US court rejects criticism of Amazon's actions over potential counterfeit sales

The Court of Appeals said that Amazon was neither guilty of direct nor contributory trade mark infringement against hair styling product manufacturer Tre Milano. It ruled that Tre Milano should not be awarded an injunction to prevent fakes of its 'InStyler' hair straightener product from being sold via Amazon.

"The evidence presented shows that Amazon itself was not guilty of direct trademark infringement," the Court said in its ruling (26-page / 72KB PDF). "Additionally, it was not guilty of contributory infringement, in that, when it was presented with evidence of infringement, it took action to remove the infringing listings, and it was not wilfully blind to third party infringement."

Tre Milano had complained that Amazon had not prevented third party retailers from selling counterfeit InStyler straighteners when it had notified Amazon about the alleged infringement of its trade marks. However, Amazon had argued that it required evidence to support infringement claims and that Tre Milano had often failed to provide it with such details.

The Court of Appeals said that Amazon was a "transactional intermediary" in the sale of counterfeit InStylers, rejecting Tre Milano's claims that the retail website had in fact acted as the "seller" of the goods.

In a previous case involving eBay, the US Court of Appeals ruled that the online auction site had not been guilty of infringing on trade marks owned by jeweller Tiffany. This was because eBay as a service provider and not a seller was entitled to use registered trade marks to describe a product as "protected by the [US] nominative fair use doctrine." eBay was also not guilty of contributory trade mark infringement as it had fulfilled its duty to remove counterfeit items for sale from its marketplace when Tiffany had instructed it to do so whenever eBay had "reason to know" or had not "intentionally shielded itself" from discovering that its website was being used for the sale of counterfeit items, the court had ruled.

Tre Milano had argued that the case law established should not be applied in Amazon's case. It argued that Amazon itself used the InStyler trade mark in connection with the sale of counterfeit products. However, the Court of Appeals rejected the company's claims.

"The evidence is clear that, at least with respect to the InStyler, Amazon is a service provider, not the seller," the Court of Appeals said. "Amazon did not currently have any InStylers in its own inventory; those it sold belonged to third party sellers. That Amazon provided the product description and handled the payments did not make it a direct seller of the products."

The Court said that Amazon could legitimately use the InStyler trade mark to list the name of the product since there was "no evidence of a ‘likelihood of confusion about the source of [Tre Milano's] product or the mark-holder’s sponsorship or affiliation." It said that it could also use the 'InStyler' mark on a "product page" it operated to advertise the availability of the product via its marketplace.

"Since Amazon itself was not selling counterfeit goods but was permissibly using Tre Milano’s mark, strict liability under the Lanham Act does not apply... While 'seller' is not clearly defined in the act, it is clear that 'a transactional intermediary is not treated as a seller,' that is, 'parties [who] act as intermediaries for a transaction and do not buy and resell the commodities’ are not direct sellers and are not directly liable for infringement under the act," it said.

Case law in the US has shown that in order to qualify as a contributory trade mark infringer parties must be shown to have had knowledge or reason to know that infringement was taking place and to have intentionally induced customers to use the mark in an infringing fashion or have supplied its products to identified individuals known to be engaging in continuing infringement. However, "general knowledge that a website is being used to sell counterfeit goods without more is "insufficient to trigger liability" for contributory trade mark infringement.  There must also be underlying direct infringement.

Amazon had not been obliged to remove listings from its marketplace upon receipt of a claimed infringement notice, the Court said. It could legitimately investigate the merits of the claims being made, it added.

"Tre Milano places great emphasis on the fact that eBay immediately removes a listing upon receipt of a [notice of claimed infringement] based on a good-faith belief of infringement, while Amazon does not," the Court said. "[US case law] cited by Tre Milano [does not] support a conclusion that a listing must be removed - rather than investigated - upon notice that it likely is for a counterfeit product."