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eBay Could Be Liable for Sale of Counterfeit Goods, Says European Court

Source: WSJ - Laurence Norman

Posted on 12 Jul 2011

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Europe's highest court said Tuesday, In a ruling on a case brought by cosmetics company L'Oreal SA, Europe's highest court said Tuesday that U.S.-based eBay Inc. and similar online marketplaces may be liable if their users sell counterfeit goods through their websites.

The European Court of Justice said the operators of online marketplaces aren't exempt from liability if they have knowledge of, or control over, information about items for sale on their websites. They also could be liable if they have information to suggest any online sales are unlawful but fail to act promptly in removing the items or blocking the sale from their websites.

In a mixed ruling that responded to the U.K. High Court's request for clarification on issues concerned with the obligations of Internet marketplace operators, the European court also ruled that European Union trademark rules apply to items for sale from non-EU countries when these are clearly targeted at EU consumers.

L'Oreal said it was satisfied with the ruling, which was "a step towards effectively combating the sale of counterfeit brands and products via the Internet." The ruling is in line with the position it has taken for several years, it added.

L'Oreal first notified eBay of concerns about the sale of its goods on eBay's European websites in 2007. L'Oreal wasn't satisfied with eBay's response and brought an action before the High Court in London claiming that eBay was jointly liable for infringements committed by its users.

The potential infringements included eBay users selling samples of L'Oreal perfumes and cosmetics that were intended for free distribution, removing outer boxes from perfumes and cosmetics before selling them via eBay, and selling L'Oreal products intended for markets outside of Europe.

Stefan Krawczyk, senior director and counsel government relations for eBay Europe, said Tuesday's court judgment provides clarity on certain issues and ensures that all brands can be traded online in Europe.

"As a marketplace, eBay provides a level playing field for all online sellers and will continue building constructive partnerships to expand the range of brands being sold on eBay," he said.

The European Court of Justice said that under EU law, national courts can order operators, such as eBay, to take measures to stop existing infringements of intellectual property rights and to prevent further infringements.

However, in eBay's favor, the court also said Internet-marketplace operators can't be liable for trademark infringements if they merely enable customers to display signs corresponding to trademarks on its website.

Kirsten Gilbert, partner at intellectual property specialists Marks & Clerk, said the ruling would be welcomed by brand owners, and would also reduce inconsistency regarding the online counterfeiting trade.

"European trademark law has been straining under the pressure of dealing with the internet age. The information revolution and the rise of online commerce have created a host of scenarios never envisaged when our laws were drafted. Today's ruling will give national courts guidance on how to approach just one of these scenarios," she said.