UK: Advocate General Gives Opinion in L’Oreal v eBay Reference

Last Updated: 22 December 2010
Article by Susan Barty, Isabel Davies, Henrietta Marsh and Tom Scourfield

The Advocate General has delivered his opinion on questions referred to the ECJ by the High Court in L'Oreal v eBay.   The questions concerned: (1) the liability of marketplace website operators (such as eBay) for the offer/sale of cosmetic samples, unboxed branded products, and non-EEA-sourced branded product on their websites; (2) the use of third party trade marks in sponsored links and offers for sale; (3) the applicability of the exemptions in the E-Commerce Directive to marketplace website operators; and (4) the scope of national courts for issuing injunctions against website operators such as eBay.

If the ECJ follows the Advocate General's opinion, which is common, the outcome would be welcomed by the operators of online marketplace websites as it recommends that such operators should not generally be liable for trade mark infringements committed by users of their websites.  The Advocate General also recommended that such operators should be able to offer guidance etc, without exposing the operator to potential liability for infringing content that they are unknowingly hosting.

To view the article in full, please see below:



Full Article

Introduction

In November 2009 we reported in an earlier Law Now, that Justice Arnold had referred a number of questions to the ECJ for preliminary reference in the L'Oreal v eBay High Court trademark infringement case. L'Oreal alleged that eBay was infringing its trade marks by using them to direct consumers to infringing goods on its marketplace website, and also that eBay should be liable for its involvement in the trade mark infringements being committed by individual sellers on the website.

In May 2009 Justice Arnold had held that eBay was not jointly liable for IP infringements committed by individual sellers on the eBay website, see our earlier LawNow. In relation to further aspects of the claim, he concluded that ECJ guidance was required. A summary of the Advocate General's response to the various questions referred is set out below.

(1) "Putting on the Market"


The Advocate General did not consider that samples and testers would have been "put on the market " in the EEA, within the meaning of the CTM Regulation, when they are supplied without charge to authorised distributors, and therefore that further sale could constitute trade mark infringement. The Advocate General cited the ECJ's decision in Coty Prestige Lancaster Group v Simex Trading in support of this conclusion.

In relation to unboxed branded products, the Advocate General concluded that a rights holder may legitimately be able to oppose further commercialisation if one of the following conditions was satisfied:

  • The unboxing results in the product no longer complying with the labelling requirements under the Cosmetics Directive, as this would be likely to cause serious damage to the reputation of the trade mark;
  • The removal of the outer packaging can be considered as a change to, or impairment of, the condition of the goods, this being particularly relevant in relation to luxury goods; or
  • Further commercialisation of the goods damages, or is likely to damage, the image of the goods and, consequently, the reputation of the trade mark. The Advocate General emphasised that this was not an inevitable consequence of the removal of packaging, and must be assessed on the merits of each case.

The Advocate General stated that "the effect of further commercialisation can be presumed as actually or potentially damaging the image of the goods and hence the reputation of the trade mark in all cases where the offers for sale or the sales transactions concerning cosmetic products stripped of their original packages take place in the course of trade as defined by the case-law of the Court" and that the burden of showing the opposite lies with the seller.

Further, the Advocate General considered that in order to prevent the advertising of goods on the website which included those which had not been put on the market within the EEA by, or with the consent of, the trade mark proprietor, the proprietor need only show that the advertisement was targeted at consumers in a territory in which the trade mark rights subsisted. It would not be necessary for the trade mark proprietor to show that the advertisement or offer for sale necessarily entailed putting the goods on the market that territory.

(2) Use of advertising keywords


The Advocate General considered that if an online marketplace operator purchased a third-party mark as a keyword, the display of that keyword in a sponsored link to direct consumers to its marketplace website would constitute "use" of the keyword within the meaning of the CTM Regulation and could, therefore, constitute infringement. The Advocate General cited the Google Adwords case in his opinion, and contrasted the position of eBay with that of Google: eBay was using the signs in the sponsored links to advertise eBay's online marketplace services, rather than to advertise competing goods, as in Google. However, the Advocate General considered that if an online marketplace operator was to use a third-party trade mark in his own advertising to describe goods that were available in his marketplace, this would indeed constitute "use" in relation to the goods; the operator would provide a source of the goods that was an alternative to the trade mark proprietor's official distribution network.

The Advocate General further opined that a sponsored link that would lead a user directly to advertisements/offers for sale of goods, some of which are infringing, could constitute use of the sign by the operator "in relation to" the infringing goods. However, this would not be considered to have an adverse effect on the functions of the trade mark where the "reasonable, average consumer" understands, on the basis of the information provided in the sponsored link, that the website stores in its system third-party advertisements or offers for sale.

(3) E-Commerce Directive Exemption


Article 14(1) of the E-Commerce Directive exempts information society service providers from liability for unlawful acts hosted by them in certain, limited circumstances. The Advocate General did not consider that a marketplace website operator would be able to benefit from the "storage of information provided by a recipient of the service" exemption by displaying a sign identical to a trade mark in a sponsored link. However, they would be able to benefit from the exemption when the sign featured in advertisements/offers for sale on the website uploaded by individual without any moderation or inspection by the online marketplace operator. Importantly, the Advocate General concluded that it would be "surreal" if eBay's provision of guidance to users in relation to hosted data would deprive it of the exemption in the E-Commerce Directive.

However, the Advocate General did consider that if the operator knew that particular infringing goods had been advertised/sold and that similar infringements by the same/different users were likely to continue then, in general, this could constitute "actual knowledge"/"awareness" of the infringement and therefore the operator may not be able to benefit from the exemptions under the E-Commerce Directive. In particular, knowledge would be deemed where there are repeat infringements by the same advertiser in relation to the same mark.

(4) Right to an injunction against an intermediary


The Council Directive on the enforcement of intellectual property rights (the Enforcement Directive) requires member states to ensure, amongst other things, that rights-holders can apply for injunctions against intermediaries whose services are used by a third party to infringe IP rights. The Advocate General concluded that an injunction against an intermediary, such as marketplace website operator on whose website infringing goods are offered/sold, could be issued under the Enforcement Directive to require the intermediary to prevent repeated instances of the same/similar infringements, in addition to the continuation of a specific act of infringement, provided that this was possible under the relevant national law. He suggested that it would often be appropriate to limit any such injunction to a specific user and specific trade mark, and this could be achieved, for example, by the operator closing the user's account.

Comment


Marketplace website operators will be encouraged by the overall tenor of the Advocate General opinion, and the recommendation within it that sponsored links that take a consumer to a web page offering infringing goods should not expose the operator to primary liability for trade mark infringement. This is, however, provided that the "reasonable, average consumer" understands the nature of the website and is aware of the intermediary nature of operators such as eBay.

The opinion recognises the practical difficulties faced by marketplace website operators in preventing trade mark infringements by individual sellers on their websites. Website operators will welcome the recommendation that operators should be entitled to assume that their website is being used in a lawful way by individual sellers, unless the operator is actually informed otherwise, and that intervention such as providing guidance in relation to listings on their website should not deprive them of the exemption under the E-Commerce Directive. Following this opinion, the ECJ's decision will be eagerly awaited by eBay and other marketplace website operators.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 17/12/2010.

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