The European court ruled in case C‑324/09 L’Oréal SA, Lancôme parfums et beauté & Cie SNC, Laboratoire Garnier & Cie, L’Oréal (UK) Ltd versus eBay International AG, eBay Europe SARL, eBay (UK) Ltd, Stephen Potts, Tracy Ratchford, Marie Ormsby, James Clarke, Joanna Clarke, Glen Fox, Rukhsana Bi.
The case concerns the following:
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.
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.
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.
33 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 http://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’.
It is common ground between L’Oréal and eBay that two of those 17 items are counterfeits of goods bearing L’Oréal trade marks.
Although L’Oréal does not claim that the other 15 items are counterfeits, it none the less considers that the sale of the items infringed its trade mark rights, since those items were either goods that were not intended for sale (such as tester or dramming products) or goods bearing L’Oréal trade marks intended for sale in North America and not in the European Economic Area (‘EEA’). Furthermore, some of the items were sold without packaging.
37 Whilst refraining from ruling at this stage on the question as to the extent to which L’Oréal’s trade mark rights have been infringed, the High Court of Justice has confirmed that the individual defendants made the sales described by L’Oréal on the website http://www.ebay.co.uk.
Second, L’Oréal submits that eBay is liable for the use of L’Oréal trade marks where those marks are displayed on eBay’s website and where sponsored links triggered by the use of keywords corresponding to the trade marks are displayed on the websites of search engine operators, such as Google.
Concerning the last point, it is not disputed that eBay, by choosing keywords corresponding to L’Oréal trade marks in Google’s ‘Ad Words’ referencing service, caused to be displayed, each time that there was a match between a keyword and the word entered in Google’s search engine by an internet user, a sponsored link to the site http://www.ebay.co.uk. That link would appear in the ‘sponsored links’ section displayed on either the right-hand side, or on the upper part, of the screen displayed by Google.
Thus, on 27 March 2007, when an internet user entered the words ‘shu uemura’ – which in essence coincide with L’Oréal’s national word mark ‘Shu Uemura’ – as a search string in the Google search engine, the following eBay advertisement was displayed in the ‘sponsored links’ section: ‘Shu Uemura Great deals on Shu uemura Shop on eBay and Save! http://www.ebay.co.uk’.
Clicking on that sponsored link led to a page on the http://www.ebay.co.uk website which showed ‘96 items found for shu uemura’. Most of those items were expressly stated to be from Hong Kong.
Similarly, taking one of the other examples, when, on 27 March 2007, an internet user entered the words ‘matrix hair’, which correspond in part to L’Oréal’s national word mark ‘Matrix’, as a search string in the Google search engine, the following eBay listing was displayed as a ‘sponsored link’: ‘Matrix hair Fantastic low prices here Feed your passion on eBay.co.uk! http://www.ebay.co.uk’.
Third, L’Oréal has claimed that, even if eBay was not liable for the infringements of its trade mark rights, it should be granted an injunction against eBay by virtue of Article 11 of Directive 2004/48.
L’Oréal reached a settlement with some of the individual defendants (Mr Potts, Ms Ratchford, Ms Ormsby, Mr Clarke and Ms Clarke) and obtained judgment in default against the others (Mr Fox and Ms Bi). Subsequently, in March 2009, a hearing dealing with the action against eBay was held before the High Court of Justice.
By judgment of 22 May 2009, the High Court of Justice made a number of findings of fact and concluded that the state of the proceedings did not permit final judgment in the case, as a number of questions of law first required an interpretation from the Court of Justice of the European Union.
In its judgment, the High Court of Justice notes that eBay has installed filters in order to detect listings which might contravene the conditions of use of the site. That court also notes that eBay has developed, using a programme called ‘VeRO’ (Verified Rights Owner), a notice and take-down system that is intended to provide intellectual property owners with assistance in removing infringing listings from the marketplace. L’Oréal has declined to participate in the VeRO programme, contending that the programme is unsatisfactory.
The High Court of Justice has also stated that eBay applies sanctions, such as the temporary – or even permanent – suspension of sellers who have contravened the conditions of use of the online marketplace.
Despite the findings set out above, the High Court of Justice took the view that eBay could do more to reduce the number of sales on its online marketplace which infringe intellectual property rights. According to that court, eBay could use additional filters. It could also include in its rules a prohibition on selling, without the consent of the trade mark proprietors, trade-marked goods originating from outside the EEA. It could also impose additional restrictions on the volumes of products that can be listed at any one time and apply sanctions more rigorously.
