Trademark Infringement Liability of E-commerce Platforms – A Review with TW Case and U.S. Case
[ April 2025 ] >Back| Trademark | ||||
| Trademark Infringement Liability of E-commerce Platforms – A Review with TW Case and U.S. Case | ||||
| In the No. 8 civil case in 2021, made by of Intellectual Property and Commercial Court in Taiwan, a plaintiff, sued Shopee, Yahoo, and Rakuten online shops for trademark infringement. The plaintiff is a trademark owner of "e.blender" which is designated for use on blenders. It discovered that someone was selling tea extractors bearing its "e.blender" trademark on the Shopee, Yahoo, and Rakuten online shops. The plaintiff filed a lawsuit not only against the infringer, but also against Yahoo, Rakuten, and Shopee, alleging that these companies negligently failed toinspect the goods sold on their platforms, and thus bore liability for trademark infringement. The key issue is: Which measure, and to what extent, must e-commerce platforms exercise to remove counterfeit goods from their shelves? The IP Court ruled in favor of the e-commerce platforms, reasoning as follows: The liability of an e-commerce platform for trademark infringement depends on 3 factors: the business model it adopts, the degree of its involvement in transactions, and its capability to foresee and prevent infringements. In this case, the e-commerce platforms operated under a C2C (customer-to-customer) model and did not actively participate in transactions between sellers and consumers. Furthermore, the defendants had reporting mechanisms in place, allowing for prompt removals of products suspected of IP infringement. Before receiving a rights holder’s complaint, it was practically impossible for the e-commerce platforms to specifically ascertain whether a seller’s product was infringing. Consequently, there was no evidence to support that the platforms were negligent. However, phrases such as "business model, degree of involvement in sales, and capability to foresee and prevent " may be too vague and broad. At what level of involvement does an e-commerce platform become liable for trademark infringement? The Tiffany (NJ) Inc. v. eBay, Inc. case in the US provides a precedent for this issue. Tiffany, a well-known American jewelry brand, aggressively pursued counterfeiters from 2003 to 2006, but the volume of counterfeit Tiffany goods and their sales continued to rise. Ultimately, Tiffany decided to target the largest marketplace for these counterfeit goods—eBay. Tiffany asserted that a significant number of counterfeit Tiffany products were sold on eBay, that "Tiffany" was a popular search keyword on eBay, and that such items frequently appeared in eBay's "Hot List" recommendations. According to Tiffany’s investigation, only 5% of the sellers on eBay offered genuine Tiffany products, while as many as 73% were confirmed to be selling counterfeit goods. Because eBay derived substantial profits from selling Tiffany-branded goods, it had a duty to conduct regular inspections and investigation to remove counterfeit items. By failing to do so, eBay was negligent. Furthermore, the high sales figures of Tiffany-branded goods, and the disproportionate percentage of counterfeit Tiffany goods (73%) on the platform, had demonstrated that eBay knew or should have known such facts, still, it allowed the sale of counterfeit goods to continue. eBay’s defense closely resembled what we saw in the No. 8 case in 2021. eBay argued that it did not directly participate in transactions, that it had a reporting mechanism, and that it was unreasonable and economically infeasible to expect it to know whether a seller was offering infringing goods before a rights holder reported the violation. The key issue here was, whether the platform had a obligation to conduct a proactive investigation to discover and remove infringing goods. In this case, two issues were undisputed. First, eBay acknowledged that, due to repeated complaints from Tiffany, it was aware that a substantial portion of the Tiffany-branded goods sold on its platform were counterfeit. Second, before Tiffany filed complaints, eBay did not have specific knowledge of which sellers were offering counterfeit goods. eBay asserted that identifying and reporting counterfeits was the trademark owner's responsibility, not the platform’s obligation. The court ruled that while eBay had generalized knowledge that counterfeits were being sold on its platform, it lacked specific knowledge about which sellers were engaging in infringement of which trademark. Mere generalized knowledge was insufficient to establish intent or negligence in trademark infringement. The Supreme Court’s standard, as established in Inwood Laboratories, Inc. v. Ives Laboratories, Inc., states that a provider of goods or services may be held liable for contributory infringement only if it "knows or has reason to know" that a specific seller is engaging in trademark infringement and continues to provide its services despite this knowledge. Because eBay had an effective reporting system in place and there was no evidence that eBay willfully ignored complaints after receiving them, the court concluded that eBay lacked the requisite intent or negligence to be held liable for trademark infringement. The Tiffany (NJ) Inc. v. eBay, Inc. decision thus established a clear benchmark: To hold an e-commerce platform liable, a trademark owner must prove that the platform "knew or should have known that a specific, identifiable seller was engaging in infringement but continued to provide services anyway." This ruling also implicitly rejected the notion that e-commerce platforms have a duty to proactively investigate and remove counterfeit goods. Receiving a complaint is just a way for a platform to acquire knowledge of infringement, but it is not the only way. For instance, in the 2011 case Louis Vuitton v. Akanoc Solutions, Louis Vuitton successfully proved through Akanoc’s internal emails that Akanoc knew its customers were selling counterfeit Louis Vuitton goods and nevertheless continued to provide services for these transactions. Consequently, Akanoc was held liable for contributory infringement. Returning to the three-pronged standard outlined by the IP Court in Taiwan—namely, business models, degree of involvement in transactions, and capability to prevent infringement—we can see that, in practice, only two factors are truly dominant: degree of involvement and capability of prevention. The "business model" factor serves as an auxiliary factor to evaluate the degree of involvement and capability of prevention, and thus cannot be deemed as an independent factor. The degree of involvement is used to assess the platform’s likelihood of knowing about "specific and identifiable infringing seller," while the capability factor determines whether the platform remained inactive despite having acquired such knowledge. In essence, liability hinges on the fundamental question: Did the e-commerce platform know or should it have known that a specific customer was engaging in infringement and yet failed to act while continuing to provide services? If the Answer is yes, the e-commerce platform will be held liable for contributory infringement. |