L’Oréal v eBay: Advocate General’s Opinion

December 9, 2010

The opinion of the Advocate General assigned to the reference of the case of L’Oréal v eBay by the High Court (see [2009] EWHC 1094 (Ch)) has now been published. It can be accessed in full here. The Court has issued a press release summarising the Opinion and this is reproduced below. The Advocate General took the view that the case raised issues that were ‘more complicated than [those in] Google France and Google in many aspects’.

The Advocate General states (at [100]-[102]) that a trade mark is used in relation to goods both when it is used by the trade mark proprietor for the purposes of distinguishing his goods from a third party’s goods and when it is used by a third party to distinguish his goods from the trade mark proprietor’s goods. He considers that a third party can use the trade mark to distinguish between the goods of the trade mark proprietor and other goods that may or may not be his own goods. Thus a party who is in the position of an intermediary or a marketplace operator also uses a sign ‘in relation to goods’ if he uses a sign which is identical with a trademark for the purpose of distinguishing between goods that are available through the use of his services and those that are not. He goes on:

I recall that the Court concluded in Google France and Google that in most cases an internet user entering the name of a trade mark as a search term is looking for information or offers on the goods or services covered by that trade mark. When advertising links to sites offering goods or services of competitors of the proprietor of that mark are displayed beside or above of the natural results of the search, the internet user may perceive those advertising links as offering an alternative to the goods or services of the trade mark proprietor. Such a situation constitutes a use of that sign in relation to the goods or services of that competitor.

In my opinion that analysis is applicable also in situations where the relevant advertising links are not those of direct competitors of the proprietor of the trade mark offering alternative goods but those of electronic marketplaces offering an alternative source of the same goods covered by the trade mark with respect to the distribution network of the trade mark proprietor.

The Advocate General compares eBay with a shopping centre operator which could not be held liable for the sale of rotten apples within its centre. He states (at [117]-[118]) that a marketplace operator is entitled to presume that market participants using its services act legally and follow the agreed contractual terms and conditions relating to the use of the marketplace until it is concretely informed of the contrary. It follows that, if the nature of an operator as a marketplace is sufficiently clearly communicated in the ad displayed with the search results of an Internet search engine, the fact that some users of that marketplace may infringe a trade mark is as such not liable to have an adverse effect on the functions of quality, communication and investment of that trade mark. 

There are some interesting reflections on the ‘hosting exemption’, especially this (at [145]-[147]):

The judgment in Google France and Google seems to suggest that the hosting provider referred to in Article 14 of Directive 2000/31 should remain neutral in relation to the hosted data. It has been argued before this Court that eBay is not neutral because eBay instructs its clients in the drafting of the advertisements and monitors the contents of the listings.

As I have explained, ‘neutrality’ does not appear to be quite the right test under the directive for this question. Indeed, I would find it surreal that if eBay intervenes and guides the contents of listings in its system with various technical means, it would by that fact be deprived of the protection of Article 14 regarding storage of information uploaded by the users.

Moreover, as a general remark on the three exceptions laid down in Articles 12, 13 and 14 of Directive 2000/31, I should say something which may seem obvious. The three articles intend to create exceptions to certain types of activity exercised by a service provider. To my understanding, it is inconceivable to think that they would purport to exempt a service provider type as such.

The stand-out aspect of the Opinion for IT lawyers is that, while eBay is not liable for potentially infringing information posted by users on its site in general, it can be held liable for any infringements from the moment it is notified of a trademark breach and also for content it transfers to search engines.

Mark Owen of Harbottle & Lewis commented on the Opinion:
‘There is an unwelcome sting in the tail for services which host content posted by users, such as YouTube, eBay and Facebook. Up until now, if any of that material infringes, the law has created a balance which acknowledges that it is impractical for the sites to clear all that material in advance and so protects them from liability provided that they remove the material promptly when they receive notifications that trade marks or copyrights are being infringed. They have no duty to monitor in advance what is posted onto their sites. The onus is on the rights-owners to be vigilant for infringements appearing on such sites and then complain.
Even if the same offender comes back selling infringing goods or re-posting the same infringing content, the legal position has been widely thought to be that the onus is still on the rights-owner to keep monitoring and notifying the hosting site, whose only obligation is to then take down the offending material each time. That this process can be repeated is time-consuming and costly for rights owners, but mildly inconveniencing for the infringer.
If today’s Opinion is followed by the Court then this would all change. The hosting sites would need to ensure that the same infringement did not take place again or risk being sued. Some may be able to afford systems which do this effectively (and indeed several of the larger sites are continually improving the tools they offer rights-owners to limit infringements), while others may find that some of their services became too costly or risky to continue offering. This has the potential to have a significant impact on the way we use many online services.’


