portals which store user-generated content play an active role and operate on data, they could not be characterized as automatic or passive; when this is the case, these intermediaries will be liable for trade mark infringement by their users. Also, even if these intermediaries are merely neutral and passive, they will be liable for infringement by their users if they fail to take corrective steps upon having actual and effective knowledge of trade mark infringement. It is, however, unclear if future cases will follow the Supreme Court decision in Rodriguez, Maria Belen v Google Inc regarding the judicially created notice-and-takedown procedure required for there to be ‘actual and effective knowledge’ of the trade mark infringement.

The federal courts have given minimal guidance as to the application of ‘technical, automatic and passive’ test to real life online marketplace or portals. Nevertheless, it seems that purchasing keywords or offering services or assistance to users, which entails optimizing the presentation of advertisements, may not be considered as a technical and passive role. The terms and conditions of the site and the protection of IP within those terms and conditions would not be enough to avoid liability for trade mark infringement by users, if the intermediaries are considered to play an active role.

© The Author(s) (2015). Published by Oxford University Press. All rights reserved.

This article has been published in Journal of Intellectual Property Law & Practice:

http://jiplp.oxfordjournals.org/content/early/2015/08/19/jiplp.jpv135.full.pdf?keytype=ref&ijkey=w20WvkJ09mW7zMr


For further information on this topic please contact Pablo A. Palazzi y Marco Luciano P. Rizzo Jurado