Trademark infringement liability of C2C platform service providers

By Wang Yadong and Lu Lei, Run Ming Law Office
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The trading model where a third party provides a platform for buyers and sellers to publish merchandise information and purchase goods online is called the C2C (customer to customer) model. With the sharp increase in the number of online purchase transactions under this model, trademark infringement cases on the C2C platform have also seen explosive growth.

王亚东 Wang Yadong 润明律师事务所 执行合伙人 Executive Partner Run Ming Law Office
王亚东
Wang Yadong
润明律师事务所
执行合伙人
Executive Partner
Run Ming Law Office

In comparison with the traditional trading method, in the virtual trading environment the infringement costs of sellers that sell trademark-infringing goods are smaller, yet the spatial range of infringement is much wider, causing trademark rights holders greater losses. Additionally, given that, on the C2C platform, small, medium and individual sellers constitute a majority, are widely distributed, and their capacity to bear liability is low, the ability of trademark rights holders to protect their rights against such small sellers one by one is extremely limited, and this potentially leads to a situation in which the losses of pursuing protection outweigh the gains. As a result, rights holders have turned to pursuing the online trading platform service providers for liability for infringement in an attempt to achieve their objective of halting the infringement and securing damages.

Obligation of reasonable care

The failure by a platform provider to perform its “obligation of reasonable care” is the necessary condition for it to bear joint and several liability with the direct infringer. In the case of Louis Vuitton and four other major international brands versus the operator and manager of the Beijing Silk Street Market, over infringement of exclusive rights to use registered trademarks, in which the author acted as counsel, a merchant directly sold goods that infringed the exclusive right to use of LV and other trademarks.

The court held that although Silk Street, as the operator and manager of the market, did not directly have a hand in the infringement, it bore the obligation of reasonable care to promptly and effectively put a stop to the infringement of others’ exclusive right to use their registered trademarks that existed in the market. Accordingly, pursuant to the Implementing Regulations for the Trademark Law, it found that Silk Street “wilfully provided the conditions facilitating the infringement of others’ exclusive right to use their registered trademarks”, which also constitutes infringement of another’s exclusive right to use its registered trademark, and was therefore jointly and severally liable with the merchant.

Determining whether the platform service provider is liable for infringement is not very different from determining whether the operator and manager of an actual market is liable for infringement performed by merchants operating within it. In both cases, whether the platform service provider, or operator and manager, performed their “obligation of reasonable care” is the key to the determination of infringement.

Factors to consider

When attempting to determine whether the platform provider has performed its “obligation of reasonable care”, the following factors may be taken into consideration:

  • Did platform provider authenticate veracity of the identification information provided by the seller? Once infringement occurred, did it promptly disclose the infringement to the trademark rights holder?
陆蕾 Lu Lei 润明律师事务所 合伙人 Partner Run Ming Law Office
陆蕾
Lu Lei
润明律师事务所
合伙人
Partner
Run Ming Law Office

Usually, in an online C2C platform transaction, neither the buyer nor seller is aware of the other’s true identity, so if the rights holder wishes to further protect its rights, it must rely on the platform provider to verify the infringer’s identity information. This requires the platform provider to authenticate the seller’s true identity and other such information and, once infringement has occurred, to promptly disclose the information to the rights holder, so as to ensure that the rights holder can pursue the infringer for liability. If it refuses to disclose this, then it can be determined that it did not perform its obligation of reasonable care.

  • Once the platform provider received notice from the rights holder, did it promptly take such measures as deletion, masking, removal of the links, etc.?

A platform provider will usually refuse to bear liability for infringement on the grounds that it was not aware of the infringing information beforehand and/or does not have the capacity to do content review. In such a circumstance, the court will usually make reference to the “safe harbour rule”, in the Copyright Law, in determining whether the platform provider performed its obligation of care.

It is generally considered that once a platform provider receives written notice submitted by a rights holder that content involved in its services is infringing, it is required to promptly take such necessary measures as deletion, masking, removal of the links, etc., failing which it will bear joint and several liability with the direct infringer.

  • With respect to repeated infringement, the platform provider is also required to take measures to halt the infringement.

Regarding repeated incidents of infringement, prompt removal of infringing information does not guarantee exemption from liability. For example, in the E-Land v Taobao et al dispute over infringement of the exclusive right to use a registered trademark, the rights holder sent letters to Taobao on seven occasions notifying it that it had discovered an infringer’s infringing content, but Taobao took no punitive measures other than deleting the merchandise information after receipt of the notices, allowing the infringer to continue to post information on the infringing goods without restriction. The court held that where Taobao had the resources and capability to take measures against a specific infringer, it failed to do so in order to halt the continued infringement, constituting indulgence of, and connivance in, the infringer’s continued infringement, making it subjectively culpable, and jointly and severally liable.

  • Other factors determining whether platform producer has performed obligation of care.

The nature and manner in which the platform provider provides services, whether it obtains direct economic benefits from the seller’s offering of specific goods, whether it has the required information management capabilities, the notoriety of the goods being traded and the prominence of the infringing information, whether it took reasonable measures to prevent infringement, whether it has set up a convenient procedure for receiving notices, etc., are all factors that can help in determining whether the platform provider performed its obligation of reasonable care.

Online trading makes the platform provider equivalent to the “market operator and manager” of a virtual market. The key to the liability of the platform provider is no different from that in the Silk Street case, its core remaining the determination of whether the platform performed its “obligation of reasonable care”, but, in this age of the “internet economy”, the factors to be considered when determining this obligation require special consideration of the different features of online trading and offline trading to arrive at a determination.

Wang Yadong is the executive partner and Lu Lei is a partner at Run Ming Law Office

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