Injunctions against Shopee?

Introduction
Are online marketplaces liable for IP infringment?

Introduction

With e-commerce booming, it is safe to say that online marketplaces have disrupted the retail scene. For example, according to a recent ranking of online marketplaces, Amazon receives approximately 6 billion views a month globally, while in Southeast Asia, Shopee and Lazada attract more than 400 million views a month combined.

However, while it is now easier than ever for sellers to connect with buyers, e-commerce platforms are accessible to both authentic and counterfeit sellers. Anyone may register an account and begin selling immediately, without the need to undergo scrutiny or due diligence.

Are online marketplaces liable for IP infringment?

In A&M Beauty Wellness Sdn Bhd v Shopee Mobile Malaysia Sdn Bhd,(1) the high court recently provided some clarification on the extent of liability that online marketplaces such as Shopee and Lazada have regarding IP infringements by sellers

Facts
After receiving no favourable response to its complaints, the plaintiff in A&M Beauty applied for a court injunction against Shopee to prevent the sale of goods bearing its AM brand name by unauthorised third parties on the platform.

Decision
While the postings on Shopee were not disputed, the high court refused to grant the injunction against Shopee on the following grounds:

• The court acknowledged that Shopee cannot possibly regulate all of its sellers. Shopee does not have the technical capability or resources to pre-screen every listing or apply auto blocks. As the injunction sought required the complete removal of listings which fit a specific criterion, the court held that it was not performable or compliable. Further, such a precedent would significantly disrupt the e-commerce market as a whole.
• By merely providing the platform, Shopee was neither the seller of the products nor the agent or representative of the third-party sellers.
• The court needed to strike a balance between the injunction in the plaintiff's interest and the consequences for Shopee. If the injunction carried a higher risk of injustice, the court should not grant it. In this case, the balance of convenience was in favour of not granting the injunction as the plaintiff had failed to demonstrate why it was necessary. On the contrary, what was demonstrated was the extreme difficulty and impracticality of manually removing the products from the marketplace. It would be impossible for Shopee to comply with an order which required it to prevent a listing from being published before it was even uploaded.

The court also found that as the plaintiff was not the registered owner, it had no locus standi to seek such reliefs and had failed to provide a meaningful undertaking as to damages. The court further held that monetary compensation was an adequate remedy in this circumstance.

Comment
Allowing easy access and registration of thousands (or millions) of active seller accounts is a cornerstone of the online marketplace and one of the reasons for its success. This decision will provide palpable relief to online marketplaces, whose continued existence arguably benefits the public by encouraging competition and stimulating the economy.

Nonetheless, it is equally undisputable that counterfeiters are thriving, with online marketplaces offering them more channels to exploit. Additional measures to curb counterfeits would therefore be welcome.

For further information on this topic please contact Bahari Yeow Tien Hong, Lim Zhi Jian or Sabrina Sharin at Gan Partnership by telephone (+603 7931 7060) or email (bahari@ganlaw.my, zhijian@ganlaw.my or sabrina@ganlaw.my). The Gan Partnership website can be accessed at www.ganlaw.my.

Endnotes

(1) WA-22IP-67-10/2019.