An intellectual property dispute between two rival manufacturers of apparatus to jump start cars has highlighted pitfalls for brands to be aware of in respect of the use (and mis-use) of their intellectual property online.
We explore how brands can attempt to retain control over the use of their IP online, and how infringements can be tackled.
The background
At the end of 2023 judgment was given in the dispute between Shenzhen Carku Technology Co. Ltd (“Carku”) and The NOCO Company (“NOCO”)
From January to July 2020, NOCO filed “takedown” notices with Amazon in respect of a number of Carku products sold on the Amazon platform by Carku’s distributors. This was on the basis that NOCO considered that such products infringed its UK patent. Most of the products were de-listed by Amazon as a result.
In retaliation, Carku commenced proceedings against NOCO for a declaration of non-infringement of the patent, revocation of the patent, and “unjustified threats” of patent infringement by NOCO. NOCO, in turn, counterclaimed for patent infringement.
In December 2023, the Court of Appeal decided in favour of Carku, concluding that NOCO’s patent was invalid and NOCO was liable for making unjustified threats against Carku’s distributors.
The judgment is now subject to a further appeal – watch this space.
The issue of online infringements and how to tackle them is a long standing problem for brands (as suppliers) and has become all the more relevant due to the increasingly popularity and use of e-commerce websites such as Amazon.
Interestingly, this was the first case in the English Courts which has concerned Amazon’s IP procedure. It is unlikely to be the last.
So what can brands do? Distribution Agreements and IP best practice
Prevention is often the best cure! The starting point will usually be the terms of a brand’s distribution agreement.
In well drafted distribution agreements, irrespective of the industry, there will be provisions concerning intellectual property which will protect the interest of both parties involved –supplier and distributor. Some key IP provisions that you may consider including in a distribution agreement include:
Definition of IP
There should be a clear definition of what constitutes intellectual property in the context of the agreement. This may include trade marks, trade secrets, copyrights, and patents. The definition of IP should refer to existing rights but also be broad enough to cover applications, renewals and extensions and all similar or equivalent rights or forms of protection which will subsist in the future in any part of the world.
Ownership of IP
Who owns the IP created or used during the agreement should be addressed. Usually the supplier will retain ownership of existing IP.
Licence to use IP
If, as is likely, the distributor needs to use the brand’s IP to carry out the services under the agreement, the supplier will need to grant the distributor a licence. However, what are to be the scope and limitations of this licence? For example, the geographic area, duration and purpose for which the licence is granted.
Restrictions in IP use
Restricting a buyer (distributor or retailer) in some way down the supply chain is often a key objective for suppliers of goods and services. However, the restriction must be compliant with competition law otherwise that provision will be unenforceable or the entire contract containing the restriction could be unenforceable.
Whilst the supplier is able to stipulate that the distributor must display or present its trade marks in a certain way on the distributor’s website, a restriction prohibiting the distributor from using the supplier’s IP on its website or online store at all would not be enforceable.
Third-party claims
Often the agreement provides that, where a distributor becomes aware that a third-party is infringing the supplier’s IP, the distributor must inform the supplier of this as soon as possible. Correspondingly if the owner of the IP (the supplier), has been accused of infringing a third party’s rights, the supplier will want to avoid a situation where its distributors in multiple jurisdictions determine how they deal with these claims (perhaps each in a different way). Indemnification
Typically, the supplier will seek an indemnity from the distributor for any losses arising from IP infringement relating to the distributor’s actions. Conversely a distributor might seek an indemnity from the supplier that Its IP does not infringe any third party rights.
Termination and return of IP
When drafting a distribution agreement, the brand should consider what happens to its IP on termination of an agreement. For example, the return or destruction of materials, documents or IP belonging to the supplier. However, the supplier may allow the distributor to continue using its IP for the purpose of selling remaining stock in circumstances where the supplier has not exercised its right of repurchase (if any).
Online Infringements – What Can be Done?
Where an infringement issue arises, there are a number of options open to a supplier.
