Is a warehouse operator responsible for storing counterfeits? | In Principle

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Is a warehouse operator responsible for storing counterfeits?

The CJEU held that a company that only stores goods without knowing they are counterfeits does not infringe trademarks. So can logistics operators sleep easy? Not really.

Coty Germany GmbH v Amazon Services Europe Sarl (Case C-567/18, judgment of the Court of Justice of 2 April 2020)

A logistics operator in the supply chain

The modern model of distribution of goods, especially fast-moving consumer goods, most often assumes the participation of a professional warehouse service provider. This entity, called a logistics operator, has the appropriate facilities (for storage, transport and distribution) and specialist know-how in these services. But it is not a party to the contract for the supply and sale of goods, and in particular does not place the stored goods on the market. Also, it does not analyse the source of origin of the stored goods.

In practice, the supplier (manufacturer) of the goods first delivers them to the warehouse of the logistics operator indicated by the recipient (e.g. a retail chain) and only from there are the goods delivered to wholesale and retail distribution points, e.g. supermarkets or, in the case of online sales, directly to consumers. This model optimises the supply chain. At the same time, the participation of the logistics operator in the supply chain raises the question of whether such an operator is liable for trademark infringement.

Circumstances of Coty v Amazon

In the case in question, a German dealer traded Davidoff perfume from illegal parallel imports on Amazon. This seller used Amazon’s warehouses through the popular “Fulfilment by Amazon” service. Instead of sending goods straight to recipients, the seller can deliver them to a warehouse run by a company that is part of the Amazon group. Only from here, using Amazon’s powerful logistics facilities, are the goods dispatched to recipients. Amazon, the company that stored the goods, did not offer them or market them. Its role was limited to storage and subsequent distribution of the goods.

However, Coty Germany GmbH, licensee of the Davidoff trademarks, did not like this state of affairs. It brought an action before the German courts against companies from the Amazon group, including Amazon FC Graben GmbH, acting as a storer, seeking among other things a ban on the storage or shipment of goods infringing Coty’s rights. The German court referred a question to the CJEU for a preliminary ruling to determine whether, in those factual circumstances, the respondent’s liability can be attributed to a company in the Amazon group.

CJEU: warehouse operator not responsible

The key legal issue was the interpretation of the term “purposes” in Art. 9(3)(b) of the EU Trademark Regulation (2017/1001) (a similar provision is found in Art. 154 of the Polish Industrial Property Law). Pursuant to this provision, it may be prohibited to use a sign by “offering the goods, putting them on the market, or stocking them for those purposes under the sign, or offering or supplying services thereunder.” If the goods are stored for another purpose, then there is no use of the mark and thus no infringement.

The CJEU emphasised that for an infringement to occur, the entity storing the goods must independently pursue the goal of offering goods or placing them on the market. But in Coty v Amazon, the respondent neither offered the disputed goods for sale personally nor marketed them. This was performed solely by a seller using the Amazon internet platform. The CJEU indicated that use of the mark requires active behaviour and management of the act constituting the use. Only the person directing a given activity can actually end it and comply with the ban issued by the court (C-179/15, Daimler).

It was also emphasised that the mere fact that technical conditions for the use have been created does not yet imply the use of a trademark. The activity of pouring a drink into cans marked with a counterfeit mark on behalf of a third party was cited as an example. In the view of the CJEU, a beverage bottler does not use the mark itself, but merely creates technical conditions necessary for a third party to make such use (C-119/10, Frisdranken Industrie Winters, C-119/10).

Consequently, the CJEU pointed out that an entity storing goods infringing trademarks for a third party, without being aware of the infringement, does not store goods for the purpose of offering and marketing them if it does not fulfil these purposes personally. Thus, it does not infringe trademarks.

Other grounds for liability of the warehouse operator

Can logistics operators in Poland sleep easy in this case? Not really. Coty v Amazon concerned their liability as direct perpetrators. Meanwhile, the storage of goods infringing trademarks may also be considered in the category of an activity of an intermediary in infringement.

The provision on the liability of intermediaries has been in force in Polish law only since 16 March 2019 (Art. 296(3) of the Industrial Property Law). According to that article, a person whose services are used in infringement is also liable for trademark infringement. This provision was enacted to implement the IP Enforcement Directive (2004/48/EC). The responsibility of such an intermediary has been addressed by the CJEU in the past. The court held that an entity renting market halls may be liable as an intermediary (C-494/15, Tommy Hilfiger Licensing LLC). Therefore, it seems that a warehouse could also be considered an entity whose services are being used by the infringer.

Thus if the legal question were to concern the liability of the intermediary, the answer of the Court of Justice, and as a result the outcome of the case before the German courts, could be quite different. However, due to the limited scope of the question referred for a preliminary ruling, the CJEU did not address this issue in Coty v Amazon. Undoubtedly the legal situation of warehouse operators has improved as a result of this judgment, since they have been ruled out as perpetrators directly responsible for trademark infringement. However, they cannot sleep peacefully until the case law settles their liability as a possible intermediary whose services the infringer uses when committing infringement.

Dawid Sierżant, attorney-at-law, Intellectual Property practice, Wardyński & Partners