European High Court Rules That eBay May Be Held Liable for Trademark Violations on Its Site
July 12, 2011
The European Court of Justice on July 12 ruled that eBay, the world’s largest online marketplace, may be held liable for trademark violations on its auction site if it has knowledge of the infringing data (Case C‑324/09, L’Oréal SA v. eBay International AG, E.C.J., 7/12/11).
At the heart of this case is the charge by the world’s largest cosmetics seller, L’Oréal, that eBay used keywords corresponding to L’Oréal trademarks to promote fake products on eBay’s European Web sites. The Court of Justice ruled that, eBay, as an operator of an online platform, can be held liable if it “played an active role” that would “give it knowledge of, or control over, the data relating to those offers for sale.”
This case follows another battle which took between L’Oréal and eBay in the High Court of England, which in May 2009 referred some unresolved questions to the European Court of Justice for guidance. In that case, L’Oréal SA v. eBay International AG  EWHC 1094 (Ch), the court found that some of the co-defendants had sold infringing products. However, it found that, given the limits on liability for Internet intermediaries under European Union law, eBay was not liable for the infringements committed by those co-defendants.
Guidance in Response to the British High Court.
The High Court of England asked the European Court of Justice for guidance on:
“iv) Whether eBay Europe have infringed the Link Marks by use in sponsored links and on the Site in relation to infringing goods …”
“v) Whether eBay Europe have a defence under Article 14 of the E-Commerce Directive …”
“vi) As a matter of domestic law the court has power to grant an injunction against eBay Europe by virtue of the infringements committed by the Fourth to Tenth Defendants, but the scope of the relief which Article 11 requires national courts to grant in such circumstances is another matter upon which guidance from the ECJ is required …”
The European Court of Justice framed the scope of liability and relief this way:
On a proper construction of Article 5(1)(a) of Directive 89/104 and Article 9(1)(a) of Regulation No 40/94, the proprietor of a trade mark is entitled to prevent an online marketplace operator from advertising – on the basis of a keyword which is identical to his trade mark and which has been selected in an internet referencing service by that operator – goods bearing that trade mark which are offered for sale on the marketplace, where the advertising does not enable reasonably well-informed and reasonably observant internet users, or enables them only with difficulty, to ascertain whether the goods concerned originate from the proprietor of the trade mark or from an undertaking economically linked to that proprietor or, on the contrary, originate from a third party.
Article 14(1) of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) must be interpreted as applying to the operator of an online marketplace where that operator has not played an active role allowing it to have knowledge or control of the data stored.
The operator plays such a role when it provides assistance which entails, in particular, optimising the presentation of the offers for sale in question or promoting them.
Where the operator of the online marketplace has not played an active role within the meaning of the preceding paragraph and the service provided falls, as a consequence, within the scope of Article 14(1) of Directive 2000/31, the operator none the less cannot, in a case which may result in an order to pay damages, rely on the exemption from liability provided for in that provision if it was aware of facts or circumstances on the basis of which a diligent economic operator should have realised that the offers for sale in question were unlawful and, in the event of it being so aware, failed to act expeditiously in accordance with Article 14(1)(b) of Directive 2000/31.
The third sentence of Article 11 of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights must be interpreted as requiring the Member States to ensure that the national courts with jurisdiction in relation to the protection of intellectual property rights are able to order the operator of an online marketplace to take measures which contribute, not only to bringing to an end infringements of those rights by users of that marketplace, but also to preventing further infringements of that kind. Those injunctions must be effective, proportionate, and dissuasive and must not create barriers to legitimate trade.
The European Court of Justice’s ruling recognizes that an Internet intermediary like eBay can be liable for assisting customers in “optimising the presentation of the offers for sale” of infringing goods “or promoting them.” Perhaps more troubling for a company that handles the number of transactions of an eBay is the ruling’s statement that, even if an intermediary did not play an active role in presenting the goods in question, liability can exist if “a diligent economic operator should have realised that the offers for sale in question were unlawful” and “failed to act expeditiously.” Given the size of eBay’s marketplace, the practicability of this test will be an issue to watch closely.