For several years now, L'Oréal has been combating the sale of counterfeit and other infringing products on the online marketplace eBay. In various countries (Belgium, France, Spain, Germany and the UK) L'Oréal has started litigation against eBay, basically claiming that eBay facilitates trademark infringement and profits from it, reason why eBay should be held responsible and be ordered to take (additional) measures to stop the infringements. In the UK, the case raised several questions of law, inter alia as to the infringing nature of testers, eBay's use of search engine keywords for advertisements on its website, and eBay's responsibility for infringing advertisements on it website. These questions have been submitted to the European Court of Justice (ECJ) by the High Court of Justice (England and Wales), Chancery Division, on 12 August 2009 (Case C-324/09).

Now, on 12 July 2010, the ECJ has issued its keenly awaited preliminary ruling on the questions referred following in most aspects Advocate General Jääskinen's opinion rendered on 9 December 2010. A summary of the ECJ's answers is given below.
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The ECJ's answers

The modalities of the offers on eBay

The first set of questions refers to different types of sales. In line with its Coty Prestige Lancaster v Simex-decision, the Court held that the trademark proprietor's rights are not exhausted where it concerns advertisements on eBay for testers and drammers. With respect to products removed from their packagings the Court found that the trademark owner can oppose the sale thereof where the consequence of that removal is that essential information, such as information relating to the identity of the manufacturer or the person responsible for marketing the cosmetic product, is missing. Where the removal of the packaging has not resulted in the absence of that information, the trade mark proprietor may nevertheless oppose the resale of an unboxed perfume or cosmetic product bearing his trade mark, if he establishes that the removal of the packaging has damaged the image of the product and, hence, the reputation of the trade mark.

In the L'Oréal/eBay case another issue concerned the market targeted for by the offers on eBay of products that are coming from outside the EU. The Court held that as long as the offers for sale of products that have not yet been marketed in the EU are targeted at consumers located in the EU the trade mark owner can oppose such sales. The Court confirmed that the trade mark owner should keep control on putting the products on the EU-market first. The national courts should asses whether it concerns sales targeted at EU-consumers. If it appears from eBay's website that the seller is willing to dispatch the products to an address in the EU, or, like in the case at hand it concerns a website operated in the EU (www.ebay.co.uk) the products are targeted at consumers in the territory covered by the national or Community trade marks.

The use of L'Oreal's trade marks as keywords by eBay

The Court found that when eBay purchases keywords consisting of trade marks for products sold via eBay, and advertisements are being triggered by such keywords, such advertisements not only promote eBay's services but also the products under the trade marks. In so far as through the purchase of the keywords the add promotes eBay's services, the use of the trade marks as a keyword is not use for identical or similar products and can therefore only be opposed under the dilution provision of art. 5 (2) TM Directive or art. 9(1)(c)  CTM Regulation. In so far as the use of the keywords result in adds to promote the sale of the trademarked products, such use can be opposed under art. 5(1)(a) TM Directive or 9(1)(a) CTM Regulation if the advertisement 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 (see also the Court's Google France-decision). It will not be easy to assess when a sponsored add placed by eBay will cause such an effect, in particular where the Court also concludes that eBay acts in a transparent way in case the add discloses both the identity of the online-marketplace operator and the fact that the trade-marked goods advertised are being sold through the marketplace that it operates.

The use of trade marks on eBay's site.

The UK Court also wanted to know how the use of trade marks on eBay's website itself for products sold via eBay should be regarded. The Court decided that eBay does not use such trade marks for the goods for which they are registered. The sellers of such goods use the trade marks for goods offered for sale via eBay.

The liability of the operator of an online marketplace.

One of the most important aspects of the case concerns the decision on the liability of companies such as eBay for what it is offering for sale through their websites. This concerns interpretation of the so-called e-Commerce Directive (nr. 2000/31). The Court decided that online marketplaces enjoy the exemption from liability under art. 14 of this Directive so long as the marketplace does not play an active role allowing it to have knowledge of, or control over the data relating to the offers for sale on its website. The Court said that the role becomes active when the operator has provided assistance which entails, in particular, optimising the presentation of the offers for sale in question or promoting those offers. It is up to the national court to decide whether eBay's role was active rather than neutral. If the operator's role remains neutral (which is the case if he merely stores the information transmitted by the customers-sellers on its server, sets the terms for its service, is remunerated for that service and provides general information to its customers) the condition for relying on the exemption from liability is that the operator does not have actual knowledge of the illegal activities or information, and if it does, acts expeditiously to remove or disable access to the information. Such knowledge can be the result of investigation on its own initiative, or of information notified to him. Although such notification can be insufficiently precise or inadequately substantiated, the fact remains that such notification represents, as a general rule, a factor of which the national court must take account when determining, in the light of the information so transmitted to the operator, whether the latter was actually aware of facts or circumstances on the basis of which a diligent economic operator should have identified the illegality.

Possible measures against online marketplaces.

Finally the Court gave rules on what a trade mark owner can ask a court to do in case infringing products are being discovered on the site of a company like eBay. The Court first outlines that the measures required of the online service provider concerned cannot consist in an active monitoring of all the data of each of its customers in order to prevent any future infringement of intellectual property rights via that provider’s website. Furthermore, a general monitoring obligation would be incompatible with Article 15 of the e-Commerce Directive and Article 3 of the Enforcement Directive (nr. 2004/48), which states that the measures referred to by the Directive must be fair and proportionate and must not be excessively costly. The system of the Enforcement Directive entails that, in a case such as that before the referring court, which concerns possible infringements of trade marks in the context of a service provided by the operator of an online marketplace, the injunction obtained against that operator cannot have as its goal or effect a general and permanent prohibition on the selling, on that marketplace, of goods bearing those trade marks. According to the Court however, if the operator of the online marketplace does not decide, on its own initiative, to suspend the perpetrator of the infringement of intellectual property rights in order to prevent further infringements of that kind by the same seller in respect of the same trade marks, it may be ordered, by means of an injunction, to do so. Furthermore, in order to ensure that there is a right to an effective remedy against persons who have used an online service to infringe intellectual property rights, the operator of an online marketplace may be ordered to take measures to make it easier to identify its customer-sellers. The Court said that the measures mentioned here are not exhaustive and can entail both the ending of infringements and the preventing of new infringements of such nature, as long as they are effective, proportionate, dissuasive and do not create barriers to legitimate trade.

Conclusion

With its answers to the questions referred in L'Oréal/eBay, the ECJ has provided some additional guidelines on what an operator of an internet marketplace can be expected to do to prevent trade mark infringements by its users.

Please click the link below for the English version of the preliminary ruling.
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62009J0324:EN:HTML