Case law alert: Audi & Volkswagen v Fruugo

District Court The Hague, 30 August 2023, Case number C/09/622304 / HA ZA 21-1105 (Audi and Volkswagen v Fruugo)

In this interest Dutch case before the District Court The Hague, Audi and Volkswagen (jointly “Audi Volkswagen”) argue that online retail platform Fruugo infringes their trade mark rights by displaying ads containing infringing, inferior products on its own online sales platform (www.frugoo.nl) and by advertising the sale of these products (displaying a sponsored link) on two third party websites: Dutch resale website Marktplaats and Google (Google Ads). The Court concludes Fruugo does not directly infringe Audi Volkswagen’s rights, neither does it act unlawfully because it can rely on the platform liability exception.

Facts: Fruugo, Audi Volkswagen and correspondence

Fruugo is an online sales platform available in 28 languages and 42 countries. Over 2000 retailers sell over 40 million products on the Fruugo platform. Fruugo does not sell any products itself but only serves as a retail platform. Fruugo uploads and categorizes the third party ads and offers the retailers ad campaigns on third party websites. Retailers pay a fee based on the amount of sales on the Fruugo platform and depending on the services purchased (including the amount of ads on third party websites). The Fruugo website notes the consumer engages in a direct agreement with the retailer, not with Fruugo.

Audi and Volkswagen are both famous companies developing and selling cars and owners of several well-known EU trademark rights. On July 2020 Audi Volkswagen found out several suspicious Audi and Volkswagen products were offered for sale on the Fruugo platform and discovered the display of several ads for these suspicious products on Marktplaats and Google. Subsequently, Audi Volkswagen made  several test purchases via the Fruugo-platform and established that the products sold were indeed counterfeits and infringing Audi Volkswagen’s trade mark rights.

Audi Volkswagen sent a demand letter to Fruugo amongst others demanding Fruugo to stop the infringement, to provide a statement of sales and to reimburse all damages and legal costs. Fruugo responded that it does not offer for sale any goods itself, immediately removed the infringing ads from its platform and provided Audi Volkswagen with the contact details of the retailers selling the infringing products on the Fruugo platform. 

Proceedings at the District Court The Hague 

Despite the foregoing, Audi Volkswagen initiated proceedings on the merits against Fruugo, requesting the Court in The Hague amongst others to grant an injunction against Fruugo to 1) stop the infringement, or facilitation of third party infringement, and to 2) implement software measures that stop and prevent the display of (future) infringing ads and to 3) reimburse all damages and legal costs. Audi Volkswagen substantiated their requests arguing that Fruugo itself infringed their trade mark rights and also acted unlawful by facilitating third party trademark infringements. Fruugo argued it did not use the trade mark rights itself and did everything within its power to stop the third party infringement.

The relevant question in this case therefore is if Fruugo can be held liable for the display of infringing ads on its platform, i.e. if Fruugo used the trade mark rights itself or acted unlawful by facilitating third party infringements? The District Court of The Hague concludes this is not the case.

First of all, the Court holds Fruugo did not use the trade mark rights itself: ‘use’ in this context, requires active conduct, for which (in)direct control is required. The Court refers to the Coty/Amazon case[1] and notes that ‘control’ implies the allegedly infringing party is able to stop the use and to comply with a possible injunction. In addition ‘control’ implies the infringing sign is used for the allegedly infringing party’s own commercial communication.

With regard to the display of the ads on Marktplaats and Google, the Court first holds that since it is the retailer offering the product, the retailer is deemed to be the advertiser on these third party websites: the ads are used to promote the sale of the retailer’s products and do not promote the Fruugo-platform as was argued by Audi Volkswagen. In addition, the retailer pays Fruugo for advertisement campaigns and chooses to use or not use this service (decides if they want to pay for this additional ad service or not). Lastly, Fruugo does not control the content of these ads. The retailer however does and provides Fruugo with the information required for the campaign and decides where and how often the ads are displayed. 

With regard to the sale on the Fruugo platform, the Court notes that Fruugo only uploads the ads to a the standard format (layout) using a fully technical and automatic process and it is only the retailer that decides on the content of the ads (what text, images and other ad details are displayed). Audi Volkswagen note that it is not clear from the ads before and during the sale, that the products are not being sold by Fruugo and argues the offering for sale should therefore be deemed for the risk and expense of Fruugo. The Court however disagrees and notes that also ‘offering for sale’ (as also noted with respect to ‘use’ in accordance with Coty / Amazon case) requires active behavior of Fruugo or (in)direct control with regard to sales, which is not the case for Fruugo with respect to the ads on its platform.

