Watch out! Court of Appeal confirms Samsung liable for trade mark infringing watch face apps

The Court of Appeal has upheld the High Court’s decision finding Samsung liable for trade mark infringement as a primary tortfeasor where consumers had downloaded third party digital watch face apps from the Samsung Galaxy App store for use on Samsung’s smartwatches.

Background

Samsung makes a range of smartwatches, specifically marketed for their watch-like qualities, with the ability to download, from the Samsung Galaxy Appstore (“SGA”), and display third party branded digital watch faces (e.g. Tissot, Longines) for use on Samsung’s smartwatches. Some of the watch faces made available for download from the SGA were developed by third party app developers and made infringing use of trade marks owned by the Swatch group. Keen to stop this, Swatch brought trade mark infringement proceedings directly against Samsung, arguing that although Samsung was not the developer of the infringing watch faces, it was intimately involved in, and controlled, the process by which the apps were made available to consumers. 

At first instance, the High Court agreed with Swatch that most of the apps in question did indeed infringe Swatch’s trade marks and that Samsung was primarily liable for those infringements. However, Samsung was granted leave to appeal on three grounds, namely that the High Court was wrong to find that:

1. use of the signs complained of was use by Samsung (as opposed to use by the third party developer in question); 
2. the use complained of was use in relation to smartwatches (as opposed to the respective apps); and 
3. Samsung could not rely on the safeharbour in Article 14(1) of the E-Commerce Directive to defend itself against financial remedies.

Did Samsung use the infringing signs?

The Court of Appeal agreed with the High Court that Samsung was using the infringing signs. 

Whilst it is clear that simply creating the technical conditions necessary for the use of a sign and being paid for that service is not enough to amount to use, Samsung’s actions went well beyond that.  For example, it: (i) provided material assistance to developers of the apps; (ii) operated the SGA and reviewed all apps for both functionality and content before they were made available; and (iii) specifically marketed its smartwatches by reference to the availability of watch face apps in its store. These actions were not, as Samsung argued, inherent in the operation of an app store and were relevant to the context in which the signs were used.

Were the signs used in relation to smartwatches?

Each of the forms of infringement alleged by Swatch required use of the relevant signs “in relation to” (i.e. for the purpose of distinguishing) smartwatches and not just the relevant apps. Swatch accepted that the user of the smartwatch would not themselves rely on the relevant signs as indicting the origin of their smartwatch, but they argued that third parties would do so. The Court of Appeal agreed, noting that, for these purposes, post-sale context can be relevant - if someone sees a person wearing a smartwatch and wants to know who the watch is made by, the natural place to look is the watch face. And if they were to look at any of the watch faces in question, they would be led to believe that the branding on it denotes the origin of the watch, unless told otherwise. So, the court found there was use in relation to smartwatches.

Could Samsung rely on the safeharbour in Article 14(1) of the E-Commerce Directive to defend itself against financial remedies?

Samsung sought to argue that, even if it was liable for trade mark infringement, it had a defence to financial remedies under the Article 14 safeharbour. Whilst the Court of Appeal agreed with the High Court that Samsung could not avail itself of this safeharbour, it did so for different reasons. The High Court had found that Samsung was “aware of facts or circumstances from which the illegal activity…is apparent” within the second limb of Article 14(1)(a), which took it outside the safeharbour. The Court of Appeal, however, concluded that Samsung’s acts were not within the scope of Article 14(1) at all. For Article 14(1) to apply, the role played by the relevant service provider must be “neutral, in the sense that its conduct is merely technical, automatic and passive” with “no knowledge of or control over the content it stores”. Here, Samsung’s use of the infringing signs was active and gave it knowledge and control over the relevant content. 

Comment

This case serves as another example of an online intermediary being found liable for IP infringement caused by the actions of third parties on their platform. In reaching its conclusion, the Court of Appeal appears to have endorsed the CJEU decision in Louboutin (which was handed down post-Brexit, see here), showing the continued influence EU judgments may have in this area.

It also serves to highlight some of the acts which might lead a court to find that an app store provider has used another’s trade marks and provides helpful guidance on the limitations of the Article 14(1) safeharbour. Whilst the decision does not say that app stores can never benefit from the safeharbour, it does confirm that they are not inevitably covered by it - whether or not it applies will depend on the specific facts of the case. However, it does raise the question of whether app store providers may be better off not carrying out a content review at all. Acknowledging this “conundrum”, and whilst noting that Samsung’s acts went well beyond simply making the apps available after a content review, the Court of Appeal made it clear that content reviews are not obligatory - however, if app store providers choose to carry out such a review, they have to accept the risk that they may not be able to rely on Article 14(1) coming to their rescue if things go wrong.