A Potential Win for Trademark Owners in Redbubble: Did the Sixth Circuit Burst the Ecommerce Marketplace Bubble?

 

Plainspeak Summary:

  • Historically, e-commerce platforms like Amazon and eBay have been considered neutral platforms with minimal requirements to recognize the rights of trademark owners in third-party sales.
  • New e-commerce shopping platforms are pushing against these limitations through aggressive marketing, curating, and self-branding actions.
  • The Sixth Circuit Court of Appeals has effectively said enough is enough, and that e-commerce “neutral” platforms can be guilty of trademark infringement with respect to the third-party goods sold on its platforms.
  • Trademark owners have new ammunition against hyperactive platforms that claim neutrality but significantly drive the sales of counterfeit and infringing products.
  • E-commerce platforms must be aware of the limitations imposed in different federal regions regarding how much due diligence and restraint is required in light of trademark rights.

Since the launch of the Boston Computer Exchange in 1982, e-commerce has revolutionized the online shopping experience. This phenomenon has only accelerated with the spread of COVID-19 that forced consumers to resort to online shopping for everyday necessities. This growth, however, comes with challenges for trademark owners: counterfeit goods.

To date, online marketplaces that host third-party goods have generally not been found liable for direct trademark or copyright infringement because they merely facilitate sales between other parties and often do not take title of the products – they are not “sellers” of counterfeit goods and thus do not satisfy the “use” in commerce requirement for claims of infringement, unfair competition, and counterfeiting under Lanham Act. See, e.g., Milo & Gabby LLC v. Amazon.com, Inc., 693 F. App’x 879 (Fed. Cir. 2017); Hendrickson v. Amazon.com, Inc., 298 F.Supp.2d 914, 915 (C.D. Cal. 2003). Consequently, brand owners have focused their policing efforts on individual sellers of counterfeit goods in the digital space; however, a recent Sixth Circuit Decision may burst the bubble that shields online marketplaces from direct trademark infringement. See The Ohio State University v. Redbubble, Inc., Case No. 19-3388 (6th Cir. Feb. 25, 2021).

Most trademark owners treat their intellectual property with high priority; The Ohio State University (the one and only OSU) is no exception. In 2017, OSU sent the Australia-based online retailer Redbubble, Inc. an order to cease and desist the sale of a variety of products with OSU insignia such as Buckeyes or former championship-winning football coach Urban Meyer-related images. No agreement was reached and the items OSU objected to continue to be sold, many of them violating the OSU’s editorial style (Never refer to “Ohio State University,” “the Ohio State University,” or “THE Ohio State University.”)

With OSU-licensed products generating $130M in royalty revenue, it is no small wonder that shortly thereafter, OSU sued Redbubble, alleging that the global online marketplace which allows customers to print artist-submitted content on apparel, stickers, phone cases and various other products, directly infringed on a number of OSU’s trademarks including BUCKEYES, OHIO STATE, OHIO STATE UNIVERSITY, and URBAN MEYER. Ohio State University v. Redbubble, Inc., 369 F.Supp.3d 840 (S.D.Ohio, 2019). Unfortunately, OSU suffered a loss in a first round against the visiting Australian team before the District Court for the Southern District of Ohio. In a narrow interpretation of what constitutes “use” under the Lanham Act for purposes of assessing direct infringement, the district court equated Redbubble to the traditional online marketplace we are all too keen of, Amazon, which provides fulfillment services to sellers but is not itself a seller. In other words, Redbubble acted merely as a “transactional intermediary” between the infringing artists and the consumers as opposed to a “seller” of counterfeit goods.

Fast-forward two years, on February 25, 2021, the teams met for a rematch before the United States Court of Appeals for the Sixth Circuit. The Sixth Circuit reversed and remanded the district court’s decision and broadened the scope of its test for direct infringement in the context of online marketplaces, holding that “use in commerce” should be analyzed on a spectrum. Online marketplaces that go above and beyond facilitating the transaction between a buyer and a seller may be liable to brand owners for trademark infringement. Unlike Amazon with its hands-off business approach, Redbubble is more than a “passive facilitator” in the sale of counterfeit goods. Under Redbubble’s business model, once an order is placed, Redbubble hires ancillary service providers who manufacture and ship the product with a Redbubble hang tag, in Redbubble packaging and showing Redbubble’s address as the return address. While the outcome of the case will be fact-specific, the Sixth Circuit’s decision opens the door for claims of trademark infringement against online marketplaces with active involvement in the sale of third-party products.

