ECJ addresses online marketplaces’ liability for trademark infringements committed by their users

On 12 July 2011 the European Court of Justice (“ECJ” or the “court”) handed down its long awaited decision in LOreal v. eBay clarifying several key aspects of the potential liability faced by online marketplaces for infringement committed by their users.

In this case, L’Oreal claimed that eBay had engaged in direct or contributory trademark infringement by: (1) displaying its trademarks on eBay’s website (through the display of its sellers/customers’ offer for sale of infringing goods bearing L’Oréal’s trademarks), (2) selecting L’Oreal trademarks on Google AdWords services, and (3) not implementing appropriate means to stop or prevent the sale of goods infringing its trademarks despite having knowledge of such infringement or, at least, of facts and circumstances from which these infringement were apparent.

Additionally, L’Oreal claimed that even if eBay was held not liable under the ecommerce Directive – because shielded by the “hosting defense” of article 14 – it should still be subject to an injunction under the IP Enforcement Directive to implement appropriate means to stop and prevent the occurrance of existing and future infringement on its platform.

In May 2009, the High Court of Justice of England and Wales, before which the case is pending on the merits, issued a preliminary decision and referred a number of questions to the ECJ relating, notably, to the liability and obligations of online marketplaces for their customer’s behavior.

The ECJ decision provides several insights, most notably on: (1) the issue of keyword advertising, (2) the availability of the “hosting defense” for online marketplaces, (3) the standard of “awareness” entailing liability under article 14(1) of the ecommerce Directive, and (4) the availability of injunctive measures against online intermediaries under the IP Enforcement Directive.

1) Clarification on keywords advertising

With regard to the selection by eBay of L’Oréal’s trademarks as AdWords to trigger advertisements leading to its online selling platform or to its customer’s offers, the court first confirmed its findings in its Google France (see Newsletter 2/2010 p. 7) and Portakabin rulings that such use:

  • is a use in the course of trade in so far as it is aimed at promoting eBay’s online marketplace services,
  • may affect one of the essential functions of L’Oreal’s trademarks if it does not enable reasonably well-informed users – or enables them only with difficulty – to ascertain whether the goods or services referred to by the advertisement originate from the proprietor of the Trademarks or from an undertaking economically linked to it or from a third party.

In line with the Advocate Generals opinion (see Newsletter 6/2010 p. 6), the ECJ added that such AdWords use should also be considered “in relation to identical goods or services” with those for which L’Oréal’s trademarks are registered, insofar as eBay used those keywords to promote its customers’ offers.

2) Availability of the “hosting defense” for online marketplace

On this point, the ECJ ruled that a service provider, such as a marketplace, is entitled to the exemption of liability of article 14 only to the extent that it confines itself to “providing an intermediary service, neutrally, by a merely technical and automatic processing of the data provided by its customers.” If, by contrast, this operator “plays an active role of such a kind as to give it knowledge of, or control over, those data,” it will lose the benefit of this exemption. For the court, an active role can be characterized, for instance, “where the operator has provided assistance to its customers which entails, in particular, optimizing the presentation of the offers for sale in question or promoting those offers.”

3) Clarification regarding the standard of “awareness” entailing liability under Article 14(1) of the ecommerce Directive.

The court held that the standard of duty required for an operator to rely on the exemption from liability under article 14 of the e-commerce Directive is that of a “diligent operator.

Moreover, the court added that the relevant awareness “of facts and circumstances from which the illegal activity is apparent” – a factor in creating liability for the service provider under article 14(1) of the e-commerce Directive – can arise as a result of (1) an investigation undertaken at the marketplace’s own initiative or (2) a notification from the right holder.

4) Clarification on the measures available under the IP enforcement Directive

Finally, the court held that national courts with jurisdiction in relation to the protection of IP rights should be allowed to order an online marketplace to take any effective, proportionate and dissuasive measures, which would contribute to not only stopping infringements already committed on their platform but also to preventing further infringements of that kind. [Béatrice Martinet Farano]