E-commerce platforms: good practices well beyond legal obligations

Friday, 9 of June of 2017

Running business has never been an easy task. Doing it with success is, evidently, even more difficult. This is especially true in these times we have been meant to live.

The information society and the technological environment in which we live offer entrepreneurs infinite means to develop their businesses. E-commerce platforms are one of the last examples of business models based on the Internet and are capable of making available thousands of goods from multiple vendors to consumers in only one webpage.

While Internet offers unlimited availability of numerous business tools, it converts business models based on it in extremely vulnerable ones, in view of the equally numerous rights interacting on the web, this being the amplest and most complex among habitats, virtual and non-virtual ones, that human beings have ever known.

The freedom in the web is nothing but an illusion, at least for those whom pretend to benefit economically from the possibilities it offers. Patents, trademarks, designs, copyrights…. every product, advertising mean or tool which might be employed for the offer and commercialization of goods and services through online platforms and shops, can be subject of an IP right and, therefore, can eventually be sources of risks and possible conflicts with third parties.

Being aware of the complexity of the situation and conscious of the necessity of making Europe competitive in the thriving internet business, the European legislator tried to protect the online business and, in particular, the position of the information service providers (hereinafter, ISPs), issuing the already famous Directive 2000/31 on certain legal aspects of information society services, in particular electronic commerce, in the internal market, better known as the Ecommerce Directive, nowadays integrated in the national legal bodies of the relevant Member States.

The great achievement that the Ecommerce Directive meant for online platforms and, in general, for those ISPs that, among other services, host information, consisted on establishing a limitation of liability for all those operators that, not having an actual knowledge of illegal activity or information, acted promptly to remove or to disable access to the information they have stored on obtaining such knowledge or awareness (see Article 14 of E-commerce Directive).

Taking into account that one of the pillar of the ecommerce regulation is that no general obligations to monitor illegal activity can be imposed on ISPs (see Article 15 of the Ecommerce Directive and CJUE Judgments of 24 November 2012, C-70/10, Scarlet and 16 February 2012, C-360/10, Netlog), the entrepreneurs of the online commerce that offer and commercialize third parties products and services can this way dedicate their time to simply make business, without constantly being worried that their means are used to commercialize infringing gooda. At least when said illegality is not known to the online operator.

However, even if diligent undertakings that act promptly against plausible rights violations happening in their domains may avoid economic liabilities, most of the times they are not immune to public punishment, to the so called web judgement and therefore they are not immune to the bad advertising which is implicit with being involved with IP rights infringements, even if formally committed by third parties. This is so, among other reasons, because the limitation of liabilities that the Directive foresees does not exclude the possibility for the IP rights owners to act against ISPs for obtaining the cease and desist of the infringing activities (see Recital 45 of E-commerce Directive). Additionally, the Directive cannot avoid Hosting ISPs to become the target of all criticisms for not impeding the access to illegal content in their platforms.

In the end, the e-commerce platforms and, in particular, the trademark under which these online activities are performed, are the visible face of the online business and it does not matter where the products come from or who is the final responsible for the infringement. In order to avoid the negative consequences of the IP violation, the e-commerce platform cannot simply delete the infringing content when so required. The rentability of the business actually depends on the reputation of the ISP, being this the reason why third parties are keen to spend a price in order to have their goods and services on the platform.

It also implies that e-commerce platforms have to maximize their diligence well beyond their legal obligations, and obliges them to act, as per any other meticulous entrepreneur, in a preventive way. This, as said, even if the relevant EU Member State has not established additional diligence requirements aimed to prevent the commission of illegal activities. In this respect, Recital 48 of the e-commerce Directive states that this Directive does not affect the possibility for Member States of requiring service providers, who host information provided by recipients of their service, to apply duties of care, which can reasonably be expected from them and which are specified by national law, in order to detect and prevent certain types of illegal activities.

The first step consists on providing themselves with an established protocol for the acquisition and commercialization of the goods and services offered in their webpages, particularly when the goods are not directly acquired by the rightholder but the goods come from distributors and intermediaries. Establishing different risk thresholds in accordance with the typology of the goods offered and in accordance with the trademarks used to distinguish said goods, on the one hand, and reviewing the invoice chain in order to guarantee that the stock numbers coincide along the trip that the product made from the manufacturer to the vendor, on the other hand, are all fundamental steps to be taken in order to detect possible irregularities.

And even if the above were sufficient in order to exclude the economic liabilities of the Hosting ISP, granted that the ISP is not playing an active role in the context of the illegal activity, this might not be enough in order to avoid that irregular goods eventually land on the platform anyhow.

Despite the attention with which hordes of commercials assume the company’s guidelines, previously established by internal and external jurists and IP experts of the company with the aim of limiting the Hosting ISP’s exposure to possible IP infringements, the mere adoption of safeguards of this kind will not guarantee that irregular, counterfeit or grey goods still show up in the e-commerce platforms’ domains.

For these reasons, clearing every product, every service, every trademark used as well as every slogan employed to advertise the offer and commercialization of the goods in the platform becomes an apparently titanic but still fundamental task, necessary to detect the existence of third parties’ rights and therefore prevents the risks that their use supposes.

As said, the mere limitation of liabilities that Hosting ISPs enjoy does not make them immune to the prejudice. This is because Hosting ISPs are identified by the general public as the main responsible for the IP infringement occurring on their websites.

For this reason, together with the rest of obligations that the law imposes them in order to avoid direct liabilities, the Hosting ISPs start feeling the necessity to realize a screening process, similar to the one that traditional manufacturers and sellers of goods and services that employ their own means to reach consumers are already putting in place. This means that Hosting ISPs, without being obliged to and with the help of their lawyers and IP experts, are providing themselves with new protocols and mechanisms aimed to determine beforehand whether the products and service offered in their platforms suppose a possible infringement of third party’s rights. Concretely, the aim is determining whether the slogans associated to each goods and services’ offer are of free use, whether the products appearance is protected by third party’s design rights and commercialized under a different trademark, whether the technology of those products is somehow protected by the third parties’ patent rights in those countries where the offer and commercialization is carried out.

In the past, e-commerce platforms have been strongly criticized for contributing to the commercialization of counterfeits, of products proceedings from the grey market or, in any case, illicit, in view of the absence of specific rules as to its duty of care. However, these same operators have been the first victims of the commercialization of illegal goods in their domains, due to the loss of reputation that these illegal practices imply with the corresponding loss of confidence by consumers and collapse of a business that depends, most of the times, in the confidence that said operators are able to generate in the public. For this reason, the establishment of protocols for preventive actions as per those described in this post, unlinked from legal obligations of any kind and even if they do not fully guarantee that no illegal activities are finally performed, should be seen with good eyes by every respected IP lover.