One of the most eagerly awaited court decisions in Europe has been handed down today by the European Court of Justice (the "ECJ") in Luxemburg. The case concerns use of trade marks online and, in particular, the liability of online service providers - in this case eBay. It is likely to be an important decision in clarifying where the balance lies in the liability of online service providers for unauthorised acts which take place over their services.

Background

The cosmetics company L'Oreal, sued in respect of items bearing its trade marks being sold via eBay, and the case was originally heard by the English High Court in 2009. Specimen claims were brought in respect of 17 items which were offered for sale via ebay.co.uk. Of these, a few were counterfeit and the rest were said to be goods which had been parallel imported from outside the European Economic Area. Some of the goods were sold without their original packaging.

L'Oréal had initially also sued a number of individuals who were selling the goods via eBay but each of these cases had either been dealt with or settled by the time the case reached the ECJ.

The High Court referred a number of questions of EU law to the ECJ. In doing so, it noted that it felt that eBay could do more to filter the activities of sellers, though it was unclear whether eBay was obliged to do so under the current state of EU law. The allegations considered by the ECJ were:

1. That eBay was also liable with the individuals for sales of those 17 items;
   
2. That by the display of L'Oréal's trade marks on the eBay website and also by the purchase of sponsored links as adwords from search engines such as Google, eBay was liable for the use of L'Oréal's trade marks; and
   
3. That whether or not eBay was liable for the trade mark infringements, L'Oréal should be entitled to an injunction against eBay under the provisions of Article 11 of the EU IP Enforcement Directive.

The ECJ's Findings

Particular findings of interest by the ECJ were:

• If an individual seller sells an item on eBay, then that may well not amount to a sale in the course of trade and if so, does not infringe trade marks. However, if due to their volume, frequency or other characteristics the sales made on such a market place go beyond what would be considered a private activity, then they will amount to sales in the course of trade. The individual sellers in this case were found to be acting in the course of trade.
  
• On whether the use of adwords by eBay amounted to infringement, the ECJ referred back to its decisions in the Google cases (Joined Cases C-236/08 to C238/08 Google France and Google). There were two uses; to advertise eBay and to advertise the goods sold. The ECJ held that eBay's use to advertise its own services was not in respect of identical or similar goods or services to those for which the marks were registered. However, such use may be covered by trade mark infringement provisions relating to use of marks with a reputation.
  
• To the extent that eBay used the key words to refer to the goods themselves, then that activity may amount to use of a trade mark on identical or similar goods to those for which the mark was registered. This was the case even though the goods themselves were actually being sold by a third party (the eBay seller).
  
• L'Oréal could sue eBay where the keyword is used in a way which did 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". This is the same test as the Court set out in the Google cases.
  
• What about the use of the marks on the eBay website itself? Here, the Court held that the use was made not by eBay but by the sellers and so eBay was not liable, though it may be possible for rights-owners to obtain an injunction against eBay.
  
• One of the key questions was whether eBay fell within the "hosting" defence under Article 14 of the E-commerce Directive. In order to fall within the defence, the service provider has to be neutral in the sense that it merely carries out a technical and automatic processing of data provided by its customers. If instead it plays an active role, then this changes its position. Here, it was held that eBay did provide some assistance to optimise some offers for sale and the ECJ clearly felt that this may expose eBay to liability. However, it remitted the issue back to the English Court to consider.
  
• Even if it did act neutrally, could eBay always rely on the safe harbour defences, in particular the hosting defence under Article 14? Not necessarily, according to the Court. If the service provider had been "aware of facts or circumstances from which the illegal activity or information is apparent" then it would be liable. Awareness in this context meant the service provider being "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". What this means is any given case is going to be hugely important, but it appears to mean more than simply being aware because a rightsowner has complained.
  
• Taking this theme on, the ECJ's final finding was in respect of what sort of injunction could a rightsowner obtain against a service like eBay, did it have to be limited to specific infringements or could it also cover future conduct? The concern of service providers is that this may introduce some form of obligation on them to filter or monitor what happens on their sites. The ECJ held that the relevant EU law (Article 11 of the IP Enforcement Directive) could not be read so narrowly as to only relate to stopping existing infringements. Specifically a site can now be ordered to suspend particular users. The Court suggested services could also be ordered to take measures to enable users to be identified easily - though the Court made no reference to the data protection issues this may give rise to. It also stressed that this was not an exhaustive list, there may be other steps service providers can be forced to take.

Conclusion

The L'Oreal case will be seen by rightsowners as an important step in making it easier for them to control their rights online. It clearly does increase the onus on service providers to some extent, though its effects may be more obvious with e-commerce sites than content platforms. That said, there will be an early opportunity to measure its effect when the English Court rules shortly in the Newzbin2 case. That case, in which rights-owners are seeking an injunction against UK ISPs to force them to block access to an offshore content site, also relates to the scope of injunctions against service providers and was heard by the same UK judge as L'Oreal, Mr Justice Arnold. Judgment in that case is currently pending and Arnold J will now inevitably take the ECJ's decision in L'Oreal into account.