Trademark infringements and online platform liabilities

By Frank Liu and Zhu Jiannan, Jincheng Tongda & Neal
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Due to the advanced development of online shopping in China, trademark rights holders will regularly carry out notarized purchases on online platforms, whereupon they will institute legal actions naming the online platform and infringer as co-defendants. In recent years, the probability of online platforms being sued in trademark and unfair competition cases has increased year by year. What legal liability can be pinned on online platforms in trademark infringement and unfair competition cases? And how is the bearing of such liability to be determined?

Frank Liu Partner Jincheng Tongda & Neal
Frank Liu
Partner
Jincheng Tongda & Neal

To determine the liability that an online platform ought to bear in a trademark infringement and unfair competition case, it is first necessary to clarify the circumstances under which it can be sued, and the legal basis. Generally speaking, in trademark infringement and unfair competition cases, there are three circumstances under which online platforms are sued.

In the majority of circumstances, the online platform is sued as the online service provider, but in certain cases there are also rights holders that will demand that the online platform directly bear liability for trademark infringement and unfair competition.

With respect to trademark infringement, to substantiate its claims, the plaintiff needs to substantiate that the online platform used an identical/similar trademark for identical or similar goods/services without permission; where an identical trademark for identical goods/services does not apply, the plaintiff also needs to substantiate that such use by the online platform is likely to cause confusion among relevant public.

Generally speaking, an online platform provides information services that fall into the category of value-added telecommunication services. A platform itself generally is more sensitive to such services, with very few using another’s trademark to engage in the provision of identical services.

Infringers that publicize and promote an identical value-added telecommunication service on another’s online platform are also uncommon. In normal circumstances, it is difficult for an online platform to satisfy the requirements for identical/similar services in trademark infringement and not cause confusion among, or misidentification by, consumers. And so the constitution of trademark infringement is essentially impossible.

With respect to unfair competition, the trademark rights holder may claim that the online platform violates: provisions of article 5 of the Anti-Unfair Competition Law concerning the infringement of another’s trademark, or the proprietary name, packaging or trade address of a well-known good, the use of another’s enterprise name without authorization, etc.; or the provisions of article 9 on false publicity. However, in the majority of circumstances, the online platform is not a direct market competitor of the rights holder and is not the direct author of such acts. As in the above analysis of trademark infringement, these types of claims by a rights holder generally do not hold up.

With the exception of the extremely rare circumstances where an online platform has indeed committed the above-mentioned acts of infringement, most of the time, when a rights holder claims trademark infringement and unfair competition against an online platform, it is setting forth an overabundance of claims for the sake of safety and completeness. In real-life cases, genuinely effective claims are mostly those targeted against online service providers pursuant to article 36 of China’s Tort Liability Law.

With respect to article 36, the first paragraph addresses online service providers that directly use a network to engage in infringement; as in the instances mentioned above, where an online platform directly engages in trademark infringement and unfair competition, these types of cases are comparatively rare.

Zhu Jiannan Associate  Jincheng Tongda & Neal
Zhu Jiannan
Associate
Jincheng Tongda & Neal

The more common circumstance occurring in judicial practice is one in which the online platform fails to perform its “notification plus deletion” obligation specified in paragraph 2 of article 36, rendering application of the “safe harbour principle” impossible, and making it jointly and severally liable with the infringer for the additional damages arising from its failure to act after receiving notification from the rights holder. Instances where the rights holder asserts the third paragraph of this article, i.e., the online platform was “aware” of the infringement but failed to take necessary measures, thereby requiring it to bear joint and several liability, are also relatively common. How to determine that an online platform was “aware” of infringement as set out in the third paragraph of article 36 of the Tort Liability Law is also an issue worth attention. With respect to its legal sense, “aware” is not simply a subjective state of the online platform, but should be determined based on specific evidence. The “aware” in this provision means, in the legal sense, “well aware, or ought to have been aware”. The determination here first requires application of the limitation on the use of the “safe harbour principle”, namely the “red flag principle” if the circumstances of the infringement already seem like a bright red flag on the online platform, regardless of whether the online platform denies its subjective state of knowing, it can be legally found that it was “well aware, or ought to have been aware” of the infringement. Further, although there are no legal provisions specifically providing for the same, nevertheless, based on judicial practice, an online service provider is subject to certain duties of care. Generally speaking, these obligations include: (1) conducting formal reviews of entities relevant to the online platform; (2) carrying out necessary advance reminders of infringement risks, and disclosing on the online platform the means for filing infringement complaints; and (3) upon becoming aware of infringing information, the online platform is required to promptly take the necessary remedies, i.e., where infringement is clear and obvious, the online service provider is required to take necessary measures in respect of the infringing information, including but not limited to deleting the same, removing the relevant links, etc.

In a trademark infringement and unfair competition case, with respect to the legal liability that an online platform may be required to bear, a comprehensive determination needs to be carried out based on the qualifications of the online provider, its service type, whether it was subjectively willful and proactive, whether there was joint infringement, whether it performed its duty of reasonable care, whether the “safe harbour principle” was exceeded, etc. The fairness and impartiality of the law can thus be reflected and its function of protector of economic development activated.

Frank Liu is a partner and Zhu Jiannan is an associate of Jincheng Tongda & Neal

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