L'Oreal vs eBay trade mark case

The European Court of Justice has given important guidance as to the responsibility of online marketeers.  A note on the case appears below.  This will affect clients both involved in protecting their trade marks and those who wish to resell products as part of their businesses.

Action against Operators of Online Marketplaces for Trade Mark Infringement

The case of L’Oreal SA v eBay International AG and others concerned the sale of goods bearing L’Oreal’s registered trade marks on eBay.  Of particular concern to L’Oreal were sales of counterfeit goods, samples and testers which L’Oreal had provided to its authorised distributors, but which were not intended for sale, and sales of cosmetics where the outer packaging had been removed.

Also of concern to L’Oreal was eBay’s purchase of keywords corresponding to L’Oreal’s trade marks which triggered the display of a sponsored link to the eBay site when the trade mark was typed into a search engine such as Google.  eBay used these sponsored links to promote both its marketplace website and the goods being offered for sale. 

L’Oreal brought proceedings against the individual sellers and eBay.  The case originally came before the English High Court, which referred a number of questions to the Court of Justice of the European Union (“CJEU”).

The CJEU has now handed down its judgment.  Much of the decision follows earlier judgments of the Court.  However, of particular interest to trade mark proprietors, particularly those whose are continually faced with infringing goods being offered for sale on online marketplaces such as eBay, is its ruling on the liability of online marketplaces for infringements committed by its sellers.  It is now clear that online service providers do not automatically escape liability on the grounds that they are merely providing a service and it is their users who are committing the acts of infringement; each case will be decided on its facts.

The Established Principles

The CJEU reconfirmed a number of principles already established in previous CJEU decisions as follows:

• Resale of testers and free samples: Under the trade mark regime, trade mark owners who have put goods bearing their trade mark on the market in the EU cannot prevent their onwards sale.  This is known as the exhaustion of rights.  The question in this case was whether by supplying its authorised distributors with testers and samples, L’Oreal was deemed to have put these goods on the market such that it could not prevent their onwards sale.  The CJEU confirmed the established principle that where a trade mark owner gives away goods for free in order to promote sales, it does not constitute the putting of the goods on the market. As such, the trade mark owner can prevent the onwards sale of these goods.
• Sale of unboxed goods: The individual sellers on eBay had in some instances removed the outer packaging of the L’Oreal products before sale.  It was noted that, particularly in the case of cosmetics, the outer packaging contains key information required by law, such as the name of the manufacturer and list of ingredients.  The CJEU was asked whether the removal of packaging from products gave the trade mark owner the right to stop the sale of the goods?  The CJEU held that a trade mark owner can stop the resale of goods where the packaging has been removed in two instances: (1) where, by removing the packaging, the reseller has removed essential information and (2) where the trade mark owner can show that the removal of the packaging has damaged the image of the product and thereby the reputation of the trade mark. This will be the case where the packaging is as important, if not more important, than its contents.
• Sponsored keywords: The issue before the CJEU was whether a trade mark owner can stop third parties from using its trade marks as keywords in order to advertise that third party’s site.  The CJEU restated the established principle that a third party’s use of a keyword corresponding to a registered trade mark will constitute trade mark infringement where the resulting sponsored link/advertisement does not enable the reasonably well informed and reasonably observant internet user (or enables them only with difficulty) to ascertain whether the goods in question originate from the proprietor of the trade mark or from a third party.

eBay’s liability

Where trade-marked goods are offered for sale via an online marketplace, it is inevitable that the registered trade mark will feature on the website.  It is the seller who is using the trade mark in this instance.  The question before the CJEU in this case was to what extent eBay could be liable for the activities of its sellers in this respect. 

The EU Directive on Electronic Commerce (Directive 2000/31) provides internet service providers (“ISPs”), such as eBay, with an exemption from liability for trade mark infringement.  It is now clear from the decision of the CJEU that in order to benefit from the exemption, the ISP must provide a neutral service; where an ISP takes an active role in respect of the data uploaded by its users, it will fall outside the exemption.  In this case eBay had been assisting in the optimisation and promotion of certain goods being offered for sale via its site.  The matter has now been referred back to the High Court to determine whether eBay’s activities mean it has taken an active role such that it cannot take advantage of the exemption. 

Even if an ISP has not taken an active role, the CJEU confirmed that it will still not benefit from the exemption if it was aware of facts or circumstances on the basis of which a diligent operator should have realised that the sales in question were unlawful and failed to act promptly in removing or blocking access to such sales.

In the final part of its judgment, the CJEU considered what action trade mark owners can take against online operators of marketplaces to prevent further infringements.  The CJEU took the view that online operators could not be ordered to actively monitor all data uploaded by its users, nor could the trade mark proprietor obtain a permanent prohibition of sales of its trade-marked goods via the website.  However, where the online operator fails to prevent further infringements, for example by suspending the perpetrator of the infringement, it can be ordered to do so.  Further the operator may be ordered to take measures to make it easier to identify sellers who infringe intellectual property rights. 

For more information regarding this case or anything relating to Intellectual Property contact Ian Morris, Head of Intellectual Property

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