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L’Oréal v eBay: good news for brand owners
Practical Law UK Articles 9-507-0026 (Approx. 4 pages)
L’Oréal v eBay: good news for brand owners
by Rachel Montagnon and Joel Smith, Herbert Smith LLP
| Published on 28 Jul 2011 • European Union, United Kingdom |
In a decision that will come as a relief for brand owners, the European Court of Justice has found that eBay can be held to account for infringing activity taking place on its online marketplace, after L'Oréal brought proceedings against eBay and a number of its users for trade mark infringement for the sale of infringing and counterfeit products on eBay's online auction site (L'Oréal v eBay, C-324/09).
In a decision that will come as a relief for brand owners, the European Court of Justice (ECJ) has found that eBay can be held to account for infringing activity taking place on its online marketplace (L’Oréal v eBay, C-324/09).
ECJ referral
L’Oréal has a closed selective distribution network in place across Europe within which authorised distributors are restrained from supplying products to other distributors.
Sellers and buyers on eBay have to accept eBay's online market user agreement, one term of which is a prohibition on selling counterfeit items and infringing trade mark rights. In some circumstances, eBay assists sellers to enhance their offerings and may also advertise some of the products using search engines to trigger the display of adverts.
L’Oréal brought proceedings against eBay and a number of its users for trade mark infringement for the sale of infringing and counterfeit products on eBay's online auction site (see News brief "Protecting trade marks: because they’re worth it", www.practicallaw.com/4-386-3102; and box "Protecting trade mark use").
The High Court referred a number of questions to the ECJ, including whether eBay:
- Could be liable for trade mark infringement as a joint tortfeasor through the sale of infringing products by its users.
- Could be liable for infringement through the use of sponsored links on third party search engines and its own site insofar as they led people to postings for infringing products.
- Had a defence under Article 14 of the E-Commerce Directive (2000/31/EC) (Article 14) for liability for information it (as an internet service provider (ISP)) merely "hosts" on behalf of recipients of its service.
- Could, nevertheless, be prevented under Article 11 of the Intellectual Property Rights Enforcement Directive (2004/48/EC) (Article 11) from selling infringing goods on its site, even if there was no infringement by eBay itself.
The decision
The ECJ held that eBay could be injuncted as an intermediary and also in relation to past, as well as future, infringements in order to fulfil the requirements of Article 11. It also found that eBay could not benefit from the Article 14 defence. This defence is confined to merely technical and automatic processing of data, where there is no actual knowledge of unlawful activity or information.
The ECJ found that for an ISP to be denied entitlement to the Article 14 defence, it is sufficient for it to have been aware of circumstances on the basis of which a diligent economic operator should have identified the unlawful activity in question, and acted in accordance with Article 14(1)(b) (expeditious removal of such information from the site).
The online marketplace operator's own investigations, which revealed unlawful material or where it was notified of the existence of such activity or information, should normally trigger a "take-down" of the offending material from the site, and any such notification should be a factor of which the national court should take account when determining whether a diligent operator should have identified the unlawful nature of the material.
The ECJ also followed the Google references brought in 2010 (C-236/08 – C-238/08) (see also Exclusively online article "Google AdWords: liability shifts to advertisers", www.practicallaw.com/8-501-8166) by finding that:
- Where advertising does not enable the user to ascertain whether the goods concerned originate from an official source, trade mark rights can be asserted where trade marks are used as keywords to trigger results to internet searches.
- Simply allowing the sale of trade-marked goods by reference to those trade marks on the online marketplace site does not involve "use" of the trade marks in question by the operator of the site.
Importantly, the ECJ found that where goods were being sold through eBay by suppliers located outside the EEA, which had not previously been put on the market in the EEA with the trade mark owner's consent, the owner could enforce its trade mark rights against the seller, as it would have been able to do with a "conventionally" marketed parallel import. The owner's trade mark rights were not exhausted as long as the webpage in question was targeted at consumers within the EEA market.
This was a matter of fact for the national court to decide, taking into account, for example, the language of the webpage or currencies accepted in payment, and, as specified by the ECJ, the geographic areas to which the seller would dispatch the product.
Since the eBay website had the address www.ebay.co.uk, the ECJ thought this conclusive, in the absence of evidence to the contrary, that it was targeted at consumers in the territory covered by the national and Community trade marks relied on in the case (that is, the UK).
Implications
The decision means that:
- Online marketplace providers and other ISPs can no longer hide behind the "hosting" defence/exception to liability provided by Article 14 if they have played an active role in the promotion or sale of the trade-marked goods, or gained knowledge of facts or circumstances that should have put them on notice that the offers for sale were unlawful, and they failed to act expeditiously.
- Injunctions against future, as well as past, infringing activity on online marketplaces will now be available for brand owners.
- Although the UK has not adopted specific rules to implement Article 11 in full (in relation to the ability to apply for an injunction against intermediaries whose services are used to infringe an intellectual property right), the High Court nevertheless will have to abide by the full text of Article 11 when granting an injunction and can injunct intermediaries such as marketplace operators. The injunctions must be "effective, proportionate and dissuasive".
Rachel Montagnon is a professional support consultant, and Joel Smith is a partner, at Herbert Smith LLP.
Protecting trade mark use
A trade mark owner can prevent the sale, offer for sale or advertising of goods and services to a consumer using the owner's trade mark rights under Article 5 of the Trade Marks Directive (89/104/EEC, now replaced by 2008/95/EC) for national marks, and Article 9 of the Community Trade Mark Regulation (40/94/EC, now replaced by 2007/2009/EC) for Community trade marks.