Applying this logic, there are many ways that online marketplaces might infringe the rights of trademark owners through the sales of third-party vendor products:

  1. Lack of customer service mechanism for responding to trademark owner complaints

Why didn’t OSU file suit under the doctrine of indirect infringement? Although liability for indirect infringement is not expressly imposed by the Lanham Act, the U.S. Supreme Court has recognized that “liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another.” Inwood Laboratories v. Ives Laboratories, 456 U.S. 844 (1982). The test for indirect infringement hinges on the extent that the facilitating party knew or should have known of the infringing acts carried out by another party.

The Digital Millennium Copyright Act, (the “DMCA”) provides a safe harbor for online service providers that comply with the DMCA’s prescribed takedown requirements in connection with indirect copyright claims; however, there is no such sanctuary for indirect trademark claims. eBay, an industry leader, filled this void with the Verified Rights Owner Program (“VeRO.”) Through the VeRO program, trademark owners can report potentially infringing listings to eBay. This procedure allows trademark owners and eBay to address potential indirect claims amicably and avoid litigation altogether. Moreover, VeRO and similar programs have arguably protected online marketplaces against trademark liability claims. See e.g. Tiffany (NJ) Inc. v. eBay, Inc., 576 F.Supp.2d 463 (S.D.N.Y.,2008); Altinex Inc. v. Alibaba.com Hong Kong Ltd., 2016 WL 6822235 (C.D.Cal., 2016). However, these programs only function as de facto safe harbors if the online platform promptly responds and reasonably addresses all takedown requests.

Coincidentally, Redbubble also provides users with a mechanism for protecting their own rights by reporting infringing content. Nevertheless, when Redbubble insisted that OSU provide direct links to infringing content, which is common practice under most notice and takedown programs, OSU filed suit instead. Redbubble’s proper implementation of a notice and takedown mechanism is likely why OSU did not file claims for indirect trademark infringement.

  1. Use of a trademark as a search engine keyword to trigger the display of an infringing product

The Sixth Circuit is not the only court to be cracking down on e-commerce platforms. For instance, a trademark owner can prevail on a cause of action for trademark infringement by claiming that “the use of a trademark as a search engine keyword that triggers the display of a competitor’s advertisement is a ‘use in commerce’ under the Lanham Act” in several jurisdictions. See Rescuecom Corp. v. Google Inc., 562 F.3d 123, 127 (2d Cir. 2009); Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011.)

For example, if Amazon used the Nike trademark in order to trigger the appearance of their advertisements and links for counterfeit Nike goods in a way that is likely to cause confusion for consumers, Nike would have a strong claim for trademark infringement against Amazon.

  1. Retargeted e-mail campaigns that advertise infringing products

The most common way for businesses to achieve successful behavioral marketing is by tracking user activities on their site. The information gathered is used to create highly curated email campaigns suited for each user’s needs. This process is often automized and e-commerce platforms inadvertently market counterfeit goods sold on their platforms. With recent case law cracking down on infringing advertisers, online marketplaces should exercise caution with retargeted e-mail campaigns.

 

About Violaine Panasci

Violaine Panasci, LL.M., studied law at the University of Ottawa before completing an LL.M. in New York with an emphasis in food systems and sustainable supply chains. Her practice areas include agricultural technology, cannabis, copyrights, data privacy, food & beverage, regulation, sustainable supply chains, and trademarks. Read more about Violaine, connect with her, and Calendly her.

 

About RVL®

Rockridge Venture Law® is a certified B Corp law firm embracing the mantra of technology lawyers for good. Rockridge® services include corporate, intellectual property, litigation, M&A, privacy, technology, and venture capital law. Rockridge has been recognized as a B Corp Best for the World and Real Leaders Top 150 Impact Company, and has been featured by Conscious Company Magazine, Forbes, and other top media focused on industry leaders in impact and innovation.

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Violaine Panasci

Author Violaine Panasci

Violaine is a branding, data privacy, and regulatory attorney at Rockridge Venture Law®. Violaine uniquely combines her work in sustainable supply chains, intellectual property protection, and technology law to advise clients in areas where business and society move faster than the law. Her practice areas include agricultural technology, cannabis, copyrights, data privacy, food & beverage, regulation, sustainable supply chains, and trademarks.

More posts by Violaine Panasci

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