rthurOn December 15, 2023, the Court of Appeal dismissed Samsung’s appeal of a High Court decision which held the tech giant liable for third-party trade mark infringement. The third parties in question sold digital copies of well-known watch faces on Samsung’s app store, which Samsung smartwatch customers could use to update their digital watch faces. The Court of Appeal’s decision, which echoes the CJEU’s ruling in Louboutin v Amazon, further solidifies the growing intermediary liability risk for online platform providers, which are increasingly being held accountable for the actions of their third-party users.

The High Court decision

The High Court found Samsung liable for the infringing digital watch faces hosted on its platform. The court ruled on three key issues, which Samsung appealed on:

1. whether there was actual ‘use’ on the part of Samsung,
2. if there was ‘use’, whether it was in relation to smartwatches, and
3. whether Samsung could rely on the Article 14(1) hosting defence.

The appeal

Whether Samsung’s actions amounted to ‘use’

The primary issue on appeal was whether the High Court’s decision was “excessively broad” in its evaluation of Samsung’s involvement, disregarding critical factors that could distinguish Samsung as the “user,” such as the third-party sellers’ independent pricing. However, the Court of Appeal determined that Samsung’s marketing, encouragement, and content review of the apps were sufficient to hold them accountable for “use.”

Whether Samsung’s ‘use’ was in relation to smartwatches

Samsung contended that consumers would not perceive the smartwatch graphic as a source of origin. However, the Court of Appeal disagreed, stating that traditional watch manufacturers typically place their branding in the prominent face location, making it plausible that some consumers would assume the smartwatch was made by such a brand. Samsung also argued that it was the third parties who had added the infringing graphic, but the court dismissed this argument, emphasising that the relevant test was “use” rather than “affixation.”

Whether Samsung could benefit from the Article 14(1) hosting defence

An essential factor in the first-instance decision was Samsung’s content moderation practice on the apps. In the High Court’s view, this brought Samsung closer to the infringing act due to the individual acknowledgement and verification of the content. The Court of Appeal recognised that this issue was a “familiar conundrum” with the eCommerce Directive exemptions, but under UK law, a content moderation practice would usually (but not always) prevent a defendant from invoking Article 14(1).

There is an important distinction to note here between UK and EU platforms. The Digital Services Act explicitly sets out that “voluntary own-initiative investigations” into uploaded content will not be a sufficient reason for Article 14(1) ineligibility.

Takeaway

Online platform providers are becoming increasingly liable for the actions of their users, and should therefore be carefully considering their content review systems. Simply moderating content based on illegality (or other policy objectives) may be inadequate considering the growing risk of third party IP infringement. The two obvious options here are for providers to:

1. increase the extent of their review to also consider IP infringement, or
2. decrease certain aspects of their review to distance themselves from the often-countless number of uploads that many of these platforms receive.

Platform providers will need to be creative in their efforts to mitigate future liability whilst avoiding disengaging and damaging the user-experience.

The Court of Appeal’s judgement can be found here.