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ECJ could increase online sellers' liability for trade mark infringements

UPDATED: E-commerce sites will have to track and block repeat sellers of fakes through their sites or be liable for trade mark infringement if the Court of Justice of the EU (ECJ) follows the recommendations of an advisor.09 Dec 2010

An ECJ Advocate General has published an opinion that says that electronic marketplaces like eBay lose their exemption from liability for a seller's trade mark infringements if they fail to stop repeat offences.

Marketplaces are protected as information society service providers from proactively stopping members or users from breaking the law. If the Advocate General's opinion is followed, though, they will lose some of that protection. Opinions of Advocates General are not binding on the ECJ but are followed in the majority of cases.

Companies generally are not liable for users' unlawful actions; but they can become liable when they gain 'actual knowledge' of such actions if they fail to react quickly.

Advocate General Niilo Jääskinen said that if the same user keeps uploading the same goods and committing the same trade mark infringement, then this could be considered to be one act, not several, and therefore eBay has a duty to act to prevent it.

"Regarding the same user and the same trade mark an operator of an electronic marketplace has actual knowledge in a case where the same activity continues in the form of subsequent listings and can also be required to disable access to the information the user uploads in the future. In other words, exemption from liability does not apply in cases where the electronic marketplace operator has been notified of infringing use of a trade mark, and the same user continues or repeats the same infringement," he said.

L'Oréal sued eBay, claiming that it was jointly liable with trade mark-infringing sellers because it did not do enough to stop them. But Jääskinen said that EBay does not break trade mark law when it allows sellers to advertise fake goods using a real manufacturer's name and logo.

The fact that the site helps sellers make listings does not make eBay responsible, said Jääskinen.

EBay is also entitled to use other companies' names in adverts placed on other sites, such as Google's, said the opinion. The fact that some of the goods claiming to be made by those companies might be fake does not mean that eBay itself is committing trade mark infringement, the advisor to Europe's highest court said.

L'Oréal said the company was liable for trade mark infringement when it used its trade marks in ads for eBay in adverts on Google's search engine. L'Oréal said that the ads linked to listings which were mostly made up of fake items, and that therefore eBay used its trade marks to direct buyers to infringing goods.

L'Oréal also argued that because eBay helps users to put together their auction and sales listings it is closely involved in the infringing activity.

EBay argued that it was not even making commercial use of L'Oréal's trade marks because while L'Oréal used them to sell cosmetics, it used them to sell its services as a place where cosmetics can be bought.

Advocate General Jääskinen recalled a recent ECJ ruling in a dispute about the use of trade marks in Google's AdWords advertising system which said that if web users see adverts as creating an alternative source of the goods then trade mark use will be in relation to the goods or services of the trade mark holder and therefore covered by EU trade mark law.

"Though ... the use of a trade mark by a marketplace operator is inherently different than the use by a seller of goods, I cannot agree that the marketplace operator would not be using the trademark in relation to the goods traded on the marketplace if he uses a sign identical with a trademark in his own advertising," said the opinion.

The Advocate General said that it is not trade mark infringement for eBay to use other brands in adverts because it cannot automatically be held responsible for the trade mark infringement of its users.

"As a matter of principle I do not think that possible problems relating to the conduct of individual market participants could be imputed to the marketplace operator unless there are grounds for secondary liability pursuant to national law," he said. "A company operating a shopping centre cannot be responsible if a grocery in its premises sells rotten apples ... a marketplace operator is entitled to presume that market participants using its services act legally and follow the agreed contractual terms and conditions relating to the use of the marketplace until it is concretely informed of the contrary."

Jääskinen said that use of trade marks on eBay by people selling fakes is not use by eBay but use by the fake-sellers.

The Advocate General said that eBay is an information society service provider, and therefore has an exemption from liability from infringements committed by its users. He said, though, that while this exemption applied to the use of trade marks within eBay, it did not apply to eBay's use of trade marks in Google and other companies' advertising systems.

Jääskinen said that if eBay is given actual knowledge of infringement then it will become liable for that infringement if it does not act to prevent it. He defined what 'actual knowledge' should consist of.

"It is evident that the service provider must have actual knowledge of, and not a mere suspicion or assumption regarding, the illegal activity or information," he said. "It also seems to me that legally ‘knowledge’ may refer only to past and/or present but not to the future. Hence, in the case of an alleged trade mark infringement on an electronic marketplace, the object of knowledge must be a concluded or ongoing activity or an existing fact or circumstance."

"The requirement of actual knowledge seems to exclude construed knowledge. It is not enough that the service provider ought to have known or has good reasons to suspect illegal activity," he said. Service providers must not have a general obligation to monitor users imposed on them, he said.

Kim Walker, an intellectual property specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, said that if the ECJ follows the opinion of the Advocate General, the ruling will place a greater duty of marketplace operators.

"Once they are made aware of a specific infringement, [the opinion suggests] they are expected to deal with it once and for all and can’t get away with taking it down and treating it as dealt with for the purposes of immunity, taking no steps to check whether it has been re-posted," he said. "The opinion doesn’t seem to change the law on eBay’s responsibility for sales of fakes, but  it does raise the bar on how it must act once notified in order to claim immunity."

"It will be interesting to see whether the Court follows this – I think it will," said Walker. "Even marketplaces smaller than eBay should be able to impose, through their filtering software, checks on specific infringements to pick up if they are promptly being repeated."

Editor's note, 10/12/2010: This story was updated to add the comment from Kim Walker.