• L'Oreal Bids Against Internet Infringers in eBay Test Case

    The High Court recently handed down judgment in L'Oreal's bid to combat infringements and counterfeits on the Internet through a trademark infringement action against eBay and specified eBay users.

    The judgment in L'Oreal S.A. and Ors. v eBay International AG & Ors. [2009] EWHC 1094 (Ch) found that eBay was not liable for acts of infringement committed by its users, but referred questions to the ECJ on whether eBay had infringed by purchasing L'Oreal's trademarks as keywords on search engines, which were then used to lead Internet users to eBay's site.

    No joint liability with users

    L'Oreal essentially claimed that by allowing sellers to offer counterfeit and infringing goods under L'Oreal's trademarks through its site, eBay was jointly liable with its users for such infringements. This was so notwithstanding the existence of eBay's VeRo program designed to remove advertisements for counterfeit or infringing products. VeRo could only deal with advertisements already posted, and by then, infringing use had been made and sales may already have resulted.

    In a detailed analysis, the judge acknowledged that the use by eBay users of L'Oreal's trademarks on counterfeit goods and goods not yet put on the market in the EEA with L'Oreal's consent could constitute infringement. He further noted that eBay could do more, perhaps a great deal more, to prevent the sale of infringing products through its site. However, he did not regard eBay as being jointly liable with its users for trademark infringement because that issue was to be determined under UK domestic law, which did not impose any legal obligation on eBay to prevent third-party infringements through its site.

    The judge thought it possible, though, that eBay might still be subject to an injunction against acting as an intermediary to infringing acts under the IP Enforcement Directive. The judge referred questions to the ECJ on the nature and scope of the relief available.

    Primary liability

    L'Oreal also claimed that eBay was primarily liable for trademark infringement by reserving a number of L'Oreal's trademarks as keywords through Internet search engines such as Google. When entered by users searching the Internet, these would trigger sponsored ads leading to eBay's site, which offered inter alia counterfeit and infringing goods.

    The judge noted that keywords raised thorny questions of interpretation concerning the nature of use, and that related questions were already before the ECJ. Nonetheless, eBay raised special further issues that might not already be covered by the pending references and he decided to refer questions on this also to the ECJ.

    Similar questions were to be referred concerning eBay's use of L'Oreal trademarks in drop-down lists on its website, which enabled prospective buyers to search for products, including ultimately infringing and counterfeit products, by product sector and brand name.

    Comment

    Given that ECJ guidance was needed on so many issues, the only major questions determined so far are that eBay has no legal duty to prevent infringements by third parties on its website under English law, and is not jointly liable with its users for their offer of infringing or counterfeit products through the site.

    This hardly disposes of the matter for eBay, though, since the questions referred include ones relating to its possible liability to an injunction against acting as an intermediary and its potential primary liability for infringement in respect of keyword use and drop-down lists. Other issues, too, were referred, including whether eBay might have a defence to any primary liability under the "safe-harbour" provisions of the E-Commerce Directive.

    The guidance in this case will be important given the challenges posed by eBay's innovative Internet business model, as well as similar Internet businesses by others, where counterfeits and infringements are much harder to combat than in normal trade. Indeed, the judge himself remarked that eBay arguably should take on the cost of dealing with infringements itself as a cost of running its innovative business model, and reclaim the cost of insuring against the risk from its actual users rather than allowing the cost to fall, as it currently does, on brand owners.

    Given the difficulties of the case it may be too much to hope for that all the issues will be resolved by the ECJ's guidance, once handed down. However, that the ECJ should tackle the task seriously is only right given the very real problems for brand owners posed by Internet-based infringements. Disputes of this nature are far from clear, and hardly over.