EU Court: Ebay, Other Online Sellers Must Protect Trademarks

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Luxembourg—The European Union’s highest court ruled Tuesday that online marketplaces, such as eBay and others, are responsible for protecting the trademark of any goods sold on the Internet and could be liable for selling counterfeits.

The Court Of Justice of the European Union made the ruling in response to questions the United Kingdom’s High Court had regarding a 2007 lawsuit French-based L’Oréal, Lancôme and other cosmetic brands filed against eBay for selling counterfeit merchandise. eBay won the case, but L’Oreal said the court agreed that eBay could do more to stop trademark infringement.

While noting that eBay had put into place some good-faith measure to stop counterfeits, L’Oréal argued that eBay is liable for trademark breaches, such as counterfeits, citing the online auction’s active involvement in the pre-sale, sale and after sale processes.

The EU Court agreed, finding that as an operator of an online platform, eBay is liable if it “played an active role” that would “give it knowledge of or control over the data relating to the offers for sale.”

‘Brands Will Be Jubilant’ Over Ruling

In other words, an online marketplace operator that plays an “active role” in allowing the sale of trademark-violating merchandise, or if it was aware of violations but did not act quickly enough, the marketplace may not be free from liability even though it did not exactly “use” the protected mark, the court said.

The Court of Justice added that it should be up to national courts in EU member countries to determine whether sales in non-EU countries are aimed toward the union. These courts may also use injunctions to enforce this, the EU court concluded.

The ruling is seen as a blow to eBay which had hoped the EU court ruling would provide enough legal guidance to help settle pending trademark disputes between it and L’Oreal. The EU court ruled last year, in a dispute between Google Inc. and LVMH that Internet hosts may benefit from an exemption under the EU’s e-commerce law only if their role in processing potentially infringing data is neutral.

“The judgment provides some clarity on certain issues, and ensures that all brands can be traded online in Europe,” said Stefan Krawczyk, eBay’s European government-relations director. “A lot of cases will still have to be assessed by the national courts. We’ve moved on–we fulfill most of these conditions now anyways.”

Last year, a French appeals court ordered eBay to pay 5.7 million euros in damages for selling counterfeit products after more than four years of proceedings in a case instigated by LVMH.

Many luxury brands, such as Tiffany & Co, Links of London and Thomas Sabo, have been working against sites selling counterfeits of their brands, and last month Tiffany won a restraining order against a U.S jewelry store which sold fake Tiffany rings as genuine products.  Tiffany purchased the rings from eBay and confirmed them as counterfeits. The restraining order stems from a lawsuit Tiffany filed for false advertising, trademark infringement and deceptive trade practices.

“Brands have been concerned for years now that the internet has facilitated the trade of counterfeit goods,” said Kirsten Gilbert, a partner at Marks & Clerk Solicitors in London.

Ashurst partner Dominic Batchelor told The Lawyer, “eBay will be concerned by this decision, which means it could be forced to prevent intellectual property infringements by its users. The practical and cost implications could be extensive, and any additional costs will presumably be passed on to eBay’s users.”

“Brand owners like L’Oréal will be jubilant at today’s ruling. Trademark owners are no longer alone in their fight for online brand protection. Instead, as is the case on the high street, companies which facilitate sales can be held accountable for the goods which pass through their hands,” added Gilbert.

While the EU courts have strengthened the hand of brand owners,The U.S. Supreme Court refused to hear an appeal from Tiffany & Co. last year, leaving in tact an appeals court ruling that Tiffany couldn’t sue eBay using federal trademark laws.

And eBay is making inroads in counteracting counterfeits. This month, for instance, eBay and The Council of Fashion Designers of America (CFDA) collaborated on a “You Can’t Fake Fashion” campaign featuring original tote bags from 50 CFDA designers.

“Counterfeits not only are illegal, they also damage brand owners, frustrate shoppers, and undermine consumer confidence,” said Alan Marks, eBay’s senior vice president of global communications, in a statement. “This campaign is another example of our commitment to being a leading industry voice in the fight against counterfeits.”