Samsung gets Z-Apped

A recent decision of the High Court of Justice of England & Wales has helped clarify the law governing registered trade mark infringement by App store operators.

In the case in question (Montres Breguet SA & Ors v Samsung Electronics Co. Ltd & Anor [2022] EWHC 1127 (Ch) (20 May 2022), Samsung were found to have infringed a significant number of registered trade marks owned by the Swatch group of companies.

Whilst the decision depended on the particular facts as determined by the judge, the case gives some useful guidance to determine when an App store operator might be found liable for infringement in relation to apps created and sold by independent 3rd party app designers from an App store.

What was the case about?

In summary, the case related to digital watch faces (watch face applications, or “apps”) that members of the public could download to Samsung’s smartwatches from the Samsung Galaxy App store (the “SGA store”).

The watch face apps in question were advertised in the SGA store using signs that were either identical or similar to those owned by the Swatch group of companies (e.g. “Swatch Orange Black WF”) and also the digital watch faces bore signs that were either identical or similar to those owned by the Swatch group of companies. For example (in this case the trade mark “Swatch”):

The Swatch group of companies claimed that between October 2015 and February 2019 a total of 23 of their registered trade marks were infringed by 30 watch face apps being made available in the SGA store, and that those apps were admitted by Samsung to have been downloaded around 160,000 times in the UK and EU. Although each of the apps was developed by a third party (the “app developers”), Swatch maintained that Samsung was intimately involved in, and controlled, the whole process by which the apps were made available, and thus Samsung was liable as a primary tortfeasor in committing registered trade mark infringement.

Samsung denied liability on various grounds, the most significant ones being that it claimed it had not ‘used’ the trade marks and, further, it relied on Article 14 of the e-Commerce Directive. It asserted that all it had done was to provide a vehicle, in the form of the SGA store, through which independent 3rd party app developers could offer and sell their watch face apps to the public.

What was decided?

The Court held that Samsung had infringed a significant number of registered trade marks owned by the Swatch group of companies.

When considering Samsung’s conduct as a whole, it had ‘used’ the trade marks. This was because, inter alia:

• There was a wide variety of watch face apps available in the SGA store and Samsung advertised the availability of that wide range of watch face apps in the SGA store.
• Samsung made a commercial choice to design only a limited number of watch face apps itself and to allow and encourage app developers to develop the vast majority of watch face apps for Samsung smartwatches.
• Samsung wanted free apps to be developed and made available that allowed or highlighted the use of functions or interfaces that are unique to Samsung smartwatches. In return, app developers benefited from increased sales of paid-for apps (because the SGA store was configured to enable users to see other apps from the same developer) and promotional opportunities provided by Samsung. This indicated a symbiotic relationship between the app developers and Samsung, going well beyond just the sharing of revenue derived from the sale of the apps.
• Samsung provided material assistance to developers of watch face apps, in the form of the Galaxy Watch Studio tool.
• Samsung hosted developer conferences to inspire and showcase the capabilities of apps built on Samsung devices, with presentations available online so that app developers who did not attend in person could view them.
• Samsung entered into licensing arrangements with all app developers before they were permitted to use any of its development material or upload apps to the SGA store.
• The SGA store is a store that Samsung operates that is dedicated to apps for Samsung products, and that it reviews all apps for both functionality and content before they are made available in the SGA store.
• Apps available in the SGA store would be understood by the average consumer to be made available by Samsung through its own store, and indeed to carry an implicit assurance that Samsung is satisfied with them and ought to provide assistance in the event that they prove problematic.
• Samsung had specifically marketed its smartwatches by reference to the availability of watch face apps in its SGA store.
• In contrast to apps that obviously relate to goods or services provided by a third party and facilitate their provision (e.g. an Uber app, enabling a user to order an Uber vehicle), the watch face apps did not do so, and did not directly perform any such function. They were also grouped together in the SGA store with watch face apps designed by Samsung. They were an optional alternative to the Samsung designed watch faces preloaded on the watch.
• The function of watch face apps was not to provide third party goods or services, but to adorn the smartwatch, tell the time and allow interaction with other functions. When in use the watch face app is the starting point for user interaction with the smartwatch. It is the interface that provides the “default” screen, but it is clearly not a simple wallpaper or background: it has an active role. Put another way, it can be perceived as a key part of both the cosmetic design and working mechanism of the smartwatch itself, rather than simply as an app that can conveniently be accessed through the watch.
• The apps in question were designed exclusively for, and operated only on, Samsung smartwatches.
• Whilst the average consumer was unlikely to blame eBay for shoddy goods acquired through its market place, a poor quality watch face app designed for the Samsung smartwatch and acquired through the SGA store would reflect negatively on Samsung in the mind of at least a significant proportion of average consumers.
• Samsung was not just providing the necessary technical environment to allow the apps to be uploaded, displayed in the SGA store and downloaded. It had a clear commercial interest in the watch face apps in the SGA store, their availability, presentation and use by consumers. The SGA store was not simply an online marketplace like eBay.

Moreover, Samsung had no defence under Article 14 of the e-Commerce Directive. Samsung reviewed all 3rd party designed watch face apps for both functionality and content before they were made available in the SGA store. The Court held that the content review process would have resulted in the reviewer, and through it Samsung, becoming aware of the app name and the appearance of the watch face and thus would have alerted a diligent economic operator to the infringement. The fact that Samsung had in place notice and takedown procedures, which brand owners could use to notify Samsung of infringements, did not itself provide a defence.

Lessons to be learned

The case highlights the difference between an online marketplace, that merely allows 3rd parties to advertise and sell their own goods, but does not play an active role of such a kind as to give it knowledge of, or control over, the way in which the goods are advertised and sold (i.e. the operator of the online marketplace takes a neutral position between the 3rd party seller and potential buyers of the goods), and an App store where the goods being advertised and sold are 3rd party developed apps that relate to goods sold by the operator of the App store, and which apps are reviewed by the App store operator before they are made available for download in the App store. The former is covered by the Article 14 e-Commerce defence. The latter is not.

It is anticipated that this case may go on appeal to the Court of Appeal, so please ‘watch this space’ (pardon the pun) for future updates.

For more information on this article, please contact Carl Steele.