Online marketplace operators liable for trade mark abuse

July 15, 2011

This article was written for and first feature on Real Business

If you're an online marketplace operator and your users list counterfeit goods or parallel imports, you could be liable, says a new ruling by the European Court.

The judgment followed a case bought by luxury cosmetic giant L'Oréal in the English High Court over the unauthorised re-sale of tester perfume bottles. 

L'Oréal argued that eBay should be liable for the counterfeit goods and parallel imports sold on its website, and that eBay's Verified Rights Owner or VeRO programme (a notice and take-down system that is intended to assist brand owners in removing infringing listings) was unsatisfactory. 

eBay, it argued, should do more to prevent, or at least minimise, sales of counterfeit goods and parallel imports. 

The case was suspended at the English High Court while it asked the Court of Justice of the EU (CoJ) for guidance on when, under EU law, online marketplace operators will be liable for infringements committed by its users. The eagerly anticipated judgment was given at the CoJ this week. It will have far-reaching implications for all online marketplace operators which allow users to sell branded goods and counterfeit goods.

Here's what you need to know about the ruling:

  1. EU trade mark laws will apply to offers for sale and advertisements on an online marketplace which relate to trade marked goods located outside the EU, if those offers for sale and advertisements target EU consumers.
  2. A trade mark owner can prevent an online advertiser using trade marks as keywords in search engines such as Google, if the keyword leads to a website where a consumer is misled into believing that the website is connected with the trade mark owner.
  3. Online marketplace operators will be exempt from liability under EU law for hosting data supplied by their users, where they provide their services neutrally by a technical and automatic processing of that data.
  4. If an online marketplace operator provides assistance and by doing so promotes the sale of counterfeit goods and parallel imports, it plays an "active" role. This will be deemed to give online marketplace operators knowledge of, or control over, the data relating to the counterfeit goods and parallel imports and they will be liable for trade mark infringement. 
  5. Even where an online marketplace operator has played a neutral role, it may still be liable for its users' infringements if it was aware or should have been aware of the sale of counterfeit goods and parallel imports and in the event of it being aware of this, it failed to act expeditiously. 
  6. National courts within the EU must have the power to grant injunctions to order online marketplace operators to take measures that not only end known infringements, but also prevent further infringements, provided this does not create barriers to legitimate trade within the EU.
  7. In order to avoid liability for being deemed to have knowledge of its users’ infringements, eBay is likely to be required to put in place procedures that stop known infringers who are likely to continue infringing activities, from subsequently doing so. The Verified Rights Owner or VeRO programme currently focuses on infringing listings and not infringing users. The practical and cost implications to eBay may be extensive. 
  8. The European judgment is not the end of the matter. The guidance it provided will need to be applied by national courts throughout the EU. Since it was the English High Court that asked for this guidance, it will need to apply the guidance in the case L'Oréal bought against eBay in the UK. It is likely to be at least six months before the English High Court makes a ruling.
  9. As a result of the judgment, online marketplace operators like eBay will need to be more proactive in working closely with brand owners to protect brands. 
  10. This is a good result for brand owners, although some would say that until the English High Court applies this guidance, the jury is still out on whether it will result in any real benefit in the fight against online sales of counterfeit goods and parallel imports.

Related pages:

Agency, Distribution and International Trade more

Fashion more

Intellectual property more

Litigation, Arbitration and Alternative Dispute Resolution more

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