High Court bolsters online marketplace defence to copyright claims

The High Court has dismissed Shein's copyright infringement claim against Temu in a judgment which will be welcomed by operators of online marketplaces. The Court held that Temu was acting as an intermediary in relation to content uploaded by third-party sellers and, in any event, would have been entitled to rely on the hosting defence. The decision provides useful guidance on when marketplace operators can avoid liability for user-generated content.

The judgment will be of particular interest to businesses that operate online marketplaces, as well as brand owners seeking to enforce intellectual property rights against counterfeit or copycat products sold online. While the dispute arose in the context of copyright infringement, the Court's reasoning highlights some of the challenges rights holders may face when attempting to pursue claims against marketplace operators rather than the individual sellers responsible for the offending content.

Background

The proceedings form part of the wider legal battle between fast-fashion rivals Shein and Temu.

Shein alleged that photographs from its website had been used by third-party sellers on Temu's platform and argued that Temu was liable for copyright infringement. Temu maintained that it was acting as an intermediary and denied responsibility for content uploaded by independent merchants.

Among other things, the Court was asked to consider whether Temu had authorised the alleged infringements and whether it could rely on the hosting defence in Regulation 19 of the Electronic Commerce (EC Directive) Regulations 2002.

The Court's decision

Shein lost on all of the principal issues.

The Court rejected Shein’s argument that Temu had authorised copyright infringement by third-party sellers, holding that Temu's role was that of an intermediary rather than a primary infringer. In doing so, the Court considered, amongst other things, Temu's prohibition on infringing uploads and the largely technical and passive role it played in relation to the listings in question.

The Court also rejected parts of Shein's case on territorial grounds, finding that certain acts of reproduction relied upon by Shein took place outside the UK.

Even more significantly, the Court held that Temu would have been entitled to rely on the hosting defence had infringement been established. That conclusion is likely to be of particular interest to other online marketplaces facing similar claims.

What does this mean for businesses?

Rights holders often regard platform operators as more attractive enforcement targets than individual sellers, particularly where infringing products appear in large numbers and sellers can quickly disappear from the marketplace. This judgment underlines the hurdles involved in that approach where the platform is able to characterise its role as that of an intermediary.

For brand owners, the decision is a reminder that an effective online enforcement strategy cannot rely on copyright claims alone. Depending on the circumstances, trade marks, design rights, platform takedown procedures and action against individual sellers may all offer more effective routes to enforcement.

Businesses operating through multiple group companies and relying heavily on digital content should ensure that copyright ownership, licences and assignments are clearly documented and can be evidenced if challenged. As this case demonstrates, those records may prove just as important as the underlying rights themselves.