Michael Gardner, head of Wedlake Bell LLP's IP & commercial team
Michael Gardner, head of Wedlake Bell LLP's IP & commercial team
A view from Michael Gardner and Randeep Grewal

Think BR: What the L'Oreal v eBay case means for brand owners

The European Court's ruling on counterfeit products in the case of L'Oreal v eBay should be welcomed as a step forward by brand owners, write Michael Gardner and Randeep Grewal of Wedlake Bell LLP.

Earlier this year, the Court of Justice of the EU (CJEU) delivered an important judgment in the case of L'Oreal v eBay. 

The action, the latest episode in a long running legal battle that started in the English courts in 2007, was L'Oreal's response to the availability of counterfeit and test products on eBay.

The English court gave judgment in the case in 2009, but was unable to resolve certain legal issues relating to the interpretation of EU law. The court referred it to the CJEU for guidance.

Internet companies such as eBay have long argued that they should not be liable for infringing the trademarks of brand owners such as L'Oreal because all they are doing is providing a platform for third parties to sell their own particular goods.   

However, L'Oreal regards it as unsatisfactory that eBay should be immune from legal liability for trademark infringement and be able to make money by letting sellers advertise goods for sale that infringe its trademarks.

The CJEU's ruling in L'Oreal v eBay has left a lot of the detail and means of implementation to be worked out by the English High Court, so it remains to be seen what practical effect the ruling will have.

The following key points, however, should be noted.

First, eBay, like many other online advertisers, makes use of paid-for keywords offered by search engines such as Google, so when an internet user enters the name of a brand as a search keyword, it brings up sponsored search results pointing the searcher at adverts for eBay's website. 

The CJEU held in L'Oreal v eBay that if the resulting ads are not sufficiently clear and indicate a possible connection in the course of trade between eBay and the brand owner, this might be enough to make eBay liable for trademark infringement. 

However, eBay will not be directly liable for the use made of trademarks by the actual sellers of the goods on its website.

Secondly, the CJEU confirmed that brand owners may be able to restrict the sale of certain types of products such as testers and samples - even if they are genuine products made by that brand owner. 

If for example, products are described as 'testers' and 'not for sale' then anyone putting those on sale commercially without the brand owner's permission could face legal action. 

Thirdly, the CJEU looked at the provisions of EC Directive 2000/31/EC on e-commerce ('the Directive') and in particular Article 14(1) of the Directive which exempts ISPs from liability for their customers' infringements. 

In order to be protected under this legislation, the ISP in question must not have played an 'active role' allowing it to have knowledge or control of the data stored on its systems (as opposed to restricting itself to technical or automatic processing of that data). 

In the context of eBay's operations, playing an 'active role' in this context may include instances where eBay has helped sellers with the presentation of the offers for sale or by otherwise promoting them (ie, not taking a neutral role between the seller and buyer of the goods). 

But even where ISPs have not played an 'active role', they may still be barred from relying on the Directive. 

This could happen, according to the CJEU, in cases where they were aware of facts or circumstances which would have led a 'diligent economic operator' to identify the infringement in question but failed to take remedial action. 

It will be for the English Court to decide whether eBay has played too active a role in the sales process and so falls outside the protection of the Directive.

Finally, the CJEU also ruled that where the services of an intermediary (eg, eBay) have been used by a third party to infringe a registered trade mark, EU Member States must ensure that the brand owner can obtain an effective, dissuasive and proportionate injunction against that intermediary to prevent continuation or repetition of that infringement by that third party.   

This is a potentially significant part of the CJEU's ruling because it may lead to the English Court imposing legal obligations on eBay aimed at preventing future infringements using its website.

Overall, the CJEU's judgment in L'Oreal v eBay will be welcomed by brand owners who will view it as a step forward in putting pressure on eBay and other sites to crack down harder on infringers and leave less of the leg work to the brand owners themselves. 

The English court's final ruling on implementing the decision will be eagerly awaited. 

Michael Gardner, head of Wedlake Bell LLP's IP & Commercial team and Randeep Grewal, solicitor specialising in brand protection.