Should Online Auction Platform Service Operators be Responsible for Buyers?(Taiwan) – Brief Commentaries on Patent Infringement Liabilities –

Oli Wong
Currently with plenty of online auction channels, not only is it possible to set up a website to sell goods but goods may also be sold in an online store set up on an auction platform established by others. This has overturned the trading patterns in the past where “only those who have stores (or websites) can trade.” However, the trading patterns involving the establishment of online shopping malls in an auction website still pertain to the trading relationship of three parties, namely, the seller, the buyer and the online auction platform service provider (hereinafter, the “Auction Website Platform Operator”). This article seeks to analyze whether a patentee who is facing the situation where a seller is selling unlicensed goods can assert to the Auction Website Platform Operator that the seller is marketing patent infringing goods on its auction platform in addition to asserting patent infringements against the infringer (i.e., the seller).( In practice, some believe that the infringement liability under Article 184 of the Civil Code and joint infringing acts under Article 185 of the Civil Code both apply to infringing acts of natural persons but do not apply to juristic persons, who in fact do not have infringing ability. Therefore, Article 184 of the Civil Code cannot be applied to seek damages from a juristic person directly (compare the point of the 95-Tai-Shang-338 Decision of the Supreme Court and the 100-Shang-752 Decision of the Taiwan High Court). However, the point of the 95-Tai-Shang-338 Decision of the Supreme Court indicates that Article 184 of the Civil Code does not necessarily apply to juristic persons directly. The decision did not hold that a juristic person is not capable of infringement (compare the point of the 103-Shang-Yi-54 Civil Decision of Taichung Branch of the Taiwan High Court). Since whether a representative organization engages in any infringing act vis-a-vis a third party in the performance of its duty does not fall within the scope of this article, this is not discussed in detail here. )
Under general circumstances, sellers and buyers seeking to sell and bid for goods in an auction website are both required to log into the auction website and become its members. When both sellers and buyers log into an auction website and become its members, the Auction Website Platform Operator will require them to agree to a standard contract known as user’s terms and conditions, service terms and conditions or subscriber’s terms and conditions if they wish to become members. In general, such terms and conditions stipulate that the sellers shall be solely responsible for the legality and quality of auctioned goods and that the Auction Website Platform Operator does not intervene in any subsequent trading matter and lawsuit or dispute between buyers and sellers arising from auctions. After accepting the above terms and conditions and becoming a member, a seller is entitled to upload information about auctioned goods, descriptions of goods and bid prices to the online auction trading platform. Buyers offer prices, make competitive bids, negotiate prices and close the sales of goods through system programs of online auction platforms. After a transaction is completed, the Auction Website Platform Operator issues an invoice or proof of purchase, and the procedure for sales return or replacement should also be guaranteed or executed by the Auction Website Platform Operator.
Although the transactions take place between buyers and sellers, the provision of trading premises, proofs of purchase and after-sale services are all handled by the Auction Website Platform Operator. In case of any patent infringement dispute, can the Auction Website Platform Operator be released from liabilities for this reason?
A search of relevant court decisions indicates that when facing patent infringements, patentees generally assert the following damages claims for the Auction Website Platform Operator’s infringing acts:
1. Direct assertion that the Auction Website Platform Operator infringes patent rights, and damages are sought pursuant to the Patent Law: When a patentee asserts that after the Auction Website Platform Operator became aware that infringing goods had infringed the patent rights of others and was notified to remove the infringing goods from its webpages, if it still allows infringing goods to be sold, this constitutes infringement by practicing the invention without permission (Articles 58 and 120 of the Patent Law). Such assertion appeared in the 103-Min-Zhuan-Su-51 Civil Decision of the Intellectual Property Court.
2. Assertion that the Auction Website Platform Operator violates laws that protect others (i.e., Article 184, Paragraph 2 of the Civil Code) and damages are claimed: A Patentee asserts that in addition to protecting public interest, the Patent Law also protects a specific scope of people (patentees such as inventors and creators), and that since the patent disclosure system seeks to protect patentees, the Patent Law is certainly a law that protects others. A seller who sells or offers to sell articles that infringe patent rights without the patentee’s permission or license violates the Patent Law and Article 184, Paragraph 2 of the Civil Code. Such assertion appeared in the 98-Min-Zhuan-Shang-Yi-18 Civil Decision of the Intellectual Property Court.
