The Court of Appeal in NOCO Company v Shenzhen Carku Technology Co Ltd [2023] EWCA Civ 1502 has upheld the High Court's decision that communications made using the Amazon IP rights notification and takedown system relating to lithium-ion batteries offered on the online selling platform were unjustified threats of intellectual property litigation.
Carku issued proceedings against NOCO seeking a finding that NOCO's patent was invalid and that notifications issued by NOCO to Amazon in respect of Carku's products were unjustified threats of patent infringement proceedings. NOCO counterclaimed that Carku had infringed its patent. The High Court found in favour of Carku that the patent was invalid and that the notifications by NOCO to Amazon were unjustified threats to sue – in respect of both threats against third party Amazon sellers of Carku products, and against Amazon itself.
The unjustified threats regime provides a remedy to those aggrieved by threats of intellectual property litigation. However, such threats are only actionable when they are made in relation to "secondary" acts of infringement, such as distribution of allegedly infringing products. The policy underlying the threats framework is to direct IP right owners to engage directly with the sources of infringements such as importers and manufacturers, rather than using threats against those downstream: distributors or online platforms.
The effect of using an IPR notification and takedown mechanism on online selling platforms may be that the party asserting their IP rights can simply get various products de-listed from sale on the relevant platform without needing to prove that their rights have been infringed in court and obtaining an effective injunction that way. This can cause damage to the aggrieved manufacturers whose distributors and platforms may simply de-list their products rather than risk being sued for infringement. For businesses who primarily use platforms such as Amazon, the effect of de-listing items can have a significant negative impact on their ratings and the way in which their listings are displayed to consumers by the relevant platform algorithms. This is an emerging issue, to which the courts may pay regard.
The issue on appeal in this case was whether NOCO's communications sent to Amazon under its IP notification framework were threats of patent infringement proceedings, and there was also a dispute about which threats were relevant to the issue of damage. The statutory definition of a threat is determined by whether a reasonable person in the position of a recipient of a communication would understand from it that a patent (or other relevant right, such as a registered trade mark, a registered design or an unregistered design) exists and a person intends to bring proceedings against another person for infringement of that patent (or relevant right) for certain acts.
NOCO argued on appeal that the trial judge had collapsed a "key distinction" between the situation where Amazon, the recipient, would understand from a communication (a) that there was a dispute which might later lead to litigation (and it could not be ruled out that the claim would be against Amazon) and (b) threats to be against Amazon itself. The Court of Appeal disagreed, however, that this distinction was significant in terms of the target of the threat of litigation: irrespective of whether Amazon believed that it or the third party sellers (or both) would be sued, Amazon was motivated to remove the Carku products, and this was the act which had "causative potency" to cause damage to Carku.
The Court of Appeal also stressed that the Amazon notification procedure remained capable of being used to send permitted communications, i.e., in a way that would not amount to an actionable threat of infringement proceedings under the unjustified threats regime. 'Permitted communications' may contain an implied threat of proceedings, but should do no more than provide relevant information for a permitted purpose, e.g., giving notice of a right or investigating whether or by whom a right has been infringed.
The Court of Appeal has been clear on the point that online notifications are capable of being threats of proceedings whether the target of the proceedings would be the online platform itself or the sellers listing the allegedly infringing goods. This may still leave room for argument about the reasonable recipient's understanding of the threatened proceedings – are proceedings almost inevitable unless some action (e.g. de-listing) is taken, or are they merely a possibility? It is clear from both judgments in this case that the notional reasonable recipient and not Amazon's subjective understanding are what is relevant.
Given the significance of online retail marketplaces to businesses worldwide, there may be further litigation in relation to issues relating to threats. In the meantime, IP owners should be aware of the risk that they may incur liability by making unjustified threats by using platform notifications and seek specialist advice.