eBay may be liable for trademark infringement by its customers

European Union
In L’Oréal SA v eBay International AG (Case C-324/09, December 9 2010), Advocate General Jääskinen has suggested that eBay was not liable for the trademark infringements of the users of its website in the first instance. However, if it had been notified of the infringing use and the use continued or was repeated, eBay would be liable. Further, under Article 11 of the IP Rights Enforcement Directive (2004/48/EC), injunctions may be available against marketplace operators in order to prevent continued or repeated infringements by the same user in relation to the same trademark. 
 
In his referring judgement, L'Oréal SA v eBay International AG ([2009] EWHC 1094 (Ch), May 22 2009), Arnold J held that eBay was not liable as joint tortfeasor for the sale of infringing goods on its website despite, in the judge's opinion, there being more that could be done by eBay to prevent such sales from occurring. However, the judge felt that he could not make a decision on the allegations that eBay's use of sponsored links to direct people to listings, insofar as those listings are for infringing products, amounted to trademark infringement, without a reference to the (then) European Court of Justice (ECJ) (for further details please see "eBay is not liable for trademark infringement by its users, says court").

Several issues were referred to the ECJ:
  • eBay's use of keywords to attract customers to its site;
  • parallel import and un-boxing issues and exhaustion of rights;
  • the existence of a defence under the E-commerce Directive (2000/31/EC) for eBay and operators of similar websites;
  • whether the efforts made by eBay to deal with repeat offenders were adequate; and
  • whether this had any impact upon any defence eBay could raise
The trade objected to by L’Oréal included:
  • use of their trademarks as keywords;
  • trade in counterfeit goods;
  • trade in unpackaged goods;
  • parallel imports of products not intended for the European Economic Area (EEA) or the European Union; and
  • the sale of tester products (samples not intended for sale to consumers).
The advocate general's opinion was as follows:
  • Tester and other sample bottles marked 'not for sale' or 'not for individual sale' and not intended for sale to customers and supplied authorised dealers (without charge) are not "put on the market" within the EEA (within the meaning of Article 7(1) of the First Trademarks Directive (89/104/EEC)) and, therefore, the trademark proprietor's ability to assert his rights in relation to them is not exhausted.
  • Trademark rights may also be asserted against goods offered for sale on eBay aimed at EEA consumers, which have not yet been "put on the market" with the consent of the proprietor in the EEA.
  • Un-boxing: in relation to luxury goods, the removal of outer packaging could constitute damage to the function of the trademark of indicating origin and the quality of the goods and to the reputation of the trademark. Therefore, it could be actionable by the proprietor.
  • Keywords: by reserving L’Oréal's trademarks as keywords, eBay was using these marks in relation to the goods (since it provides an alternative purchasing source which coexists with the official distribution network), but the use of such keywords does not necessarily result in misleading the consumers as to the origin of the goods offered. In cases where the advertisement in relation to which the keywords are used is not misleading the consumers as to the origin of the goods, the function of the trademark in indicating the origin of the product is not likely to be jeopardised.
  • Simple display of a trademark on an electronic marketplace is different to a sponsored link and is not use of a trademark by the marketplace operator. Rather, it is use by the users of the marketplace.
  • Assistance given by eBay to its clients in the preparation of their listings (which involve the use of trademarks) is insufficient to adversely affect eBay's neutrality in such situations. In order for an internet service provider (ISP) to benefit from the 'hosting' safe harbour provided for under the E-Commerce Directive and be exempted from liability for any information stored by its users, it is a requirement for it to be behave neutrally in relation to such information (see the Google cases).
  • While, in the advocate general's opinion, eBay is exempt from liability in relation to such hosting activities, it remains liable for the content of data that it communicates as an advertiser to a search engine operator (ie, its own advertising activities). There is "actual knowledge" of illegal activity or information, or "awareness" of facts or circumstances (within the meaning of Article 14(1) of the E-Commerce Directive) where the operator of the electronic marketplace has knowledge that goods have been advertised, offered for sale and sold on its website in infringement of a registered trademark, and such infringements by the same user are likely to continue in relation to the same or similar goods.
  • L’Oréal had argued that, even if eBay is not itself liable for trademark infringement, an injunction should be issued against it to prevent further use of its marketplace for infringing purposes. One of the questions referred by Arnold J was whether Article 11 of the IP Rights Enforcement Directive required member states to ensure that trademark proprietors could obtain such an injunction against an intermediary to prevent further infringements where the services of an intermediary, such as an operator of a website, have been used by a third party to infringe a registered trademark and, if so, what was the scope of the injunction that should be made available. The advocate general's opinion was that a trademark proprietor can obtain "an effective, dissuasive and proportionate injunction against the intermediary to prevent continuation or repetition of that infringement by that third party", but that the "conditions and procedures relating to such injunctions are defined in national law". The advocate general commented that the requirement of proportionality would exclude an injunction against the intermediary to prevent any further infringements of a trademark, but that an appropriate limit for the scope of injunctions may be that of a double requirement of identity - an injunction to prevent continuing or repetition of infringements by the same party in relation to the same trademark.
Electronic marketplace operators and other ISPs will be relieved to see the advocate general following Arnold J's approach of no initial liability for the infringing trademark use of its users. However, the advocate general's opinion sounds a warning in terms of preparedness to take down allegedly infringing sites and in relation to eBay's own advertising activities to which Article 14 of the E-commerce Directive (the 'hosting' safe harbour) would not apply.
 
Joel Smith and Rachel Montagnon, Herbert Smith LLP, London

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