CJEU (ECJ) Today Decided In Case C‑324/09 L’Oréal SA et al. vs. eBay International AG et al.

Today, the Court of Justice of the European Union (CJEU) has published the final decision in Case C‑324/09 (L’Oréal SA et al. vs. eBay International AG et al.).

From the Court decision we learn that L’Oréal is a manufacturer and supplier of perfumes, cosmetics and hair-care products. In the United Kingdom it is the proprietor of a number of national trade marks. It is also the proprietor of Community trade marks. L’Oréal operates a closed selective distribution network, in which authorised distributors are restrained from supplying products to other distributors.

Furthermore, eBay operates an electronic marketplace on which are displayed listings of goods offered for sale by persons who have registered for that purpose with eBay and have created a seller’s account with it. eBay charges a percentage fee on completed transactions. eBay enables prospective buyers to bid for items offered by sellers. It also allows items to be sold without an auction, and thus for a fixed price, by means of a system known as ‘Buy It Now’. Sellers can also set up online shops on eBay sites. An online shop lists all the items offered for sale by one seller at a given time. Sellers and buyers must accept eBay’s online-market user agreement. One of the terms of that agreement is a prohibition on selling counterfeit items and on infringing trade marks. In some cases eBay assists sellers in order to enhance their offers for sale, to set up online shops, to promote and increase their sales. It also advertises some of the products sold on its marketplace using search engine operators such as Google to trigger the display of advertisements.

According to the factual section of the Court decision, starting point was that on 22 May 2007, L’Oréal sent eBay a letter expressing its concerns about the widespread incidence of transactions infringing its intellectual property rights on eBay’s European websites. L’Oréal was not satisfied with the response it received and brought actions against eBay in various Member States, including an action before the High Court of Justice (England & Wales), Chancery Division.

L’Oréal’s action before the High Court of Justice sought a ruling, first, that eBay and the individual defendants are liable for sales of 17 items made by those individuals through the website www.ebay.co.uk, L’Oréal claiming that those sales infringed the rights conferred on it by, inter alia, the figurative Community trade mark including the words ‘Amor Amor’ and the national word mark ‘Lancôme’. The Court decision confirmed that it was common ground between L’Oréal and eBay that two of those 17 items are counterfeits of goods bearing L’Oréal trade marks.

The Court (Grand Chamber) today ruled:

1. Where goods located in a third State, which bear a trade mark registered in a Member State of the European Union or a Community trade mark and have not previously been put on the market in the European Economic Area or, in the case of a Community trade mark, in the European Union, (i) are sold by an economic operator on an online marketplace without the consent of the trade mark proprietor to a consumer located in the territory covered by the trade mark or (ii) are offered for sale or advertised on such a marketplace targeted at consumers located in that territory, the trade mark proprietor may prevent that sale, offer for sale or advertising by virtue of the rules set out in Article 5 of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, as amended by the Agreement on the European Economic Area of 2 May 1992, or in Article 9 of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark. It is the task of the national courts to assess on a case-by-case basis whether relevant factors exist, on the basis of which it may be concluded that an offer for sale or an advertisement displayed on an online marketplace accessible from the territory covered by the trade mark is targeted at consumers in that territory.

2. Where the proprietor of a trade mark supplies to its authorised distributors items bearing that mark, intended for demonstration to consumers in authorised retail outlets, and bottles bearing the mark from which small quantities can be taken for supply to consumers as free samples, those goods, in the absence of any evidence to the contrary, are not put on the market within the meaning of Directive 89/104 and Regulation No 40/94.

3. Article 5 of Directive 89/104 and Article 9 of Regulation No 40/94 must be interpreted as meaning that the proprietor of a trade mark may, by virtue of the exclusive right conferred by the mark, oppose the resale of goods such as those at issue in the main proceedings, on the ground that the person reselling the goods has removed their packaging, where the consequence of that removal is that essential information, such as information relating to the identity of the manufacturer or the person responsible for marketing the cosmetic product, is missing. Where the removal of the packaging has not resulted in the absence of that information, the trade mark proprietor may nevertheless oppose the resale of an unboxed perfume or cosmetic product bearing his trade mark, if he establishes that the removal of the packaging has damaged the image of the product and, hence, the reputation of the trade mark.

4. On a proper construction of Article 5(1)(a) of Directive 89/104 and Article 9(1)(a) of Regulation No 40/94, the proprietor of a trade mark is entitled to prevent an online marketplace operator from advertising – on the basis of a keyword which is identical to his trade mark and which has been selected in an internet referencing service by that operator – goods bearing that trade mark which are offered for sale on the marketplace, where the advertising does not enable reasonably well-informed and reasonably observant internet users, or enables them only with difficulty, to ascertain whether the goods concerned originate from the proprietor of the trade mark or from an undertaking economically linked to that proprietor or, on the contrary, originate from a third party.

5. The operator of an online marketplace does not ‘use’ – for the purposes of Article 5 of Directive 89/104 or Article 9 of Regulation No 40/94 – signs identical with or similar to trade marks which appear in offers for sale displayed on its site.

6. Article 14(1) of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) 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 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.

Where the operator of the online marketplace has not played an active role within the meaning of the preceding paragraph and the service provided falls, as a consequence, within the scope of Article 14(1) of Directive 2000/31, the operator none the less cannot, in a case which may result in an order to pay damages, rely on the exemption from liability provided for in that provision if it was aware of facts or circumstances on the basis of which a diligent economic operator should have realised that the offers for sale in question were unlawful and, in the event of it being so aware, failed to act expeditiously in accordance with Article 14(1)(b) of Directive 2000/31.

7. The third sentence of Article 11 of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights must be interpreted as requiring the Member States to ensure that the national courts with jurisdiction in relation to the protection of intellectual property rights are 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. Those injunctions must be effective, proportionate, and dissuasive and must not create barriers to legitimate trade.

Article 14 of the Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) reads as follows:

1. Where an information society service is provided that consists of the storage of information provided by a recipient of the service, Member States shall ensure that the service provider is not liable for the information stored at the request of a recipient of the service, on condition that:
(a) the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent; or
(b) the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information.
2. Paragraph 1 shall not apply when the recipient of the service is acting under the authority or the control of the provider.
3. This Article shall not affect the possibility for a court or administrative authority, in accordance with Member States’ legal systems, of requiring the service provider to terminate or prevent an infringement, nor does it affect the possibility for Member States of establishing procedures governing the removal or disabling of access to information.

The good news for eBay and other operators of e-commerce platforms is that in principle they can enjoy privileges from Article 14 quoted above provided that the operator has not played an active role allowing it to have knowledge or control of the data stored. It is the same old game: If, on the Internet and in your role as an intermediary, you dare to digg too deep into your customer’s business, you may well find yourself liable for any of your cusomer’s misconduct. In the particular circumstances discussed in the Court decision, an operator of an online marketplace 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.

Bad news is that in future national courts might well face some difficulties in determining the exact boundaries of Article 14 with regards to the facts and merits of every individual case coming up. We shall wait and see if this might develop into a roadblock for operators of online marketplaces in Europe.