With the prevalence of TV and Internet, shopping channel and online shopping have already become important platforms and channels for product sales nowadays. In practice, suppliers of goods to TV stations, online shopping websites and other platforms are normally obligated to contractually guarantee their authenticity. It is unclear, however, whether such a platform operator can contest a claim of infringement brought by a trademark owner on the ground that its investigatory obligation was fulfilled by the supplier's guarantee, and thus no negligence was involved.
In the 2018 Min-Shang-Shang-Geng (1) No. 2 civil judgment dated June 13th, 2019, the Intellectual Property Court expressed its opinions on the behavior positioning and the investigatory obligations of TV stations and online shopping website operators in transactions. The defendants in this case were two well-known e-commerce operators in Taiwan accused by an internationally renowned luxury fashion house of selling counterfeit watches without authorization on TV shopping channels and online shopping websites. After reviewing this case, the Intellectual Property Court held that the defendants infringed on the trademarks at issue. The grounds of logic are summarized as follows:
1. As the defendants were the sellers of the infringing goods at issue, the defendants’ acts constituted direct infringement:
The defendants argued that the watches at issue were sold to consumers by the supplier and that they merely provided platforms instead of selling those watches and thus did not infringe on the trademarks. However, the argument was not accepted by the Court.
The Court held that the shopping channels operated by the defendants controlled the meetings, and the production and filming of advertisements for the products at issue, while the supplier could merely express its opinions to them. Moreover, the hosts were hired by the defendants. Furthermore, the defendants handled services such as customer phone calls, inquiries, invoicing, and other services from order to sale. Given their significant involvement in the sales process, the defendants did not merely assist in the sales and promotion of the products as an intermediary platform, but actually sold the goods as a seller.
Furthermore, the Court held that the online shopping websites operated by the defendants did not specify the actual product supplier, and that the defendants handled all services such as receiving orders, inquiry, after-sales service and invoicing. Accordingly, it was clear that the defendants did not merely provide website platforms for buyers and sellers to conduct trade, but played the role of business owners who cooperated with the suppliers and attract consumers with information as well as providing a convenient user interface. The defendants were actually the sellers of the products.
The defendants argued that they had asked the supplier to present documents such as an import declaration, a duty payment certificate for customs import and an affidavit of authenticity, and that they had no means to know that the products were counterfeit. They, thus, asserted that they had exercised the due care of a prudent administrator without any negligence.
However, the Court held that the defendants hastily accepted and sold such high-priced luxury watches without asking the supplier about the source of the product, which was far below market price, and without checking whether there was a certificate of authorization or distribution, or whether there was an invoice or proof of purchase during the parallel import. In addition, the Court pointed out that the basis for the infringement was not that the fact that defendants failed to identify the counterfeit watches but that they failed to exercise the due care of a prudent administrator by mitigating the risk when there was apparent breach or inconsistency in the content of documents such as import declaration and payment certificate. Accordingly, their negligence caused the infringement.
The defendants claimed to be "digital communication service providers" under the draft "Digital Communication Act," and therefore, in accordance with the spirit of such draft act, they had no responsibility for reviewing or supervising the information that was transmitted or stored by others.
However, as the Court pointed out, to be considered as "digital communication service providers" defined in the draft act and consequently exempt from the responsibility of review or supervision, the defendants should pass the hurdles that "the information transmitted is initiated or requested by a user" and "the information accessed by the user has not been changed." Nevertheless, the content and information in the online shopping websites in litigation was not initiated or requested by the supplier. The defendants were therefore not "digital communication service providers" under the aforesaid draft act, and accordingly still bore the responsibility of review and supervision.
In comparison with other digital communication service providers who only provide online intermediary services, the defendants enjoyed much higher revenues, transaction involvement and consumer trust when cooperating with suppliers as business owners by providing information and a convenient user interface to attract consumers. If the infringed watches at issue were sold by the product supplier directly, the sales volume might not have been so high. Hence, the Intellectual Property Court considered that the defendants were key to the damages from the trademark infringement in this case. If the defendants bore no responsibility for review or supervision, it would obviously contradict the principle of justice.