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July 5, 2022

Thailand’s First Judgment to Test E-commerce Platform Liability for IP Infringement

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With the growth of technology and internet use, consumers are increasingly shifting toward online shopping. E-commerce platforms have created useful and practical online transactions for products across borders. The number of sellers on e-commerce platforms has also increased significantly in recent years. Naturally, the larger the supply of online products, the greater the risk of possible IP infringement online. While this has made shopping more accessible and convenient for many, it has also created significant opportunities for fraudulent sellers. These fraudulent sellers are often anonymous, and it can be hard to identify them or hold them to account. As a result, some intellectual property (IP) owners have tried to hold e-commerce platforms responsible, raising questions as to what legal liability e-commerce platforms have for content posted by users.

In March 2022, the Central Intellectual Property and International Trade Court (IP&IT Court) issued a landmark judgment finding a world-leading e-commerce platform not liable for a third party’s alleged IP infringement on its platforms.

Contributory infringement

IP can be infringed directly by the person who sells or manufactures the infringing product, or indirectly by a party that encourages or contributes to the infringing act. At present, Thai IP law does not contain any clear provisions on contributory infringement by e-commerce platforms and, until recently, there were no clear court judgments on this issue.

One recent development in this area in Thailand has been the adoption of the Copyright Act (No. 5) B.E. 2565 (2022), which will come into effect on August 23, 2022. This act provides that internet service providers will not be liable for copyright-infringing materials posted by users, provided they comply with certain legal requirements. However, there are currently no equivalent provisions relating to patents, trademarks, or other types of IP rights.

The closest applicable legislation is Section 432 of the Civil and Commercial Code, which provides that a person who instigates or assists in a wrongful act is deemed to be a joint actor and will be jointly bound to compensate for the damage. However the law does not clearly state how this test for contributory infringement should be applied to e-commerce platforms.

In light of the above, in March 2022, the IP&IT Court issued its first judgment on the question of the liability of e-commerce platforms for indirect IP infringement.

Are e-commerce platforms liable for the sale of the IP-infringing goods?

In June 2017, a Thai company filed a patent infringement suit as a plaintiff against Hangzhou Alibaba Advertising Co. Ltd. (Alibaba), alleging that they were liable for the listing of fire-extinguishing balls sold on Alibaba.com, China’s largest international online wholesale marketplace, and AliExpress.com, a global retail marketplace under Alibaba Group, that infringed its patent. This suit also resulted in some negative media coverage against the e-commerce platforms.

Alibaba argued that it did not know or have any reason to know that the products offered for sale on its platform were alleged to have infringed the plaintiff’s patent. As a result, the defendant could not be liable for infringing the plaintiff’s patent.

The buyers must first register an account to order products from the defendant’s websites. When registering an account, buyers enter into an agreement which states that sellers are responsible for any damage caused to the buyer. The plaintiff purchased the fire-extinguishing balls from AliExpress.com website and, as a user of the Alibaba platform, was bound by this agreement. Therefore, the plaintiff’s claim should have been brought against the seller, not the e-commerce platform.

It was the sellers who posted the product listings on alibaba.com and aliexpress.com independently and offered them for sale.Alibaba did not post the disputed product, nor did it have the capacity to control the sale of the product on its online platform. In addition, Alibaba did not know, or have reason to know, that the fire-extinguishing balls infringed the plaintiff’s patent. To combat infringement, Alibaba also maintains a robust notice-and-takedown system and may remove infringing product listings upon receipt of proper notices.

On March 24, 2022, the IP&IT Court issued its judgment in favor of the defendant, concluding that Alibaba was simply an online platform providing services for the buying and sale of the products on its website, and thus the defendant did not infringe the plaintiff’s patent.

Observations

This is a landmark case, as it is the first time the IP&IT Court has addressed the liability of an e-commerce platform for indirect IP infringement. What is particularly notable is the reasoning the court applied. The court used tests that reflect international standards, looking at the e-commerce platform’s actual knowledge of the IP infringement, the party that financially benefited from the IP infringement, and the ability of the e-commerce platform to control the infringing activity. The decision also demonstrates that the court will consider how e-commerce platforms operate in practice and their capacity to control alleged IP-infringing materials on their platform.

As e-commerce and online shopping continue to grow, so too will the number of IP infringement claims brought against platforms. This judgment has the potential to serve as a useful guide for navigating these issues.

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