3. Assertion of joint infringement and the seller’s joint and several liabilities: A patentee asserts that it has informed the Auction Website Platform Operator of the existence of the patent-in-suit several times. Since the Auction Website Platform Operator continues to allow the seller to market infringing goods even though it should have long been aware of the patent-in-suit and the inaction of the Auction Website Platform Operator indicates its failure to assume its supervisory and management responsibility, it should assume joint and several liabilities for infringement along with the seller. Such assertion appeared in the 99-Min-Zhuan-Shang-Yi-30 Civil Decision of the Intellectual Property Court.
4. Assertion that the Auction Website Platform Operator engages in illegal management with damages sought: A patentee asserts that although the Auction Website Platform Operator is clearly aware that it has no right, still it operates and sells infringing goods for its own benefits against the will of the patentee. Since the patentee can still claim the benefits obtained as a result of the management, the Auction Website Platform Operator has become an unlawful administrator and should certainly assume infringement liabilities. Such assertion appeared in the 10-Min-Zhuan-Shang-Yi-51 Civil Decision of the Intellectual Property Court.
Regardless of whether a patentee asserts the Auction Website Platform Operator infringes patents rights or engages in joint infringement under Article 184, Paragraph 2 of the Civil Code or Article 185 of the Civil Code, the Intellectual Property Court is inclined to first examine if such infringing product infringes patent rights to analyze whether the patentee’s rights have been truly infringed. From this perspective, when infringing goods are promoted on an online auction platform, the patentee can directly assert that the Auction Website Platform Operator allows the practice of patent rights without the permission of the patentee, or that failure to take the goods off the shelves in time has the same effect. Even though the Operator is not intentional, still the liability of negligence can hardly be released. It seems that it is feasible to assert patent infringement under the first part of Article 184, Paragraph 1 of the Civil Code and the Patent Law.
Another question is whether a patentee can assert that the Auction Website Platform Operator violates “laws that protect others” under Article 184, Paragraph 2 of the Civil Code. The Intellectual Property Court made the conclusion that “the Patent Law is not a law that protect others within the meaning of Article 184, Paragraph 2 of the Civil Code” in its 98-Min-Zhuan-Shang-Yi-18 Civil Decision. Since the infringement system basically follows the doctrine of fault liability, it is practically admitted that in addition to protecting personal rights and interests, such provision of law should be limited to imposing certain obligation to act on actors. The exclusivity of patent rights pertains to the nature and legal effects of the rights. However, the Patent Law does not impose any specific obligation to act on any person. Therefore, such provision should not apply. In addition, the Patent Law imposes the obligation to specify on patentees and contains provisions that prevent the public from infringing patent rights due to ignorance. Therefore, patentees are certainly not allowed to apply Article 184, Paragraph 2 of the Civil Code to wantonly accuse others of infringement, and it seems that patentees cannot claim damages for patent infringement in accordance with Article 184, Paragraph 2 of the Civil Code.
