L’Oréal v. eBay, Inc. – European Courts Differ from U.S. Courts When It Comes to Website Liability for Trademark Infringement By Users of the Site

In a decision handed down by the Court of Justice of the European Union on July 12, 2011, eBay has been found to be potentially jointly liable for trademark infringement along with individuals selling infringing goods on the eBay auction site because it had prior knowledge of the infringement.  Paris-based cosmetics company L’Oréal brought the complaint against eBay arguing that it is liable for trademark infringement because it is involved in the pre-sale, sale and after-sale processes of selling infringing products.  The Court agreed and held that an operator of an electronic marketplace that has provided active assistance in the sale of products rather than just taking a neutral position between the buyer and seller cannot be protected by the European Union’s e-commerce law exemption which applies only to parties playing a neutral online role.

eBay purchased keywords from online advertising services, such as Google Adwords, that included registered trademarks in order to direct potential customers seeking to purchase those goods to its website.   However, the goods being sold included both legitimate goods as well as counterfeit and unpackaged goods from non-European Economic Area (EEA) countries thereby infringing upon L’Oréal’s trademarks.  eBay implemented its own precautions against infringement by incorporating a take-down notification system and operating a Verified Rights Owner Program (VERO), however L’Oréal was not a member of the VERO program and rather turned directly to eBay for assistance with handling the infringing goods.  However, unsatisfied with eBay’s response, L’Oréal pursued its action before the High Court of England and Wales which referred several questions to the European Court.

In addition to joint liability, the Court considered the extent of injunctive relief that intellectual property owners could obtain against online intermediary websites, such as eBay, whose services are used as tools to infringe upon the IP of others.  The Court found that it could impose injunctions against online marketplaces requiring them to suspend accounts of those utilizing the site to sell fraudulently-marked goods or to employ measures which would make it easier to identify infringers.  However, the injunction would not require the website to actively monitor all activity of the website or prevent the sale of all goods bearing a particular trademark.

By finding eBay liable for joint liability, the European court differs from cases upheld in the United States.

In the Tiffany (NJ) Inc. v. eBay, Inc., cases in the federal district courts in New York, the federal courts rejected Tiffany’s argument that an intermediary website may have secondary liability thrust upon it if it has “generalized” information that its website was being used to sell infringing merchandise.  The court deduced in Tiffany that even though eBay had general knowledge of infringement by various sellers, it did not require eBay to prevent the same sellers from selling goods via their eBay accounts because general knowledge of infringement is insufficient to determine that actual infringement occurred.  eBay would have been liable, based upon Inwood Labs., Inc. v. Ives Labs., Inc. 456 U.S. 844 (1982) if it continued offering its services to sellers it knew or had reason to know were infringing on the mark’s holder’s marks.

Practical Considerations

What does this decision mean for clients who operate websites used or accessed from the European Union?

This decision suggests that, in the E.U., website owners might consider taking a more active role in addressing and preventing infringement upon learning of potential infringement from a trademark holder.  Indeed,  although an exemption from liability exists under the European E-Commerce Directive, any active role by the website owner in promoting items for sale by users may negate this exemption.

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