How does Amazon avoid being held liable for trademark infringement? We can find some answers by examining a case recently filed by Daimler AG, maker of Mercedes-Benz cars, against Amazon. Daimler is alleging direct trademark infringement and unfair competition, but the case will inevitably deal with the legal doctrine of contributory trademark infringement.

Facts of Case

According to reports, Mercedes-Benz accuses Amazon of selling or facilitating the sale of an “exorbitant number of counterfeit and infringing goods.” See news report here. Specifically, Mercedes-Benz is accusing Amazon of selling counterfeit wheel center caps, which are decorative center disks that hide the lug nuts. See description here. The wheel caps at issue have, as the main visual feature, the famous Mercedes-Benz logo, an encircled three-pointed star.

Daimler owns a series of USPTO registered trademarks for their encircled three-pointed star, the earliest of which was registered in 1958. In the lawsuit, Daimler claims that it — or its predecessors — has/have used the marks in commerce in connection with automobiles, trucks, and parts since the 1950s, that its marks are famous and highly recognizable to consumers.

Daimler alleges that it bought some of the infringing wheel center caps from the Amazon website in August and October of 2016. According to Daimler, the wheel caps were manufactured by Otis Inc., a California-based car parts manufacturer. Daimler claims Amazon is infringing directly because Amazon uses the phases “shipped and sold by Amazon” and “shipped from and sold by Amazon.com.” In general, with respect to their relationship to Amazon, sellers listing products for sale on Amazon.com come in one of three categories:

• Third-party sellers stating no relationship with or to Amazon,
• Third-party sellers advertising some sort of approval from Amazon and
• Sales advertised as “shipped and sold by Amazon.”

Apparently the counterfeit wheel caps purchased by Daimler were from this in the third category.

Daimler contends that many consumers believe “shipped from and sold by Amazon” means that Amazon has vetted the sellers and the products and that the consumers are buying authentic non-counterfeit products.

However, Daimler’s complaint contends that Amazon’s prevention efforts are insufficient. Daimler says the actual anti-counterfeiting policies are a mere pretense and that, in reality, Amazon’s market strategy is to subtly encourage any and all types of sales. Daimler points to the fact that Amazon’s process of removal is designed to be time-consuming and cumbersome thereby discouraging rights holders from seeking removal of sales listings for counterfeit goods. As an example, before one can file can submit a Report Infringement Form, the rights holder must buy one or more of the articles and then confirm their counterfeit status. The Amazon process is after-the-fact and places the burden of proof on the trademark owner, not the third-party selling possibly counterfeit goods.

This is round two of the heavy-weight battle between Daimler and Amazon. Daimler first sued Amazon back in 2016 before the International Trade Commission (“ITC”). Daimler says the ITC outcome has not resolved the problem.

Daimler’s case against Amazon will likely turn on application of the doctrine of contributory trademark infringement.

What is Contributory Trademark Infringement?

A mark owner can sue for contributory trademark infringement if the owner can show that a person or business entity intentionally induced another to infringe the owner’s trademark or where that person or business entity contributed to the infringement of another by supplying goods and/or services after learning of the infringement.

Legal analysis of contributory infringement focuses on four factors:

• Was there control over the instrumentality used to infringe?
• Did the alleged contributor possess knowledge of trademark infringement activity? — knowledge considered in three general categories: actual knowledge, “should have known” knowledge and wilfully blind
• Did the alleged contributor continue to supply its goods and/or services despite said knowledge?
• Did the alleged contributor take sufficient remedial steps to stop the infringing activity?

The first factor will likely be resolved in favor of Daimler. The “instrumentality” used to infringe is Amazon’s online sales platform. That and similar sales platforms have been deemed a mechanism for allowing infringing conduct. There is a famous case where a flea market was considered an “instrumentality” used to infringe trademarks.

The second factor is less clear. The case law says that “knowledge” must be more than a general knowledge or reason to know that counterfeit goods are being sold. Some knowledge of particular infringing items being listed or sold is necessary. Daimler probably has enough facts to show that Amazon has generalized knowledge, but may or may not be able to show knowledge of the “specific instances of infringement.” On the other hand, Daimler is hinging its case on the “shipped and sold by Amazon.com” advertising. Arguably, that raises the bar for what Amazon knew or should have known.

More importantly, the legal analysis does not view the four factors in isolation. The fourth factor considered efforts to remedy the infringement. So knowledge of even specific infringements might not be enough to win the case depending on the remediation efforts.

Remediation efforts are implicated in the third factor: Did Amazon continue to supply its service — online sales platform — to known infringers? Amazon will likely defend by pointing to its removal of thousands of seller listings after being informed. Amazon also sends warning letters and repeat offenders are permanently banned from selling on Amazon. Resolution of these types of issues are often fact intensive and case-by-case. It will be interesting to see what evidence Daimler uncovers.

The final fourth factor — reasonable remedial steps — is again unclear. For normal sales on Amazon, this factor probably weighs in favor of Amazon. Amazon has a robust removal policy. The case law only requires “reasonable” steps to promptly halt the infringing activity. Just as importantly, the steps required are taken “after-the-fact.” To date, the law does not require “before-the-fact” preventative screening for businesses like Amazon and eBay and other online sales platforms.

But Daimler is making an interesting argument that the label “shipped from and sold by Amazon.com” creates a “before-the-fact” screening duty because consumers see the label as a warranty of sorts that they are not buying counterfeit goods. Again, resolution of these types of issues are fact intensive, case-by-case and “context-specific.”

Contact Revision Legal

The lawyers at Revision Legal will be watching the case with interest. Revision Legal offers a wide array of legal services related to intellectual property and business law, including all services related to trademarks. We can be reached by using the form on this page or by calling us at 855-473-8474.

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