A ruling on a “copycat” website by the Milan IP Court

(the original version of this post is published on Diritto 24 – Il Sole 24 Ore)

On 8 November 2019, the Milan IP Court issued an interesting decision (judgment  no. 10130/2019) on trademark infringement in connection with “copycat” websites.

A well-known US manufacturer of food supplement and cosmetics, at the head of an international group, became aware of the presence of a third-party’s website devoted to the sale of its products on the Italian market, which was remarkably similar to the official website. The Italian company responsible for the website had no connection whatsoever with the group, yet its trade name was the same as the US parent company’s, with the addition of the word “Italia”. The website’s domain name– which was also used for email communications with customers – was composed by the same two words. The website content included extensive use of the US company’s (unregistered) word and figurative trademarks.

The products marketed through the website were apparently authentic, although at least one of them had never been put by the US parent company on the European market.

In addition, the website had ensured – through the Google AdWords service – enhanced visibility in Google searches carried out by using the company’s name.

The US company, together with its Italian subsidiary and licensee, filed a trademark infringement lawsuit against the Italian company in charge of the website.

The defendant claimed descriptive fair use and exhaustion of the trademark rights in relation to the marketed products.

In addressing the case, the Court, preliminarily, granted the status of enforceable unregistered trademarks to the plaintiffs’ word and figurative trademarks, due to their inherent distinctiveness (i.e., the fact that the trademarks do not have a foreseeable conceptual link with the marked goods and services), their effective use for a long period of time and their acquired, non-merely local, reputation. The activity of the plaintiff’s official website on the Italian market was a key factor for the Court’s assessment.

Having thus found, the panel concluded that the use of the plaintiffs’ trademarks by the defendant was infringing. This finding applied not only to the incorporation by the defendant of the plaintiffs’ trademarks within its own trade name, but also to the reproduction of the plaintiff’s trademarks on the website, notwithstanding the fact that the website sold indeed original products.

In the Court’s view, in fact, the reproduction of the plaintiffs’ trademark in the defendant’s website created, in any case, an undue connection with the defendants, thereby making the descriptive fair use doctrine inapplicable. According to the judges, the descriptive fair use defence shall apply only when another party’s trademark is identified as such and it is used for the sole purpose –otherwise not achievable – of indicating the intended use of a product or service; it shall, on the contrary, not apply when the trademark is used as a promotional vehicle for business.

As regards the use of Google AdWords for online searches ran by using the plaintiffs’ company name as a keyword, the Court, in accordance with the ECJ Interflora, Google France and Portakabin case-law, concluded that the defendant’s advertisement – composed by an advertising link and a short catch phrase that recalled the parent company’s name – was aimed at misleading users as to the actual identity of the defendant, «including through the referral to a website quite similar to the plaintiffs’».

The Court also found that the selling of the plaintiffs’ products on the Italian market – although they were genuine – infringed on the plaintiffs’ trademark rights. In this regard, the defendant had predictably invoked the principle of exhaustion, i.e. claimed that the products had been placed on the EEA with the owner’s consent.

Nevertheless, the Milan Court rejected this argument, noting that in the matter of exhaustion of rights the burden of proof lied with the defendant, and that the purchase receipts submitted by the latter did not allow to trace back to the right-holder(s) the first act of sale in the EEA (on the contrary, the records included elements that would suggest a purchase outside the EEA, such as the importation duties). Aside from that, the Court found that the sale was carried out «in a manner that caused harm to the trademark’s owner» (i.e. through a website that deceived customers users about the existence of a connection with the plaintiffs) and that, therefore, the owner had legitimate reasons to oppose further commercialisation of the goods, making the exhaustion rule inapplicable.

Having thus found, the Court enjoined the defendant from using the plaintiffs’ signs and from marketing their products, setting a penalty of € 500 for every day of delay in complying, and ordered the publication of the ruling in the defendant’s website and in the Corriere della Sera newspaper, at defendant’s costs. The defendant was further ordered to pay damages and legal expenses. In assessing damages, the Court took into account  the extended time period, the nature, and the number of infringements and,  noting that «the profits earned by the infringer may be considered as a parameter to quantify the damages», decided to quantify the plaintiffs’ losses as a percentage of the turnover generated by the plaintiffs’ illegal activities, as documented by bank account statements filed during the trial.