ECJ online marketplace ruling gives brand owners certainty, says expert

Out-Law News | 12 Jul 2011 | 4:29 pm | 2 min. read

A ruling from the European Court of Justice (ECJ) which will make online marketplaces responsible for some sellers' trade mark infringements will make brand owners more sure of their rights than before, an expert has said.

Iain Connor, an intellectual property law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM, also said that the ruling will place a greater burden on companies such as eBay to police the sale of potentially-fake products.

The ECJ said that online marketplaces retain their immunity from liability for infringing sales unless they have "played an active role" in the sale, This could include promoting or improving the presentation of sales.

"The case gives clarity as to the remedies available to trade mark owners who find unlawful products bearing their trade marks for sale on online market place sites," said Connor. "It will mean that operators of such sites must have adequate and effective notice and take down procedures if they are to avoid having to pay damages arising from the unlawful sale of the products."

Companies that make it possible for third parties to sell goods or services through them are not usually liable for illegality in those sales, according to the EU's E-Commerce Directive. Once companies are aware of illegality they must act quickly to stop the sale.

In a dispute between L'Oreal and online auction site eBay over the sales of fake perfumes, the ECJ has said that this exemption does not apply when marketplaces take an "active role" in promoting sales and gather information that should lead it to be aware of trade mark infringements.

"[The E-Commerce Directive] ... must be interpreted as applying to the operator of an online marketplace where that operator has not played an active role allowing it to have knowledge or control of the data stored," the ECJ said in its ruling.

"The operator plays such a role when it provides assistance which entails, in particular, optimising the presentation of the offers for sale in question or promoting them," the ECJ ruling said.

"In circumstances where it optimises search results to promote certain goods over others all eBay is put on notice that unlawful goods are being sold it can be found liable for trade mark infringement and ordered to pay damages," said Connor.

The ECJ said that even marketplaces which do not promote infringing sales will lose their right to exemption from liability for sellers' trade mark infringements if "a diligent economic operator" should have been able to tell that sales were unlawful and it failed to stop them.

The case was referred to the ECJ from the UK High Court. L'Oreal had argued that eBay should be found jointly to blame when users of their site infringe their trade mark rights by selling their goods without their permission.

The ECJ said that EU member states must make sure that courts have the power to force online marketplaces to identify potentially-infringing sellers. It said that operators such as eBay must identify sellers, and that the right of buyers to identify those selling as a business was more important than individual sellers' data protection rights.

"The ECJ has made clear that member states must provide for adequate remedies to prevent trade mark infringement. This can involve awarding injunctions against eBay to stop the sale of unlawful goods provided those injunctions do not create barriers to legitimate trade," Connor said.

The Court also ruled on L'Oreal's claim that eBay's purchase of its trade marked terms as search engine keywords infringed its rights.

As it has in previous cases, the ECJ ruled that the use of L'Oreal's trade marks as keywords was permitted as long as the adverts that appeared beside search results did not confuse users into thinking that they were connected with L'Oreal.

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