Dr Monika Żuraw

eBay on the blacklist

On 12 July 2011 the European Court of Justice issued a judgment concerning the use of trademarks on internet auction sites (L’Oréal SA v eBay International GmbH, Case C-324/09).

The case was originally brought before the English court by L’Oréal, accusing eBay of actions resulting in trademark infringement. The judgment contains a number of holdings dealing specifically with online activity as well as holdings that are relevant for traditional commerce.

The ECJ held that the owner of a trademark is entitled to prohibit an online operator from using the trademark as part of referencing services if online ads that are displayed using the mark do not enable the user to determine whether the goods come from the owner of the trademark or from a third party. The court thus held that an organiser of online sales, such as eBay, is liable for use of trademarks belonging to others in advertising for auctions held on the auction site.

eBay advertised using third-party trademarks for goods sold in auctions, belonging to eBay users who had purchased the AdWords service in the Google search engine. A user who entered a trademark term was presented a sponsored link advertising eBay auctions for goods bearing the trademark. eBay did not advertise its own services directly, but only auctions conducted by eBay users. The court nonetheless held that eBay was an advertiser, because it displayed links and listings constituting advertising, not only of offers for sale on the online market but also advertising of the market itself, and thus eBay itself could infringe the trademarks.

The court held that advertising from the operator of the market and displayed by the operator of the search engine must in each instance display the identity of the operator of the market and the fact that the trademarked goods that are the subject of the advertising are being sold through an online market operated by it. This would then exclude trademark infringement by the operator.

It should thus be concluded that if information is presented in the sponsored link displayed as a result of entering a trademark term in the internet search engine that the advertiser of the goods is eBay, and the offer to sell the goods involves an auction on eBay, eBay is not infringing the trademark.

The ECJ also addressed the ability to exclude the liability of the operator of an online market on the grounds that it only stores data uploaded by the party conducting the auction (i.e. hosting). The court held that the operator may not rely on an exclusion of liability contained in relevant regulations concerning electronic services if the operator plays an active role enabling it to obtain knowledge of the stored data or exercise control over the data. If, for example, the operator provides support in optimising the presentation of specific sales offers or promotion thereof, then it is considered to play an active role.

Even if the operator does not play such an active role, it may nonetheless not escape liability. It is sufficient if the operator knew or should have known of the circumstances demonstrating the unlawfulness of the auction and did not immediately take the measures required by applicable regulations.

The ECJ also held that the member states must have laws in place under which the national courts may order the operator of an online market to take actions to stop trademark infringement by users of the site and prevent further infringement.

The court also addressed the issue of auctions conducted outside the EU. Original trademarked goods are often sold from outside the EU (e.g. from the United States) to consumers located within the EU. The owner of the trademark may oppose such sales if it has not consented to sale of the goods within the EU. This applies as well to sales offers or advertising of goods directed to customers in the EU. In this situation, the rights to the trademark are not exhausted and the holder may prohibit sales of such goods.

At the same time, the ECJ upheld its previous position that it is impermissible to sell testers and product samples.

The court also held that a trademark owner may oppose resale of original goods without their packaging if the lack of packaging would result in failure to convey essential information, such as identification of the producer. Even if there is no loss of important information, the trademark owner may oppose sale of cosmetics without their packaging if it demonstrates the removal of the packaging may have a negative impact on the image of the product and thus the reputation of the trademark.

This judgment means that internet auction sites are not exempt from liability for unlawful goods offered on auctions. Before, this issue was controversial, and—apparently as a precaution—litigation was not brought against the auction sites. The European Court of Justice has now held that an auction site is liable for its own actions in advertising auctions by its users. If the operator of the website is involved in advertising of auctions by users or has information showing that the auctions are unlawful, it cannot escape liability by relying on the claim that it only offers hosting, i.e. storing data uploaded by third parties.

Dr Monika Żuraw, Intellectual Property practice, Wardyński & Partners