Amazon is not liable for patent, copyright or trademark infringement when a third-party retailer uses its platform to sell counterfeit goods, a jury found on Thursday in a closely watched lawsuit in federal court In Seattle.
It’s a victory for Amazon and other e-commerce companies in a case with major implications for their businesses. The company’s two year legal battle with Seattle-based novelty pillowcase maker Milo & Gabby was closely watched across the industry, with the potential to establish new rules about what online marketplaces must do to keep counterfeit goods from being listed on their sites.
Instead, the jury verdict could help to protect companies like Amazon from future lawsuits in similar situations. It may help protect a huge and growing business for the e-commerce giant. In 2013, Amazon reported marketplace sellers sold more than a billion items worth “tens of billions of dollars.”
A nine-member jury in U.S. District Court in Seattle agreed with Amazon on all seven questions they were asked to address, ruling that the company was not behind the counterfeit content listed on its site, and had technically not made an “offer to sell” — the legal requirement to hold Amazon liable for the counterfeit goods.
Milo & Gabby tells GeekWire it plans to appeal the decision, saying in a statement, “The issue is highly important to small companies, such as Milo & Gabby, who are repeatedly victimized by unknown, overseas knock-off artists selling through Amazon. The fiction that, ‘The largest Internet-based retailer in the United States’ doesn’t actually sell or offer products for sale is, we think, worthy of appellate review.”
The case was originally filed in 2013 and revolves around Milo & Gabby-brand animal shaped pillows.
The company, which was founded by the husband-and-wife team of Karen and Steve Keller, explains on its site that it had made an intentional decision not to sell on Amazon. Nonetheless, Karen Keller one day stumbled across an ad bearing Amazon’s logo.
“There it was, the image (she took) of her 15 year old daughter, who was 11 at the time, sleeping on the animal-shaped pillowcase she designed,” the company tells customers on its site.
The company says a Chinese manufacturer copied their designs, stole their product photos and began selling indistinguishable pillows. It argued that Amazon was liable for the infringement because it made an “offer to sell” the counterfeit goods, even storing the knockoff pillowcases in its warehouses as part of its Fulfillment by Amazon program.
But Amazon countered that its fulfillment, payment processing and product listing services don’t mean that Amazon is offering a product for sale. Instead, the company argued, those are services the company provides to third-party retailers, which are the ones making the offer of sale.
Here’s the jury verdict on the core questions in the case.