In recent years online ecommerce has seen a gradual rise, this is in part due to the COVID 19 pandemic where we were all placed in a position where we had no other option but to shop online rather than visit retail outlets in person. It seems that this shift in consumer shopping habits is here to stay, with ecommerce sales expected to account for 20.8 % of retail sales worldwide in 2023.
The vast majority of us now find ourselves visiting online retailers in the first instance, with the likes of online e-commerce platforms such as Amazon and eBay often being our first port of call. It is therefore no surprise that companies such as Amazon and eBay have also reported an increase in the number of small and medium sized businesses selling on their respective platforms.
With the rise of established businesses and budding online entrepreneurs now exploring the option of trading solely online, it goes without saying that the protection, and enforcement of IP rights is critical for growth, and continued reputation of a brand.
One benefit for businesses pursuing online retail, is that online ecommerce platforms provide user friendly tools to ensure effective management for the policing of Intellectual Property rights (IPR). eBay for instance, offer a Verified Rights Owner (VeRo) Program which allows owners of intellectual property (IP) rights and their authorized representatives to report eBay listings that may infringe on those rights. Amazon has an Intellectual Property Policy which states that it provides protection and safeguarding measures for intellectual property rights holders. In addition, Amazon also has a Brand Registry scheme, whereby IPR Holders can register their brand in to Amazon’s Brand Registry. Once enrolled, sellers on Amazon will have access to various IP enforcement tools such as its Report a Violation (RaV) tool that provides text and image-based searching, simplifying the process of reporting any potential infringement. The underlying function for both platforms and indeed others allows the Intellectual Property rights holder to file an online IP complaint, or more commonly a take down notice.
Take down notices are notices issued by rights owners to service providers (such as internet service providers, network operators and web hosts) that are hosting infringing, or potentially infringing material. The takedown notice sets out details of the alleged infringement, with a view to securing the ‘takedown’ of the material by the relevant website.
Take down notices are usually favourable to the IPR Holder and can often be a quick and effective method to stop a potentially bothersome online seller, or competitor using your IPR. However, before proceeding with this course of action the question which should be asked first, is whether there is an infringement. If not, you could run the risk of a claim of unjustified threats.
This topic was recently explored in Shenzhen Carku Technology Co., LTD v The Noco Company [2022] EWHC 2034 (Pat).
The case concerns a dispute over the alleged Infringement of battery-powered car jump starters and the claimant “Carku” seeking revocation of a UK Patent owned by the defendant “NOCO” who was Carku’s competitor. Carku argued that the statements made by NOCO to Amazon, in the policing of its IPR amounted to an actionable threat of patent infringement under section 70 of the Patents Act 1977. Consequently, those statements led to Amazon delisting a number of Carku’s, and Carku’s distributors products sold on Amazon.
So, what is an actionable threat?
The Intellectual Property (Unjustified Threats) Act 2017 provides protection against groundless threats of infringement proceedings by the holder of a patent, trade mark, unregistered design right or registered design. A groundless threat of infringement proceedings can include:
- making a threat where no relevant IPR exists
- The IPR has expired or is invalid, or
- No infringement has taken place because what you are doing is sufficiently different to what is protected by the IP right.
If a threat is actionable, then any party aggrieved by the threat may take action against the sender of the communication and seek a remedy by either i) filing an injunction to stop the continuation of threats, ii) seek damages for loss caused by the threat, and iii) request a declaration that the threat is unjustified.
It is important to note that there are no threats provisions affecting unregistered rights such as copyright, passing off or trade secrets. The action will be unsuccessful if it is found that the recipient of the threat was indeed infringing.
(For an overview of The Intellectual Property (Unjustified Threats) Act 2017 , please see our previous article – csy-ip.com/intellectual-property-unjustified-threats-act-2017)
In recent years, the issue of whether alleged threats made via an online IP complaints portal such as a takedown notice has been discussed in Quads 4 Kids v Campbell [2006] EWHC 2482 (CD), Cassie Creations v Blackmore & Mirrorkool Limited [2014] EWHC 2941 (CH) and T & A v Hala [2015] EWHC 2888 (IPEC). All of these cases concern eBay’s VeRo programme and seem to adopt a hesitant approach, with the view being that it was arguable that a complaint made via an IP complaint portal could amount to a threat.
In the case at hand, NOCO registered its brand in Amazon’s brand registry, and also had a separate first party (1P) relationship with Amazon. This was because Amazon buys products directly from NOCO to sell on Amazon’s own account. Its status as a 1P partner meant that NOCO had been allocated a contact at Amazon referred to as a category manager. Over the course of 6 months, NOCO made a number of complaints via Amazon’s infringement form in respect of Carku’s products. As a result of the notifications made by NOCO, and after consultation with its solicitors Amazon delisted a number of Carku products.
Carku sought to revoke NOCO’s patent and alleged that the complaints made against them were unjustified threats. NOCO defended the validity of their patent and counterclaimed Carku products infringed their patent. The judge found that some of Carku’s products did infringe NOCO’s patent, however, the judge also found that NOCO’s patent was invalid due to the presence of prior art.
Regarding the issue of unjustified threats, the court’s application of The Intellectual Property (Unjustified Threats) Act 2017 is that notifications such as a takedown notice, should be considered from the perspective of whether an ordinary reasonable person in the position of the recipient would have understood the communication to be a threat.
NOCO’s argument was that it was relevant that Amazon had procedures in place with the main objective of protecting customers against infringing products. This therefore established that Amazon had a bigger role in enforcing rights than just receiving complaints through its complaint’s procedure. Amazon would therefore be unlikely to consider the submission of a complaint via their procedure to be a ‘threat’.
It was held that in order for NOCO to successfully argue that Amazon had not been threatened with proceedings, NOCO would need to establish that in response to their complaint, Amazon automatically removed the infringing Carku products, with no consideration of its legal position. However, when it received the complaints, Amazon would have understood that if it carried on selling, NOCO would be ready, willing and able to sue the relevant third party. After considering its own legal position and weighing up the risks of allowing the product to continue to be sold on its platform, Amazon allowed some products to remain (around 30%) on its website following the complaint.
The judge concluded that the patent was invalid for obviousness, had the patent been valid, it would have been infringed by some of Carku’s products however most were non-infringing. Finally, it was held that NOCO’s communications to Amazon were actionable threats and were not justified. Following this, the judge ordered an inquiry as to damages to assess the loss incurred by Carku.
Commentary
While the case concerns patent infringement, the decision can be applied to trade mark and design infringement matters where take down notices or IP complaints are made via an online complaint platform. Although the outcome of each matter will depend on its specific facts, the decision serves as a reminder to online businesses and budding online entrepreneurs that filing a complaint to simply block a would-be competitor out of the market, without any consideration as to whether their activity is infringing could be problematic and you could run the risk of a claim of unjustified threats. Therefore, before taking this step, we recommend that IPR holders consider whether there actually is an infringement and what the benefit and likely outcome would be if this step is taken.
For assistance with registering your brand on Amazon’s Brand registry, or if you believe your IP rights may have been infringed, please get in touch with one of our team.