ECJ Press Release Summary

eBay operates a global electronic marketplace on the internet where individuals and businesses can buy and sell a broad variety of goods and services. To attract new customers to its web site, the company has bought keywords, including well-known trade marks, from paid internet referencing services (such as Google’s AdWords) so as to direct clients to its electronic marketplace.

L’Oréal, owner of a wide range of well-known trade marks, accuses eBay of being involved in trade mark infringements committed by sellers on its internet marketplace. L’Oréal alleges that, by buying keywords corresponding to L’Oréal trade marks, eBay directs its users to infringing goods offered for sale on its website. Moreover, L’Oréal is of the view that the efforts taken by eBay to prevent selling infringing products on its electronic marketplace are inadequate. L’Oréal has identified different forms of infringement including the trade of counterfeit and unpackaged products as well as the sale of non-European Economic Area (EEA) source products to the EEA countries and the sale of product samples not intended for sale to consumers.

The High Court, before which the dispute is pending in the UK, has asked the Court of Justice a range of questions as to the nature of the infringing products identified by L’Oréal. Moreover, the High Court also wishes to know what an operator of an internet marketplace can be expected to do to prevent trade mark infringements by its users.

In his Opinion delivered today, Advocate General Niilo Jääskinen finds, first of all, that testers and dramming bottles, often marked with the words ‘not for sale’ or ‘not for individual sale’, which are not intended for sale to customers and are supplied without charge to the trade mark proprietor’s authorised distributors cannot be considered as being goods put on the market with the consent of the trade mark proprietor. It is therefore still up to the trade mark proprietor to decide if he intends to put these products on the market and he can also prohibit the sale of such products.

Similarly, trade mark protection can also be invoked where the goods offered for sale on the electronic marketplace have not yet been put on the market within the EEA by or with the consent of the trade mark proprietor insofar as the offer for sale is targeted at consumers in EEA countries.

As to the effects of the unboxing of trade marked cosmetic products, the Advocate General states that in the case of luxury cosmetics it cannot be excluded that the outer package of the product constitutes a part of the condition of the product due to its specific design which includes the use of the trade mark. According to Mr Jääskinen, in such cases the trade mark proprietor is entitled to oppose further commercialisation of the unpackaged goods insofar as the removal of the package impairs the functions of the trade mark of indicating the origin and quality of goods or damages its reputation.

Then, the Advocate General analyses eBay’s role in the trade mark infringements. In this context, he considers that although eBay does not itself sell L’Oréal goods on its website, it nevertheless offers an alternative source for buying them which coexists with the distribution network of the trade mark proprietor. Therefore, by reserving L’Oréal’s trade marks as keywords leading customers to its internet marketplace, eBay uses these trade marks in relation to goods marketed by L’Oréal under these signs.

However, according to the Advocate General, the use of the disputed trade marks as keywords by eBay does not necessarily result in misleading the consumers as to the origin of the goods offered. He finds that in cases where the ad itself is not misleading as to the nature of the advertising internet marketplace operator, the function of the trade mark of indicating the origin of the product is not likely to be jeopardised.

The Advocate General also makes it clear that if the use complained of by the trade mark proprietor consists of the display of the sign on the website of an operator of an electronic marketplace itself rather than in a sponsored link of a search engine, it cannot be deemed as use of the trademark in relation to goods by the marketplace operator, but by the users of the marketplace. In effect, in such cases, the marketplace operator merely allows its clients to use signs which are identical with trade marks without using those signs itself. Hence, the potential adverse effects to the trade mark resulting from the listing of trade mark protected goods by users of an electronic market place cannot be attributed, under EU trade mark law, to the marketplace operator.

Finally, the Advocate General discusses the interpretation given by the Court in the Google case according to which an information service provider storing information at the request of its client is exempted from liability for this information only if it remains neutral in relation to the hosted data. While noting that eBay may not be neutral in this sense because it instructs its clients in the drafting of the advertisements and monitors the contents of the listings, Mr Jääskinen does not consider that such an involvement in the preparation of the clients’ listings should result in losing the protection granted to businesses storing information uploaded by users. The Advocate General points out nevertheless that whilst eBay is generally exempted from liability for information stored by its clients on its website, it still remains liable for the content of data it communicates as an advertiser to a search engine operator. The exemption from liability does not apply either in cases where the electronic market place operator has been notified of the infringing use of a trade mark, and the same user continues or repeats the same infringement. In that latter case, a judicial injunction can also be given against the electronic marketplace operator to prevent the continuation or repetition of the infringement.