In case joint infringement is asserted under Article 185, Paragraph 1 of the Civil Code, although the act of joint infringement is not preconditioned by communication of intent, related and joint action is still required.( The (66)-Yuan-Tai-Tsan-0578-Ling-Li-Bian-1 Interpretation of June 1, 1977 from the Judicial Yuan.) However, the infringement by an Auction Website Platform Operator (who allows a seller to market infringing goods on its auction platform) is obviously different from the seller’s infringing acts. Whether joint infringement can serve as the ground to penalize the two is open to question.( Long-sheng Chen, Indirect Trademark Infringement Liabilities of Online Service Providers, Chung Yuan Financial & Economic Law Review, Issue 33, Pages 234-235.) The liability of the Auction Website Platform Operators still depends on whether the Auction Website Platform Operator is subjectively clearly aware or should have been aware of the infringing act. To wit, this depends on the duty of supervisory caution the Auction Website Platform Operator should assume and also relates to the failure of the Auction Website Platform Operator to take the products off the shelves after it is informed of infringing acts by the patentees. In practice, an infringing act based on inaction is premised on an obligation to act by the actor. The so-called “obligation to act” includes legal and contractual obligations, the behavior of the actor and the obligation to act derived from good social morals (compare the point of the 100-Tai-Shang-1314 Decision of the Supreme Court). However, whether the removal of infringing goods when an Auction Website Platform Operator is notified is its obligation or right to act still depends on the provisions of its terms and conditions for user services. If the terms and conditions seek to supervise and prevent subscribers’ behavior of using the Internet for illegal acts or infringing the rights of others and stipulate that in the event of infringement, the Auction Website Platform Operator has the right to suspend or terminate such subscriber’s use of the network services and to remove the contents of its postings, since such provision is set to maintain the quality of network information and services rather than protect personal rights and interests, it is not a typical law that prevents impairment to rights and interests or prohibits infringement of rights. In this connection, removing the contents of postings is a right rather than an obligation of an Auction Website Platform Operator. Therefore, it is impossible to infringe the rights of others by way of inaction (compare the 100-Shang-752 Civil Decision of the Taiwan High Court). However, whether the simple provision of auction platform services constitutes the “assistance” or “initiative” under Article 185, Paragraph 2 of the Civil Code is still open to question.
If it is asserted that the Auction Website Platform Operator is an unlawful administrator, it is still necessary to establish that the Auction Website Platform Operator still operates and sells infringing goods for its own benefits even though it is obviously aware that it has no right to do so. However, in general online auction practices, Auction Website Platform Operators merely provide online platform services. They are neither manufacturers who develop or produce relevant products nor agents or distributors of such goods. Goods carried on auction platforms are all provided by sellers, who upload product introduction and sales information on their own. In addition, before an auction is conducted by a seller, the Auction Website Platform Operator always agrees with the seller that there shall not be any act that infringes intellectual property rights of others, and suppliers are required to agree and specifically guarantee that they will never infringe the intellectual property rights of others before the Auction Website Platform Operator enters into an agreement with them to agree to their selling acts on such auction platform (the 99-Min-Zhuan-Shang-58 Civil Decision of the Intellectual Property Court, the 99-Min-Zhuan-Su-96 Civil Decision of the Intellectual Property Court and the 103-Min-Zhuan-Su-51 Civil Decision of the Intellectual Property Court). A patentee who asserts that an Auction Website Platform Operator is an unlawful administrator should assume more burdens of proof to substantiate the administrative behavior of an Auction Website Platform Operator and its consequential administrative liabilities. Where this is favorable to the patentee is also questionable.
Based on the foregoing arguments, certain difficulties still exist if a patentee seeks to assert that an Auction Website Platform Operator should be directly or jointly and severally liable for a seller’s patent infringing acts. In addition, online auctions come in complex types. There is still no consistent or benchmark opinion about this in practice. Therefore, when a patentee becomes aware of infringing goods sold in an auction website, the best way to protect its rights and interests is to send a letter to the seller and the Auction Website Platform Operator as soon as infringing goods are detected so that they become aware that the goods have infringed the patent rights of others and a patentee may require the seller and the Auction Website Platform Operator to take the infringing goods off the shelves at the same time. Following such notification, an Auction Website Platform Operator is in a state where solid grounds exist to support that it is aware that infringing goods exist. At this juncture, the Auction Website Platform Operator is obligated to take preventive measures. It is only when the Auction Website Platform Operator still fails to fulfill such preventive obligation that the patentee can assert the Auction Website Platform Operator violates its obligation to act and thus should be liable for damages for relevant infringing acts. In this fashion, not only an Auction Website Platform Operator is not imposed with onerous supervisory obligations but this also contributes to better clarification of infringement liabilities in future lawsuits and is a feasible approach that balances the rights protection of Auction Website Platform Operators and patentees.