L’Oreal v eBay – on counterfeit products: is it worth it?

In July 2011, the European Court of Judgement (ECJ) considered the case L’Oréal v eBay, where L’Oréal had brought proceedings against eBay and a number of its users for trade mark infringement for the sale of counterfeit products on eBay’s auction site, and ruled on several points which had been referred by the High Court, namely whether eBay (and other websites like it):

  • Could be jointly liable for trade mark infringement 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; and/or
  • 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 ECJ decision, which will go some way to strengthening the position of brand owners , found that eBay can be held to account for infringing activity taking place on its online marketplace, in relation to past, as well as future, infringements under Article 11.

Critically, the ECJ also found that where goods were being sold through eBay by suppliers located outside the EEA, and those goods had not previously been put on the market in the EEA by the trade mark owner, the owner could still enforce its trade mark rights against the seller, as long as the webpage in question was targeted at consumers within the EEA market. This would be a question of fact for national courts to decide, and could take into account the currency of payment, language and even the website address, for example, in L’Oreal v eBay, the address was – www.ebay.co.uk, therefore the ECJ thought this was conclusive that it was aimed for consumers in the UK territory and therefore covered by the national trademarks.

The ECJ then considered whether eBay could rely on the defence in Article 14, and found that eBay could not. The ECJ said that if a diligent economic operator should have been aware of the unlawful activity and did not act in accordance of Article 14(1)(b) and remove the information expeditiously from its site, the defence would not be available. The ECJ further stated that the defence is limited to only the technical and automatic processing of data.

It seems that, following on from the decision of the ECJ:

  • The High Court  will be able to place injunctions on intermediaries despite the UK having yet to adopt specific rules to implement Article 11 in full;
  • Injunctions against future, as well as past, infringing activity on online marketplaces will now be available for brand owners;
  • Online marketplace providers and other ISPs cannot rely on the defence 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.

The net is clearly tightening around portals and peer to peer websites that profit from the interaction of buyers and sellers.  It seems that the number of hiding places for ISPs is also likely to diminish in the near future.