Court of Appeals Finds E-Commerce Platforms Liable for Trademark Infringement and Rules That the Use of a Trademark as a Keyword Constitutes Trademark Infringement

Recently, Divisions I and III of the Federal Court of Appeals in Civil and Commercial Matters issued decisions finding de Argentina SA (“DeRemate”) and Compañía de Medios Digitales CMD SA (“CMD”) liable for trademark infringement as the result of allowing the users of their e-commerce platforms to sell counterfeit NIKE goods. DeRemate was ordered to pay damages in the amount of AR$ 200,000, while CMD was ordered to pay AR$ 180,000, in both cases plus interests (Federal Court of Appeals in Civil and Commercial Matters, Division I, Nike International v., May 5, 2015; and Division III, Nike International v. Compañía de Medios Digitales, May 21, 2015).

In 2004, Nike alleged that DeRemate was violating Nike’s rights under Argentine trademark laws by allowing its users to offer NIKE counterfeit products on its platform However, negotiations were sought and the parties came to an agreement which, among other things stated that DeRemate would remove illicit NIKE products when notified. By 2008, Nike sought further action claiming that DeRemate was in breach of the agreement and that illicit NIKE goods were still being sold on the website. Therefore, Nike requested that DeRemate be ordered to cease any use of NIKE, including its use as a keyword, and to compensate Nike for damages.

On the same grounds and with a very similar story, in 2007 Nike sought action against CMD who owns and operates the website in which counterfeit NIKE products were also being offered.

Both DeRemate and CMD sustained that (i) they were not responsible because they were neutral virtual markets which allowed third party users to convene and carry out interactions; (ii) they refuted the notion that they were an online store; (iii) they denied owning any of the products sold on their websites; and (iv) they denied any participation in the transactions itself.

Based on the recent decision from the Argentine Supreme Court in “Rodriguez María Belén”, ISPs like DeRemate and CMD can be held liable for the behavior of a third party, and/or for the illicit content third parties upload to their platforms, once they have actual knowledge of the possible infringement and fail to correct the situation. It is worth noting that the concurring dissent also raised a second scenario under which ISPs could be held liable, this is when they are not just mere intermediaries but rather assume a more active role, as for example editing, modifying or directly creating the content, all of which although not mentioned by the Supreme Court, would prove that they had actual knowledge of that content.

In that regard, and without express mention to the Supreme Court decision, both Divisions concluded that the defendants were not mere intermediaries but rather had an active role. To that end, and relying on the “L’Oreal v. eBay” case decided by the European Court of Justice (Case C‑324/09, July 12, 2011), the Court of Appeals found that DeRemate had an active role, as it purchased the term “Nike” as a keyword redirecting users to its website and provided a payment method that facilitated the illicit transactions. The Court of Appeals also found that CDM had an active role because it helped promote the products on its website and took a 5% commission of every transaction.

Particularly in the decision against DeRemate, the Court of Appeals said that the use of the well-known mark NIKE as a keyword in order to get users to its website was a trademark infringement because it created confusion among consumers and diluted the mark.

This is the first case in which an Argentine court had to analyze on the merits whether the use of a mark as a keyword would actually be considered a trademark use. Following a similar approach to that of the European courts, the Court of Appeals agreed with Nike that such use is within the prohibitions contained in the trademark law.

In both cases, the Court also concluded that the filters that CMD and DeRemate had in place to avoid counterfeits were insufficient, as in some cases the postings clearly identified the goods as “replicas” or “not original” and were not taken down.

Lastly, both decisions put in place certain obligations for the parties going forward. The defendants were to implement filters to eliminate blatant trademark infringements, while Nike had the burden of informing the defendants of those goods which would violate its rights. The Court demanded that the defendants take down infringing posts in a 24-hour period after receiving notification and to immediately send Nike the complete information about the user posting the infringing product.

While the decision against CMD has become firm and final, DeRemate filed an extraordinary appeal before the Supreme Court which has not yet been granted certiorari.