The Court of Appeal has upheld the High Court’s judgment in favour of companies in the Swatch Group in a claim of trade mark infringement against Samsung (Montres Breguet SA v Samsung Electronics Co. Ltd [2023] EWCA Civ 1478). The case examines the extent to which App Store proprietors, such as Samsung, are responsible for the apps listed on their platforms as primary infringers of relevant IP rights.
Swatch brought proceedings against Samsung for trade mark infringement in respect of various digital watch face apps which appeared on the Samsung Galaxy App store and which could be downloaded to Samsung smartwatches. The apps enabled the user to change the default face of their smartwatch into a digital copy of various Swatch Group watches. Swatch claimed that the apps infringed its registered trade marks and brought its claim against Samsung, rather than against the app developers themselves.
The High Court Decision
In 2022, the High Court ruled in favour of Swatch. Applying retained EU case law such as Google France (Case C-236/08 to C-235/08), L'Oréal (C-324/09) and Coty Germany v Amazon (C-567/18), the High Court held that Samsung had used the signs in the course of trade. There was active behaviour by Samsung in relation to the apps and it controlled their availability. Relevant factors included:
- Samsung advertised the watch face apps and encouraged app developers to build them;
- it reviewed the content and functionality of the apps before listing them on the app store;
- it materially assisted developers with the creation of the apps; and
- The apps were designed exclusively for Samsung smartwatches.
Samsung sought to rely upon the “hosting defence” under Article 14 of the E-Commerce Directive. This provides that “information society services” (i.e. companies which host information online) are not liable for the information stored on their systems by their users on the condition that they:
- do not have actual knowledge of illegal activity or information; and
- upon obtaining such knowledge or awareness, act quickly to remove or to disable access to the information.
In Google France and L’Oréal the CJEU interpreted the hosting defence as being limited to “technical, automatic and passive” conduct, rather than those instances where the company hosting the information has played an active role.
As Samsung reviewed the content and functionality of all apps before listing them on its app store, the Court found that its conduct was clearly active. Samsung sought unsuccessfully to distinguish the previous case law (none of which had considered the position of an app store proprietor), claiming that it would be impossible for an app store operator to take a passive role but that this should not prevent an app store proprietor from being able to rely on the Article 14 defence.
The Appeal
Samsung appealed on three grounds:
- First, that the judge was wrong to hold that there was use of the signs by Samsung.
- Secondly, that the judge was wrong to hold that the use of the signs complained of included use in relation to smartwatches. This ground of appeal went to the extent of the infringement, if any.
- And thirdly, that the judge was wrong to reject Samsung's hosting defence.
On the first ground, the Court of Appeal supported the High Court's finding that Samsung had used the trade marks featured on the third party watch apps. Samsung had done more than merely create the technical conditions for the use of the signs and the judge was correct to take account of matters which, though not known to consumers, still affected their perceptions of the sign (as confirmed in the recent CJEU case of Louboutin v Amazon (C-184/21)). The High Court had considered Samsung's conduct as a whole, and taken into account a range of factors including: Samsung’s promotion of the fact its watches had interchangeable faces; its active encouragement of the creation of watch face apps by third party developers; its decision to review apps before listing them on their app store; and the fact it had a clear commercial interest in the watch face apps given they were being applied to Samsung watches.
The second appeal ground was swiftly dismissed, with Arnold LJ holding that the High Court was entitled to find that it did not matter whether Samsung affixed the signs to smartwatches, provided that it used the signs in relation to smartwatches in some way.
As to the hosting defence, the Court of Appeal focused on whether the defence applied at all. Samsung argued that app store proprietors should not be excluded from the scope of Article 14(1) due to their necessary involvement in determining whether apps should appear on their stores. Samsung argued that it should not be penalised for conducting pre-listing reviews of all apps, particularly as such checks were in the public interest.
Arnold LJ emphasised that, to fall within the scope of Article 14(1), the service provider's activities must be of a mere "technical, automatic and passive nature". However, "Samsung’s acts of use of the disputed signs were active, and gave it knowledge of and control over that content" and it was therefore held to fall outside the scope of the hosting defence.
Comment
Whilst app stores are not automatically excluded from the scope of the hosting defence, they also do not inevitably benefit from it. Arnold LJ acknowledged the "familiar conundrum" of whether to conduct pre-upload checks, but the answer for service providers was that if they chose to carry out content reviews, they had to accept the risk that the hosting defence might not be available.
The decision highlights the need for app store proprietors and similar service providers to consider their content review procedures carefully. If they wish to be able to rely on the hosting defence, they may want to consider whether to focus more on the notice and takedown process.
It remains to be seen whether Samsung will seek permission to appeal to the Supreme Court.