Cosmetics company L'Oréal has failed to show that eBay was
jointly liable with the sellers of fakes and illegally imported
goods and had "participated in a common design" to infringe its
trade marks, the Court said.
L'Oréal has embarked on over 100 lawsuits in Europe over eBay
trade in its goods. The company is taking action against sales of
its products or counterfeits of them which it believes damage its
business and reputation.
In its High Court case L'Oréal submitted evidence which showed
that of 287 test purchases that it made on eBay, only 84 products
were legitimate and intended for sale within the European Economic
Area (EEA).
It said that the agency it employed to conduct the purchasing
had not deliberately targeted auctions likely to carry fakes or
grey imports, but that still 14 of the products were counterfeits,
49 were never intended for sale and 139 were put on the market
outside of the EEA and not intended for import.
L'Oréal took a case against the sellers of the goods bought in
the test purchases, and won its argument that those people had
infringed its trade mark rights, either by selling fakes or by
selling goods put on the market outside of the EEA and not intended
for import.
It then sought to prove that eBay bore joint liability for these
trade mark infringements because it did not do enough to prevent
them.
EBay argued that it has a scheme that helps to police trade mark
infringement. The scheme is called VeRO (Verified Rights Owner).
L'Oréal does not participate in the scheme and said that it is
unacceptable because it puts the onus of preventing infringement
solely on the trade mark holder and does not punish rogue sellers
enough.
Much of the case was argued on the basis of European Union law,
but the question of eBay's liability, both sides agreed, was not
one that was harmonised at EU level, but was simply a question of
the law in England and Wales.
The judge in the case, Mr Justice Arnold, said that the most
appropriate legal precedents for deciding the question of joint
liability were those involving the sale of tape recording machines
in the 1980s.
Record companies had said that Amstrad was liable for the
copyright infringement of people who used the tape recording
machines to duplicate commercial recordings.
"What were the consequences in law, first of Amstrad knowing
that the majority of those who bought their machines would use them
to copy unlawfully pre-recorded cassettes protected by copyright
and, secondly, of their intention to supply that market?" said a
ruling that the Court referred to, from a 1986 case. "I am
satisfied that mere knowledge on the part of the supplier of
equipment that it would probably be used to infringe someone’s
copyright does not make the supply unlawful; nor does an intention
to supply the market for such user."
"Mere supplying with knowledge and intent will not be enough to
make the supplier himself an infringer or a joint tortfeasor with
someone who is," it said.
In another case involving Amstrad referred to by the High Court,
the question of what it meant to be a joint infringer of someone
else's rights.
"Joint infringers are two or more persons who act in concert
with one another pursuant to a common design in the infringement,"
it said. "The purchaser will not make unlawful copies because he
has been induced or incited or persuaded to do so by Amstrad. The
purchaser will make unlawful copies for his own use because he
chooses to do so. Amstrad’s advertisements may persuade the
purchaser to buy an Amstrad machine but will not influence the
purchaser’s later decision to infringe copyright."
L'Oréal said that eBay did participate in a common design to
infringe its trade mark rights because it acted along with the
individuals selling the goods in an action which resulted in
infringement.
It promoted the listings, exercised some control over the sale
and over the sellers both legally and technically and profited from
the sales. L'Oréal also argued that eBay was involved in the
infringement as it went along, which is different to Amstrad which
sold a machine which only later was used to infringe
"In the present case the infringing acts are acts of
advertisement, offer for sale, exposure for sale and sale which are
committed by means of the [eBay site]," said the ruling, outlining
L'Oréal's case. "Thus, counsel argued, the infringing acts
themselves are subject to the control of eBay Europe and eBay
Europe profit from the infringing acts themselves."
L’Oréal also said that eBay should accept liability and deal
with the consequences of it by insuring against it.
EBay argued that it had no obligation to protect other people's
trade marks, and that the site was just a tool that did not
distinguish between the sale of infringing and non-infringing
goods. At worst, it said, it was guilty of facilitating sales that
it knew might break trade mark laws, and that this was not
sufficient to make it legally liable for those sellers' trade mark
infringements.
Mr Justice Arnold said that it was not an easy case to rule on.
"I have found this a difficult issue to decide," he said. "It
requires the application of well-established principles to a new
and rather different scenario to those to which they have
previously been applied. In particular, I agree with counsel for
L’Oréal that the situation in the present case is rather different
to the situation which exists where the defendant sells a product
or machine and the infringement is subsequently committed by the
purchaser."
"I confess to having considerable sympathy with the suggestion
that eBay Europe could and should deal with the problem of
infringement by accepting liability and insuring against it by
means of a premium levied on sellers. In characterising L’Oréal’s
claim as an attack on eBay’s business model, it seems to me that
counsel for eBay Europe came close to the heart of the issue," he
said.
"As the evidence in this case graphically demonstrates, eBay and
its competitors have created a new form of trade which carries with
it a higher risk of infringement than more traditional methods of
trade. I consider that there is much to be said for the view that,
having created that increased risk and profited from it, the
consequences of that increased risk should fall upon eBay rather
than upon the owners of the intellectual property rights that are
infringed."
"Nevertheless, I have concluded that the three main points made
by counsel for eBay Europe are well founded and add up to a
complete answer to L’Oréal’s case," he said.
"As a matter of domestic common law, eBay Europe are under no
legal duty or obligation to prevent infringement of third parties’
registered trade marks," said Mr Justice Arnold.
The judge had said earlier in his ruling that eBay could do more
to stop trade mark infringing sales going ahead. It could
pre-filter listings; use better filters on more aspects of the
listing; demand disclosure of sellers' identities; restrict volumes
of high risk goods, such as perfumes; implement new
anti-infringement policies; take better account of negative
feedback; and take tougher action on infringers, he said.
But that does not mean that eBay is legally responsible for
fakes and grey imports. "The fact that it would be possible for
eBay Europe to do more does not necessarily mean that they are
legally obliged to do more," he said.
The judge also dealt with L'Oréal's claims that eBay directly
infringed its trade marks in its use of keyword advertising, an
aspect of the case dealt with in another of today's OUT-LAW.COM
reports.
