Is an online marketplace responsible for the sale of intellectual property infringing goods by third-party?
Is an online marketplace responsible for the sale of intellectual property infringing goods by third-party?
It has always been said that the law is struggling to keep up with the rise of online shopping platforms.
Despite the fact that most of the, if not all, online shopping platforms have their own policy in place to govern the listing of products by the vendor, keeping an eye on every vendor has proved to be challenging. This is even more so when it comes to ensuring that the vendors are selling authentic and genuine goods.
The Case: Elide Fire Ball Pro vs Alibaba
In fact, in June 2017, a Thai company called Elide Fire Ball Pro, who is the manufacturer and vendor of “Elide Fire Ball” filed a lawsuit against Hangzhou Alibaba Advertising Co. Ltd. (Alibaba), accusing Alibaba for promoting a “Elide Fire Ball” knock-off, “AFO” fire-extinguishing ball on their websites Alibaba.com and aliexpress.com.
Essentially, the fire-extinguishing ball is a patented product and the CEO of Elide Fire Ball Pro owns the right to this patent. The company claims that the “AFO” fire-extinguishing balls that are listed on the said websites are counterfeit products. Not only are these products much cheaper than the original Elide Fire Ball, these products are also unable to extinguish fire. As a result, the reputation of Elide Fire Ball Pro has been affected adversely and many distributors have cancelled their orders. It is estimated that the brand has to date, suffered a loss of 3 billion Thai Bhat.
The Court’s Decision
The Thailand Intellectual Property and International Trade Court went on to rule in favour of Alibaba, whereby the court stated that Alibaba was merely an online marketplace on which the sellers are able to sell goods or services to potential buyers. It essentially connects buyers and sellers for this very purpose only and it certainly does not promote the sale of any goods. Therefore, Alibaba could not be said to have infringed Elide’s patent right. That said, it may be beneficial for Elide to pursue an action against the sellers instead.
Precisely, the court had applied several tests in order to reach this decision, this is undoubtedly a welcome change in this area of law. These test are also expected to be applied heavily in the future given the popularity of online shopping nowadays.
Why Did the Court Rule in Favour of Alibaba?
+
The Thailand court held that Alibaba was merely an online marketplace that connects buyers and sellers. It does not promote the sale of any specific goods itself. Since Alibaba only provided the platform and did not directly sell the counterfeit products, it could not be held liable for patent infringement committed by third-party sellers on its platform.
What Is the Difference Between a Marketplace and a Seller?
+
Marketplace (like Alibaba, Shopee, Lazada): Provides the platform infrastructure where independent sellers list and sell products. Acts as an intermediary connecting buyers and sellers.
Seller: The actual party listing, promoting, and selling the products. Responsible for the authenticity and legality of the goods they offer.
This distinction is critical for IP infringement liability — the seller is typically liable, not the marketplace platform.
What Should IP Owners Do About Counterfeits on E-commerce Platforms?
+
Based on this case, IP owners should:
- Pursue the sellers directly: File takedown notices and legal action against the actual sellers listing counterfeit products
- Use platform reporting systems: Most platforms have IP protection programs (e.g., Alibaba IP Protection Platform, Amazon Brand Registry) for reporting counterfeits
- Register with platforms: Enroll in brand protection programs to streamline takedown requests
- Monitor continuously: Employ monitoring services to detect counterfeit listings quickly
While platforms may not be liable for infringement, they often cooperate with IP owners to remove counterfeit listings when properly notified.
GET STARTED TODAY
Looking to Protect Your Intellectual Property?
Our team handles all IP matters from prosecution to litigation.