Online auctions defeated on trademarks

Auction websites like eBay may be liable to trademark rights holders if they are not taking appropriate measures to prevent infringement of trademark rights by professional traders, the European Court of Justice has ruled.

The European court was giving judgment in a case brought by L'Oréal where the cosmetics giant sought to make eBay prevent the auctioning of products that breached its trademarked brands.

Ruling in case C-324/09 L'Oreal v eBay, the court said that national courts hearing applications in such cases should be 'able to order the operator of an online marketplace to take measures which contribute not only to bringing to an end infringements of those rights by users of that marketplace, but also to preventing further infringements of that kind'.

It added: 'Those injunctions must be effective, proportionate, and dissuasive and must not create barriers to legitimate trade.'

L'Oréal brought proceedings to stop traders attracting bidders using trademarked names as keywords which brought up sponsored entries on the auction site, some of which linked to competing or counterfeit products.

In its defence, eBay said it merely provided a conduit for trade between sellers and buyers.

Emily Devlin, senior associate in the intellectual property group at Osborne Clarke, said the ruling was not strictly about the use of keywords as an aid to advertising but more about the principle of intermediaries' liability.

'The intermediaries' position is that it is up to the brand owners to police their brand,' she said. 'The reality is that there's always something illegal or counterfeit being sold online, and, while the sites will act on individual requests, it's not their role to police the use of a brand in general terms.'

The ruling follows the decision in Google France last March (case C-236/08), a case brought in the French courts by Louis Vuitton and other luxury brands, where the ECJ ruled that Google was not liable to brand owners for selling brands as keywords to advertisers not associated with the brands in question.

The only exception was where the referencing site '“ as in the eBay case '“ had played an active role giving it knowledge or control over the data stored, or failed to take action when made aware of the unlawful nature of the activity.

'The combined result of the two cases,' Devlin said, 'could be that a sponsored link could fall on the wrong side of the lawfulness line if consumers following a link about a particular brand expect to find a legitimate product but end up elsewhere.'

The Luxembourg court said in its ruling last week that an operator could be liable if it played an active role which gave it 'knowledge of, or control over, the data relating to the offers for sale, when it provides assistance which entails, in particular, optimising the presentation of the online offers for sale or promoting those offers'.

In such cases the operator could not rely on the exemptions from liability in the e-commerce directive.

The court went further, saying that, even where operators did not play such an active role, they could not escape liability if they were 'aware of facts or circumstances on the basis of which a diligent economic operator should have realised that the online offers for sale were unlawful and, in the event of it being so aware, failed to act promptly to remove the data concerned from its website or to disable access to them'.

While potentially increasing the burden on online auctioneers, the court's ruling also sets limits to the liability of operators.