Liability of online platforms for trade mark infringement: the Court of Appeal's decision in Montres Breguet v Samsung Electronics

The Court of Appeal on 15 December 2023 dismissed Samsung's appeal in Montres Breguet SA & Ors v Samsung Electronics Co Ltd & Anor ([2023] EWCA Civ 1478). The judgment provides helpful guidance regarding "use" of a trade mark by app store operators and the limitations of parties' reliance on the e-Commerce Directive hosting defence.

Background

The Claimants are all members of the Swatch group of watch makers (they were collectively referred to as "Swatch" in the High Court and Court of Appeal proceedings). Swatch brought trade mark infringement proceedings against Samsung regarding 30 digital watch face apps which could be downloaded to Samsung smartwatches from Samsung's Galaxy App ("SGA") store. Swatch claimed that the digital watch face apps were identical or similar to their trade mark rights which included watch brands such as Swatch, Tissot and Breguet. The infringement proceedings were brought against Samsung rather than the developers of the digital watch face apps, who were a variety of third party app developers. In some instances, the digital watch face apps available for download on the SGA store replicated in precise detail genuine watches sold by Swatch (please see below example).

Swatch in the High Court successfully claimed that Samsung infringed their trade mark rights despite the digital watch face apps being developed by third party app developers. Furthermore, Mrs Justice Falk rejected Samsung's attempt to rely on the hosting defence under Article 14 of the E-Commerce Directive ("ECD").

Samsung appealed to the Court of Appeal with the focus of the appeal being the below three issues:

1. Samsung did not use the complained of signs (i.e. the third party app developers used the signs exclusively);
2. There was no use of the sign in relation to smartwatches; and
3. It was incorrect to reject the hosting defence under Article 14 of the ECD.

These issues are discussed below.

Appeal Issue 1: did Samsung use the signs?

As mentioned above, the digital watch face apps of concern were designed and created by third party developers. Despite this, in the High Court it was found that Samsung itself had used the complained of signs, owing to a combination of factors including:

• Samsung marketed their smartwatches as truly watch-like;
• Samsung promoted that a wide range of watch face apps were available in the SGA store to make their products appear more attractive;
• Third party watch face apps were sold alongside Samsung watch face apps in the SGA store which was operated by Samsung and was dedicated to watch face apps for Samsung products;
• Samsung encouraged third party app developers to create watch face apps to be sold on the SGA store; and
• Samsung reviewed all third party apps before they were listed on the SGA store.

Owing to the above factors, amongst others, it was considered that Samsung played an active role and therefore used the signs itself.

Samsung appealed the above finding on the basis that Falk J took an "overly broad" approach to use. Samsung submitted in its appeal that some of the factors considered by Falk J were irrelevant. Furthermore, other factors were not taken into account in the assessment of use. Samsung's factors to demonstrate that it did not use the signs included that the third party app developers set the price of the watch face apps and that Samsung also discouraged third party app developers from infringing third party IP rights. 

Samsung's appeal was rejected on this issue. The Court of Appeal maintained that Samsung's actions went beyond merely creating the technical conditions of use of the sign. Amongst the factors that Samsung considered were incorrectly disregarded by Falk J, it was decided by the Court of Appeal that consumers would be unaware that the third party developer, not Samsung, set the price of the watch face apps and that Samsung had discouraged third party app developers from infringing third party IP rights.

Appeal Issue 2: did Samsung use the signs in relation to smartwatches?

In the High Court decision, Falk J held that the use of the downloaded watch face app after sale could denote the origin of the smartwatch.  The downloaded watch face app appeared in the same position as would be expected on a conventional watch. Therefore, people other than the owner of the smartwatch would consider that the downloaded watch face on the watch denoted origin.

Samsung appealed on the basis that there was no realistic likelihood that persons other than the wearer of the smartwatch would perceive the downloaded watch face app as indicating the origin of the goods. Samsung also submitted that it was the third party app developer, not Samsung, that affixed the signs to the smartwatch via the downloaded watch face.

The Court of Appeal rejected Samsung's appeal on this issue. It considered that following the sale of the digital watch faces, friends or acquaintances who see individuals wearing the smartwatches may not know the smartwatches are made by Samsung given the branding on the downloaded watch face. This was because, traditionally, watch manufacturers' branding would be included where the digital watch face appeared on the smartwatch. The second argument under this appeal ground was given short attention as the test is "use" rather than "affixing" of the Signs. It was considered that Samsung had used the Signs even if they did not affix the Signs to the smartwatches.

Appeal Ground 3: Hosting Defence under Article 14 of the ECD

Falk J in the High Court had decided that Samsung could not rely on the hosting defence under Article 14 of the ECD as its actions went beyond "mere technical, automatic and passive nature" acts. This was because Samsung, before listing apps, would conduct checks of the watch face apps, including their functionality and safety. Furthermore, Samsung took active steps to facilitate and encourage the design of the watch face apps to be added to the SGA store.

The Court of Appeal in its judgment commented that Samsung on appeal placed most emphasis on the availability of the hosting defence. Firstly, Samsung submitted that app stores should not be excluded from the hosting defence due to undertaking checks as to whether an app can appear in their store or checking for the illegality of any app to be hosted on the store. This argument was rejected as Samsung's conduct went beyond merely making apps available and checking them for illegality.

Samsung also submitted that it should not be punished for proactively undertaking content review rather than simply taking infringing content down when notified by rights holders. The Court of Appeal acknowledged the policy conundrum. However, parties have to accept the risk that you may not be able to rely upon Article 14 of the ECD if you undertake content review before content is made available to the public. Overall, it was considered that Samsung's acts were active and controlling of content uploaded to the SGA store.

Comments

The High Court and Court of Appeal judgments show there is a commercial decision to be made for online platforms that host third party content. If you conduct a review of content before it is made available to the public, you may be unable to rely on Article 14 of the ECD. This may mean accepting content on your app store for example which may infringe intellectual property or have defects, viruses or other issues which may impact your commercial success owing to poor performance of third party offerings, and then having to take them down at short notice when you become aware of issues. However, if you take this approach you would be able to rely on the hosting defence.

Alternatively, businesses will need to conduct thorough checks into content if they decide to undertake a vetting process. In the Court of Appeal decision, it was mentioned that Samsung employed software engineers who took around six minutes to review each watch face app. These employees had little knowledge of famous watch brands such as those owned by Swatch, and these checks were deemed inadequate. Therefore, businesses that undertake content review may need to add more thoroughness to checks for earlier trade mark rights. There are likely to be limits to these checks. In this case the providers of digital watch apps may naturally check watches as there is somewhat of a natural extension. However, there are situations where trade mark infringement (perhaps on reputational grounds) may be less apparent and harder to vet fully as an online platform.