L'Oreal v eBay: The English Instalment - May 09
A version of this article appeared in The Times on 22 May 09
The case of L’Oréal v eBay [2009] EWHC 1094 CH (‘Case’) has highlighted the difficulty in harmonising the European trade mark jurisprudence and the way the law adapts itself to new technologies. This article discusses the Case and considers its impact.
The L’Oréal group (‘L’Oréal’) brought a series of trade mark infringement test cases in number of European jurisdictions against certain companies within the eBay group (‘eBay’) and eBay business users (‘Users’).
CASE AGAINST USERS
L’Oréal alleged that some of the User’s products bearing L’Oréal’s trade marks (‘Trade Marks’) sold on eBay’s website (‘Site’) by the Users were (i) counterfeit; (ii) tester and unboxed products which L’Oréal did not intend to be put on the market; (iii) products placed onto the market outside the EEA of which, L’Oréal’s rights were not exhausted; or (iv) if the products had been placed in the EEA with L’Oréal’s consent, L’Oréal had legitimate reasons to oppose further commercialisation as they were sold without external packaging in contravention of the Cosmetic Products (Safety) Regulations 2004.
The High Court judge upheld L’Oréal’s allegations except issues (ii) and (iii), where the judge said that the interpretation of the First Council Directive 89/104/EEC (‘Trade Marks Directive’) was unclear and guidance from the ECJ is required.
CASE AGAINST EBAY
L’Oréal alleged that eBay (i) was jointly liable for Trade Mark infringements committed by its Users; (ii) eBay is primarily liable for use of the L’Oréal trade marks in sponsored links and on the Site, where such use were for infringing goods; and (iii) L’Oréal should be entitled to an injunction against eBay to restrain future infringements by the Users.
JOINT LIABILITY
L'Oréal argued that eBay was jointly liable for the acts of its Users and specifically, acts such as the advertisement, offer for sale, exposure for sale or sale of the infringing goods by eBay’s Users which were subject to the control of eBay, and of which eBay profited from the infringing sales made eBay jointly liable for such infringements by its Users.
The judge held that the law of joint liability/accessory was not covered by the Trade Mark Directive and thus, governed by domestic English Law.
The judge considered the leading case of Amstrad Consumer Electronics v The British Phonographic Industry [1986] FSR 159. Amstrad, the producer of a tape cassette recording machine, was held not to be jointly liable for copyright infringement despite knowing of the likelihood of the machine being used to infringe copyright. This was because there was no ‘common design’ with the persons using the machine to infringe copyright as Amstrad had no control over the machine once it was sold to the user.
L’Oréal argued the present Case should be distinguished from Amstrad and that a ‘common design’ exists because (i) eBay took steps to promote listings; (ii) eBay profited from the seller making the listing and the sales proceeds; and (iii) eBay had control over the Site of which the infringing products were sold.
eBay submitted that (i) it had no duty or obligation to prevent third parties from infringing L'Oréal’s or third party trade marks; (ii) the Site was operated in a neutral and impartial manner, irrespective of whether the goods sold by its Users were infringing or non-infringing goods; and (iii) where eBay did intervene in a listing, this was done to prevent or minimise infringements.
The judge agreed with eBay. However, he expressed difficulty in deciding this issue since this required the principles of Amstrad to be applied to a new scenario created by new technologies. He also expressed some sympathy for L’Oréal’s claim that eBay’s novel business model enabled by new technologies greatly increased the risk of infringement.
ISSUE OF SPONSORED LINKS
The judge was of the opinion that use of the Trade Marks by advertisers (as oppose to search engine providers) as sponsored links constituted ‘use’ in a trade mark sense and thus, potentially trade mark infringement. Nevertheless, he considered it necessary to refer questions to the ECJ.
eBay submitted that even if it were liable for the use of the Trade Marks as sponsored links, the hosting defence under Article 14 of the E-Commerce Directive 2000/31 (‘E-Commerce Directive’) would be available. The judge held that given that there were conflicting decisions by other European courts, guidance from the ECJ was required.
INJUNCTION
L’Oréal sought an injunction under Article 11 of the European Parliament and Council Directive 2004/48/EC on the enforcement of intellectual property rights (the Enforcement Directive). It provided injunctions to be granted where an infringement of an intellectual property right has been found and an injunction necessary to prohibit the continuation of infringement. The judge held that the law on intermediaries was unclear and guidance from the ECJ was required.
CONCLUSION
1. Business users of auction sites will infringe trade marks by selling counterfeit or tester products.
2. Until the law relating to sponsored links is clarified, sellers and website owners using third party trade marks as sponsored links should cease such practice.
3. Brand owners wishing to combat counterfeit products on eBay should continue to monitor the Site and report any suspected infringements to eBay.
Edward Davies, Head of IP and Michael Nga, Commercial Solicitor
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