Further it is relevant that Audi Volkswagen also refer to the Louboutin / Amazon case[2], in which it was decided with regard to online sales platforms providers, that in case signs are displayed in ads on these platforms that are similar or identical to third party trademark rights, there is only “use” of such sign by the retailers, not the host of the platform, unless the sign is also used in the own commercial communication of the host (platform provider, i.e. Amazon). The CJEU in that case further provides answers to the situation in which the online sales platform has third party resellers and also itself sells products on the platform (third party and Amazon ads). In such situation, the online platform provider is only deemed to use the sign itself, in the situation in which an average user of the website connects the services of the provider to the sign (which is deemed to be the case when the impression is made the provider acts for its own benefit and risk).

In contrast to the arguments put forward by Volkswagen Audi, the Court holds there is no general rule that the perception of the public (in this case the Fruugo platform user) should be taken into account in all events to answer the question who offers the allegedly infringing goods according to trade mark law. The specific perception of the public should only be taken into account, if required by the specific context: the specific context in the Louboutin / Amazon case (Amazon hosts a platform for resellers and sells product itself), does not apply to the Fruugo platform and this case. The Court therefore concludes the main rule from the Louboutin / Amazon case applies which means that the ads on the Fruugo platform that contain signs that are identical to third party trade mark rights, result only in trade mark use by the third party resellers. It is therefore irrelevant to take circumstances into account that it might not have been clear for the users of the Fruugo platform before and during sale that the products were sold by third party retailers and not Fruugo.

Lastly, with regard to the alleged unlawful act, the Court holds Fruugo can successfully invoke the liability exemption as defined in article 14(1) of the E-commerce Directive. First of all, the Court concludes Fruugo offers hosting provider services. The three requirements to fall within the definition of a hosting provider are met: (1) Frugo offers information society services as defined in recital 42; (2) Frugo stores information from its users; and (3) Frugo provides neutral services. 

With regard to the last requirement (neutral service provider), the Court first holds Fruugo does not sell the products itself and the retailers provide the information that is to be uploaded. Fruugo does not provide commercial communication (also not by offering the advertising campaigns). Further the Court holds there is no knowledge and control over the ads (despite the general guidelines for ads as provided by Fruugo). Lastly, the fact that Fruugo assists the seller on its platform in several ways (such as handling returned goods, providing a customer service, handling the payment process and providing several payment option in several currencies and sending an invoice with the Fruugo logo), does not mean it does not act ‘neutral’ within the meaning of article 14(1) E-commerce Directive.

The Court subsequently discusses the two other requirements laid down in article 14 (1) (a) and (b). With regard to (a), the knowledge requirement, the Court holds there is no evidence or ground to conclude that Fruugo – as a hosting provider –  was aware of the illegal activity (the infringement) before the demand letter (the notice). The general fact that Fruugo should be aware its platform can also be used for infringing ads, is insufficient in that regard.  With regard to (b) – if the hosting provider after obtaining knowledge, has acted expeditiously to remove or to disable access to the information – the Court also holds this requirement is met. Fruugo removed the infringing ads within one day after receiving the demand letter and in addition also removed ads of similar products that were also possibly infringing. The argument of Audi Volkswagen that there was no official notice-and-take down policy in place, was therefore dismissed. Lastly, the Court also notes Fruugo can invoke the DSA platform exemption. The requests of Audi Volkswagen are therefore all denied by the Court.

Conclusion  

In this case, the District Court of The Hague first ruled that Fruugo itself did not infringe the trade mark rights of Audi Volkswagen and took into account there was no control over the infringing ads and made a clear distinction between the situation in which the platform itself also sells products (such as Amazon) and in case it does not (such as Fruugo). The fact that the user of the platform was possible not able to clearly distinguish before and during sales that Fruugo was not the selling party, was therefore not deemed relevant from a trademark perspective since Fruugo did not ‘use’ the trademarks itself. Further it is interesting that the Court held that Fruugo serves as a ‘neutral hosting provider’, despite the fact it facilitates the third party sale on its platform in several ways suggesting Fruugo might be the seller of these products. Lastly it is interesting to note that an official notice and takedown procedure was not in place, but is not required as long as the host acts expeditiously to remove or disable the ads. We are curious to see if Volkswagen and Audi will appeal this case (they have until the end of November 2023 to do so) and look forward to follow up on this matter if that will be the case.