The Liability of Marketplace Platforms - Interpretation of the European Court of Justice and the Brazilian Courts
The marketplace business model - which is nothing more than an electronic sales platform - has been increasingly used in Brazil. Virtual buying and selling intermediation services are fast becoming the main sales channel for Brazilian ecommerce in the past years, since they are a means used by shopkeepers to increase their sales by taking advantage of the high user traffic in those virtual malls.
Through the platform, the shopkeeper offers its products, thereby reaching a greater number of consumers. In turn, consumers evaluate products, prices and conditions, and make purchases and payments more conveniently in a single virtual environment. In return, the marketplace charges for the transactions it intermediated, often in the form of a commission.
There has been a lot of discussion, from the perspective of consumer law, about the liability of the marketplace platform in case of vices or defects in the provision of the service or product that is sold under its intermediation. Based on the appearance theory in the Consumer Defense and Protection Code, it is not difficult to conclude that, even if the marketplace does not act directly, it has strict liability, which makes the supplier responsible for the losses suffered by the consumer, regardless of having acted with bad faith or fault.
Liability is an inherent risk in the business and, therefore, any supplier that is receiving profits from a certain activity must answer for its burden.
What if the violation does not involve a consumer relationship? And when the product marketed through an online marketplace platform infringes the intellectual property rights of others? Can the platform be held liable for such an infraction?
Recent court decisions have found that marketplaces act as a third party content provider, thus falling under the terms of article 19, 1st paragraph of Law No. 12.965/14. This law provides that the content provider can only be held liable for content generated by a third party - in this case the storekeeper using the Marketplace platform - if, after a court order, it does not take the appropriate measures.
Within the European Union, the responsibility of marketplaces for products sold by third parties has recently been analyzed (Case CJEU – C-567/18) from an even more interesting perspective. It considered the event that the platform, in addition to advertising the product sold by third parties also stocks and stores these products.
The issue was raised by a German company that learned that its perfumes were being improperly marketed by a third party in the European Union through Amazon. In addition to advertising products on its platform, the third party also stored them under the service of “Shipping through Amazon”, in which third-party products are stored by other companies of Amazon group, in this case Amazon FC Graben.
As a result, after taking measures directly with the seller, the German company, requested that Amazon would deliver the remaining stock of the infringing products to the company. Amazon accepted this request and forwarded the products. It turned out that a portion of these products were owned by another seller, which motivated the German company to request that Amazon produce the data of this other seller, a claim that was denied.
In light of Amazon's denial, the company filed a lawsuit against Amazon Services Europe and Amazon FC Graben alleging that their conduct constituted a violation of the plaintiff's rights over its trademark. The lawsuit also referred to the fact that the plaintiff’s had requested that these companies be ordered to abstain, under penalty of sanctions, from storing or sending, directly or through third parties, in the course of commercial operations, perfumes belonging to the German company, when these products have not been placed on the market with its consent.
In a first analysis, the German Regional Court dismissed the plaintiff’s claims, finding that Amazon Services Europe had not stored or shipped the infringing products and that Amazon FC Graben had not stored those products on behalf of the seller and other third parties sellers, and these companies cannot be held responsible for products marketed effectively by third parties.
The German company appealed and the case was sent to the Court of Justice of the European Union. The German Federal Supreme Court considered that the decision would depend on that court's interpretation of Article 9, No. 2, item b) of Regulation No. 207/2009 of the European Union 1 , as well as the interpretation of Article 9, No. 3, item b) of Regulation No. 2017/1001 of the European Parliament on the European Union trademark 2 in the event that the person who stores third-party products that violate someone else's trademark rights was unaware of the infringement.
When analyzing the case, the Court of Justice of the European Union found that the activities performed by the Amazon Group companies were not in violation of the plaintiff's Intellectual Property rights, since they would not make effective use of the sign, as the companies themselves did not offer the infringing products for sale or put them on the market.
Thus, for there to be a violation of rights in respect of the storage of products that infringe the trademark of third parties under European law, it must be demonstrated that the person who stored the products does so in order to offer these to the market or to insert them into the market. If such conduct does not occur, there will be no liability for those who store the product, in this case, the marketplace.
Therefore, the interpretation of the Brazilian and European Courts is that the marketplace as a content provider (in this case an internet application provider) cannot be objectively held liable for violations of third-party rights. This is unlike what happens when there is a consumer relationship. On the other hand, the marketplace can be held subjectively liable in the event that it is proved that it had prior knowledge of the violation and remained inert, not removing the content that violates the rights of others.
Content providers are not obliged to previously control the information placed in their domain, since any monitoring would constitute a violation of the freedom of communication and censorship. Such an Internet provider will only be held liable in cases where, aware of the violation of rights, they remain inert, without taking any steps to end such infraction.