File a takedown request
Amazon, eBay and most online e-commerce platforms operate “notice and takedown” procedures, which enable rightsholders to report content (such as product listings) which infringe their IP rights, to the platform.
Upon receipt of a complaint, the platform will typically “investigate” the issue and remove the content if the complaint is upheld.
These processes have varying degrees of success.
Platforms are much more likely to remove infringing content if a complaint is based on registered rights such as trade marks or patents, and if the infringement is blatant.
For obvious reasons, platforms are much less inclined to involve themselves in the thornier issues, and will typically not action a complaint that requires any detailed legal analysis. As such platforms are unlikely to remove infringing content if the basis for a complaint is more complex or relates to unregistered rights such as passing off.
The likely success of a takedown may also depend on the platform in question. It can be difficult to force platforms to take required action particularly where a platform’s business model depends on the continued availability of goods at low prices.
Some platforms may also have a more vested interest in preventing certain types of infringement than others. For example, Amazon operates an anti-counterfeit policy and is much more inclined to take action to remove product listings for goods which are not authentic, than it is to remove product listings for goods which are parallel imports. This is despite the fact that its takedown mechanism allows IP complaints to be submitted on this basis!
Nonetheless, if an online infringement is detected, submitting a takedown request is a useful (and relatively inexpensive) first action for a brand.
But exercise caution
However, as demonstrated by Carku v NOCO, care is needed when drafting the form of any takedown request, so as to try to avoid any liability for “unjustified threats” where registered rights are relied upon.
Cases relating to unjustified threats remain relatively uncommon in the English Courts. However, it is possible that this particular case could result in an increase of such claims by manufacturers and distributors whose products have been removed from online marketplaces. For example, due to excessive takedowns submitted by suppliers, or complaints based on rights which are suspected to be invalid.
Drafting appropriate wording to be used in a takedown request may therefore involve striking a careful balance between providing the platform with sufficient information (and incentive) to remove the infringing content, and exposing a rightsholder to liability for a claim for unjustified threats of IP infringement.
Consider signing up to a Brand Registry
Platforms are not required, as a matter of English law, to “monitor” or “police” IP infringement on behalf of a supplier.
However, many such platforms do operate programmes which can assist rightsholders in preventing online infringements. For example, Amazon’s “Brand Registry”.
A supplier must sign up to use Amazon’s Brand Registry, following which it is provided with access to additional tools which Amazon claims are designed to “protect brands”.
One benefit that the Brand Registry offers a supplier is the ability to record any registered trade marks via the platform, and to be provided with enhanced support for detecting and reporting online infringements.
However, there are limitations to such programmes.
In respect of the Amazon Brand Registry, any benefit to a supplier will invariably be weighed up against any detriment to Amazon and its business interests – which will often trump a supplier’s rights!
For example, Amazon’s Brand Registry will not allow a supplier to prevent others from selling its products (regardless of whether or not they are authorised to do so).
Write to the Infringer
The main issue with online infringements is the ease with which infringing content can be re-listed. Another issue can be the sheer volume of infringing product listings, often across multiple channels, websites and platforms. Tackling online infringements can therefore often feel like a “whack-a-mole” approach – take one out and another simply appears in its place.
Sometimes, the only way in which to stop infringements is to tackle them at the source, by contacting the infringer themselves (if they can be identified).
In Carku v NOCO case, NOCO elected to simply file takedowns against products listed by Carku distributors but never contacted Carku directly. This might have resulted in a different outcome.
Key takeaways
- Consider the IP provisions of your distribution agreements carefully.
- Ensure that any agreement in place enables you to control any “offensive” action if you or your distributors become aware of any third party infringements, and any “defensive” action in the event that you or your distributors are accused of infringement.
- Where possible, register all intellectual property rights.
- Make use of any mechanisms offered by online platforms in order to detect or report infringements – but be aware of the limitations and have a platform’s own business interests in mind!
- Where possible, make a direct approach to an infringer.
Authors
Follow us online
