Under the Advocate General’s opinion, online marketplace operator eBay can become liable for its users’ actions.
The Advocate General recommended that eBay should not be primarily liable for trade mark infringements committed by eBay users. However, it could become liable where it knew its users were selling infringing goods and that the same users were likely to continue the infringing activity regarding the same or similar goods. In these circumstances, eBay will be deemed to have actual knowledge of, or information of, that eBay user’s infringing activities.
It has always been the case that, under its Verified Rights Owner or VeRO programme1, eBay can take down a particular listing when the rights owner complains. However, there is nothing to stop an eBay user re-listing the same infringing item at a later date, nor to stop that user from committing other infringements. If the Court of Justice (CoJ) follows the opinion, to avoid liability eBay will need to put in place procedures to deal with known infringers who are likely to continue to infringe in the future.
Luxury cosmetics giant L’Oréal brought proceedings in the English High Court against eBay and seven individuals who L’Oréal claimed had sold products allegedly infringing its trade marks through eBay Europe. The allegedly infringing products included: counterfeit products; products which L’Oréal had not intended to be sold in the European Economic Area (EEA); cosmetic tester and dramming bottles; and products which were sold without the original packaging.
L’Oréal claimed that eBay should be liable for infringing and parallel imported goods sold via its website. Against each of the seven individuals eBay had repeatedly removed listings, placed listing restrictions, required the completion of VeRo tutorials (some of the alleged infringers were required to do this up to six times) and suspended accounts. L’Oréal argued that eBay Europe could do more to prevent, or at least minimise, sales of counterfeit and other infringing products.
In the High Court judgment given in May 2009, eBay was held not to be jointly liable for the trade mark infringements committed by individuals selling infringing goods on eBay. However, the High Court felt unable to decide all the issues before it and, in what is becoming a frequent occurrence in IP matters, asked the European Court of Justice (now the CoJ) for guidance on:
- whether eBay had infringed L’Oréal’s trade marks by use of them in sponsored links and on eBay’s website in relation to the counterfeit, cosmetic tester and dramming bottles, unpackaged, or non-EEA source products
- whether eBay had a defence in simply storing information listed by eBay users
- the scope of the right to obtain injunctions against intermediaries like eBay whose services were used by eBay users to infringe intellectual property rights
Questions were referred regarding the interpretation of the Trade Marks Directive2 and corresponding Community Trade Mark Regulation3, the E-Commerce Directive4 and the Directive on the Enforcement of IP Rights5.
On 9 December 2010 the Advocate General published his opinion.
Advocate General’s Opinion
- In line with the CoJ decision in Coty Prestige Lancaster Group judgment6 given in June 2010, the Advocate General unsurprisingly held that cosmetic testers and dramming bottles which were not intended for sale and supplied free of charge to authorised distributors were not put on the market in the EC with a trade mark owner’s consent. As such, sales of these products on eBay was trade mark infringement and L’Oréal was entitled to stop such sales7.
- While the CoJ had not addressed the issue of parallel importing unboxed cosmetics specifically, Boehringer Ingelheim8 set out conditions for selling repackaged and relabelled pharmaceutical products. Applying these principles to unboxed cosmetics9, a trade mark owner was entitled to oppose sales of unboxed cosmetics where the removal of packaging without the trade mark owner’s consent:
- removed information required by the Cosmetics Directive10 or other EC measure; or
- could be considered as such as changing or impairing the condition of the goods – it was noted that packaging could be considered part of the condition of luxury cosmetics; or
- damaged, or was likely to damage, the image of the goods and therefore the reputation of the trade mark. This would be presumed where the sales of unboxed cosmetics on eBay were in the “course of trade”. This was likely to be the case where more than one or two unboxed cosmetics were sold on eBay.
- Trade mark owners were entitled to stop goods being advertised or offered for sale on eBay which targeted EEA consumers, where those goods had not yet been put on the EEA market by them or with their consent. The question of what amounted to ‘targeting’ consumers is being assessed in cases pending before the CoJ11.
- Distinguishing the case from Google France and Google12 eBay was not a paid internet referencing service but an electronic marketplace operator. Applying the same analysis used in Google France and Google, eBay’s use of trade marks as keywords in sponsored links to its website (Scenario 1) was trade mark use13. However, such use would not be infringing use provided that the reasonable average consumer understood that the goods displayed on the sponsored link were not advertised or offered for sale by eBay. In these circumstances eBay would not be liable for infringement, even where some of those goods displayed through sponsored links were counterfeit goods.
- Where a trade mark was displayed on the electronic marketplace website itself rather than through a sponsored link of a search engine (Scenario 2), there was no trade mark use by the electronic marketplace operator. Use of the trade mark was by the marketplace user.
- Under Article 14 of the E-Commerce Directive (the hosting exception) eBay would not be liable for infringing listings under Scenario 2, provided the listings were uploaded by eBay users without any inspection or control by eBay. Here, it was simply storing information provided by a third party. Conversely, eBay could not rely on the hosting exception under Scenario 1, where it used trade marks as keywords in sponsored links to its website. eBay was not simply storing information; this was being done by the paid internet referencing service provider.
- Where eBay’s activities included activities covered by the hosting exception and activities not covered by it (its use of trade marks as keywords in sponsored links on search engines), eBay would remain liable for those not covered by the hosting exception.
- eBay would be deemed to have actual knowledge of, or information of, an illegal activity and be unable to rely on the hosting exception, where it knew that an eBay user had sold infringing goods and the same eBay user was likely to continue to infringe the same trade mark regarding the same or similar goods in subsequent listings. Knowledge may therefore be ‘actual’ if it relates to a future likely event. However, measuring actual knowledge by a future event (which may not subsequently happen) and by a likelihood of occurring, makes it difficult to establish when ‘actual knowledge’ will exist.
- Injunctions could be awarded against intermediaries such as eBay whose services were used by a third party to infringe intellectual property rights14.
The Advocate General’s recommendations are accepted in the majority of cases.
None of the recommendations in the opinion are unexpected – the recommendations on the sale of cosmetic testers, dramming bottles, unboxed cosmetics and exhaustion of rights fit with existing case law. Recommendations around whether eBay’s use of trade marks in sponsored links, advertisements on its website and on listings amounted to infringement recalled the recent Google France and Google judgment, but made clear that in this case eBay was not a paid internet referencing service provider like Google, but an electronic market place operator.
It is the practical effect of these recommendations which is likely to cause eBay the most concern. VeRO currently focuses on infringing listings and not the infringing users. To avoid having ‘actual knowledge’ of infringements, eBay will need procedures which stop known infringers who are likely to continue infringing activities, from subsequently infringing.
As discussed, the opinion leaves unclear when eBay will be deemed to have actual knowledge of infringements by its users who it knows have previously infringed. This, in turn, makes ambiguous when eBay will be liable for infringements by its users. With over 300 million registered users and acting as host to millions of transactions every day, it is difficult to see how eBay will be able to develop a procedure that will be sophisticated enough to differentiate between a one time unintentional infringer who will not infringe again and persistent infringers who will continue to infringe time and time again.