Advocate General of the Court of Justice of the European Union, Opinion of 9 December 2010, C-324/09, L'Oréal v. eBay

Advocate General Jääskinen delivered his opinion in L'Oréal v. eBay, a case referred to the Court of Justice of the European Union for a preliminary ruling from the High Court of Justice of England and Wales. The case combines questions of primary liability (the use of signs by keywords in sponsored links) and secondary liability of the operator of an online marketplace for infringements by users of its service.

In the national proceeding, L'Oréal argued that eBay should be liable (1) for the trade of infringing products by sellers on its platform and (2) for the use of keywords, such as trademarks, bought from paid internet referencing services. The keywords are displayed in so-called "sponsored links" when internet users type a trademark in a search engine.

In its decision, the Court of Justice of the European Union will have to balance the trademark owner's and the operator's contrary interests and consider aspects of Directive 89/104 (Trademark Directive), the scope of the exemption of the information service provider's liability, as contained in article 14 of Directive 2000/31 (E-Commerce Directive), and the scope of the right to obtain an injunction against an intermediary whose services are used by a third party referred to in article 11 of Directive 2004/48 (Directive on the Enforcement of Intellectual Property Rights).

In his opinion, the Advocate General took the view that the goods in question, i.e. perfume and cosmetic testers, which are not intended for sale to consumers, are not put on the market within the meaning of article 7 (1) of the Trademark Directive. Therefore, the principle of exhaustion does not apply, so that the trademark owner can prohibit the sale of such goods by a third party. Likewise, the trademark owner was entitled to oppose the further commercialization of unpacked products if the outer packaging of perfumes and cosmetics was removed without his consent and if this was likely to damage the image of the goods and therefore the reputation of the trademark. Finally, the Advocate General assumed that offers for sale for products that are not meant to go on sale in the European Economic Area (EEA) infringed the trademark owner's rights if he could show that the advertisement was targeted at consumers within the EEA.

Whereas these assumptions could be made on the grounds of prior rulings of the Court of Justice, there were no guidelines regarding the questions on the use of signs in keyword advertising and on the aspects of service provider liability of the operator of an internet auction marketplace.

Regarding keyword advertising, the Advocate General suggested that the display of a sign identical to a registered trademark in a sponsored link constitutes a "use" of the sign by the provider of an electronic marketplace within the meaning of article 5(1) (a) Trademark Directive. However, he held that the use of the sign by the provider of an internet auction marketplace did not have an adverse effect on the functions of the trademark, provided that the average consumer would understand on the basis of information included in the sponsored link that the operator of the electronic marketplace stores in his system advertisements or offers for sale by third parties.

With respect to the infringing offers for sale uploaded by users of the marketplace, the Advocate General found that the service of the operator of an internet marketplace amounted to nothing more than to the storage of information provided by a recipient of the service within the meaning of article 14(1) E-Commerce Directive ("Hosting"). Therefore, the operator could not be charged with a general obligation to monitor the information stored. Thus, liability required either that the operator neglected his duty to take down an infringing content after notification or that the same user continued or repeated the same infringement in the form of subsequent listings relating to the same trademark.

We expect the ruling of the Court of Justice of the European Union to be rendered in April or May 2011. Although the Advocate General stressed that aspects of secondary liability may also need to be considered under national law, the decision of the Court of Justice could provide a benchmark for service provider liability in Europe and may be in contrast to prior ruling of national courts.