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AUGUST 2011

The European Court of Justice (“ECJ”) has recently given judgment in respect of a longstanding dispute between L’Oréal and eBay concerning the alleged use of L’Oréal’s trademarks to direct people to infringing goods on the eBay website. 

When the matter first came before the English High Court some 2 years ago, it was held that that eBay was not jointly liable for infringements of intellectual property committed by sellers via its website.  However, the English Court also felt that clarification and guidance was required from the ECJ regarding a number of other aspects to L’Oréal’s claim, including the issue of whether eBay had infringed L’Oréal’s trademarks by purchasing sponsored links.  The objective was for such links to then direct potential purchasers specifically to listed goods on eBay’s website.

In addition, the English Court sought a determination from the ECJ on whether, in such circumstances, eBay’s efforts to prevent the sale of counterfeit goods on its website were adequate.  The question was also asked whether injunctions may be granted against intermediaries whose services are used by a third party to infringe the intellectual property rights of others.

The issues referred to the ECJ therefore centred around the obligations which a company such as eBay should be subjected to in order to prevent trademark infringement by its users, the primary focus being on the role of intermediaries in such circumstances.

The ECJ made a number of important findings regarding the responsibility of internet service providers.  One of the key issues which the ECJ considered was whether an internet service provider could be exempt from liability for its customers’ use of infringing marks within their advertisements.  Simply providing a service whereby customers may advertise their goods does not, according to the ECJ, amount to a use of another’s trade mark.  However, an intermediary will only be exempt from liability if they are able to demonstrate that they did not play an active role in assisting the use of another’s trademark on their site.  This involves an assessment of whether the intermediary had knowledge of (or control over) the data it stored.  Even if an intermediary does not take an active role, it may still have the requisite knowlede of an infringement if it were to become aware of facts or circumstances which should have made it realise that the advertisement or use of another’s mark was unlawful.  Factors such as the extent to which an intermediary acts expeditiously to remedy the situation once notified of a potential infringement would also be taken into account. 

As a consequence, the ECJ ruling can now be viewed as taking a tougher stance against intermediaries who might otherwise seek to avoid liability.  It will be increasingly difficult to assert no more than a passive role in providing information to customers, particularly where a degree of control is exercised over the data stored. 

The scope for injunctions against intermediaries has also been widened by the ECJ’s ruling.  National Courts now have the power to order online service providers to take steps to prevent further infringement as well as to bring ongoing infringements to an end.  While it has been acknowledged that injunctions should not be used as a barrier to prevent trade, intermediaries may be ordered to suspend the account of an infringer and/or to take steps to make it easier to identify those who may be infringing others’ rights.  In such circumstances, intermediaries may find that they are asked increasingly to help in identifying potentially infringing customers who are using their service. 

The ruling also brings into question the extent to which ISPs may continue to bury their heads in the sand, relying on the exemption from liability as provided for by the E-Commerce Directive.   Operators should not simply assume that users of their sites are acting lawfully unless or until they are informed otherwise.  They should have procedures in place to deal with items posted to their sites, in particular where these are within their control.  No doubt, the question of whether intermediaries are to be viewed as taking an active role in relation to the content of material on their sites will need to be the subject of greater scrutiny in the future.  However, for brand owners such as L’Oréal,  the ECJ’s guidance will be most welcome in the fight for online brand protection.

Deborah Rider
Senior Solicitor

If you would like any further information about the issues raised in this article please contact Deborah Rider (drider@gdlaw.co.uk), or any other member of Goodman Derrick LLP’s dispute resolution team on 0207 040 0606.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.