The High Court of Justice states, however, that the fact that it would be possible for eBay to do more does not necessarily mean that it is legally obliged to do so.By decision of 16 July 2009, which follows on from the judgment of 22 May 2009, the High Court of Justice decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:
‘(1) Where perfume and cosmetic testers (i.e. samples for use in demonstrating products to consumers in retail outlets) and dramming bottles (i.e. containers from which small aliquots can be taken for supply to consumers as free samples) which are not intended for sale to consumers (and are often marked “not for sale” or “not for individual sale”) are supplied without charge to the trade mark proprietor’s authorised distributors, are such goods “put on the market” within the meaning of Article 7(1) of [Directive 89/104] and Article 13(1) of [Regulation No 40/94]?
(2) Where the boxes (or other outer packaging) have been removed from perfumes and cosmetics without the consent of the trade mark proprietor, does this constitute a “legitimate reason” for the trade mark proprietor to oppose further commercialisation of the unboxed products within the meaning of Article 7(2) of [Directive 89/104] and Article 13(2) of [Regulation No 40/94]
(3) Does it make a difference to the answer to question 2 above if:
(a) as a result of the removal of the boxes (or other outer packaging), the unboxed products do not bear the information required by Article 6(1) of [Directive 76/768], and in particular do not bear a list of ingredients or a “best before date”?
(b) as a result of the absence of such information, the offer for sale or sale of the unboxed products constitutes a criminal offence according to the law of the Member State of the Community in which they are offered for sale or sold by third parties?
(4) Does it make a difference to the answer to question 2 above if the further commercialisation damages, or is likely to damage, the image of the goods and hence the reputation of the trade mark? If so, is that effect to be presumed, or is it required to be proved by the trade mark proprietor?
(5) Where a trader which operates an online marketplace purchases the use of a sign which is identical to a registered trade mark as a keyword from a search engine operator so that the sign is displayed to a user by the search engine in a sponsored link to the website of the operator of the online marketplace, does the display of the sign in the sponsored link constitute “use” of the sign within the meaning of Article 5(1)(a) of [Directive 89/104] and Article 9(1)(a) of [Regulation No 40/94]?
(6) Where clicking on the sponsored link referred to in question 5 above leads the user directly to advertisements or offers for sale of goods identical to those for which the trade mark is registered under the sign placed on the website by other parties, some of which infringe the trade mark and some [of] which do not infringe the trade mark by virtue of the differing statuses of the respective goods, does that constitute use of the sign by the operator of the online marketplace “in relation to” the infringing goods within the meaning of 5(1)(a) of [Directive 89/104] and Article 9(1)(a) of [Regulation No 40/94]?
(7) Where the goods advertised and offered for sale on the website referred to in question 6 above include goods which have not been put on the market within the EEA by or with the consent of the trade mark proprietor, is it sufficient for such use to fall within the scope of Article 5(1)(a) of [Directive 89/104] and Article 9(1)(a) of [Regulation No 40/94] and outside Article 7(1) of [Directive 89/104] and Article 13(1) of [Regulation No 40/94] that the advertisement or offer for sale is targeted at consumers in the territory covered by the trade mark or must the trade mark proprietor show that the advertisement or offer for sale necessarily entails putting the goods in question on the market within the territory covered by the trade mark?
(8) Does it make any difference to the answers to questions 5 to 7 above if the use complained of by the trade mark proprietor consists of the display of the sign on the web site of the operator of the online marketplace itself rather than in a sponsored link?
(9) If it is sufficient for such use to fall within the scope of Article 5(1)(a) of [Directive 89/104] and Article 9(1)(a) of [Regulation No 40/94] and outside Article 7 … of [Directive 89/104] and Article 13 … of [Regulation No 40/94] that the advertisement or offer for sale is targeted at consumers in the territory covered by the trade mark:
(a) does such use consist of or include “the storage of information provided by a recipient of the service” within the meaning of Article 14(1) of [Directive 2000/31]?
(b) if the use does not consist exclusively of activities falling within the scope of Article 14(1) of [Directive 2000/31], but includes such activities, is the operator of the online marketplace exempted from liability to the extent that the use consists of such activities and if so may damages or other financial remedies be granted in respect of such use to the extent that it is not exempted from liability?
(c) in circumstances where the operator of the online marketplace has knowledge that goods have been advertised, offered for sale and sold on its website in infringement of registered trade marks, and that infringements of such registered trade marks are likely to continue to occur through the advertisement, offer for sale and sale of the same or similar goods by the same or different users of the website, does this constitute “actual knowledge” or “awareness” within the meaning of Article 14(1) of [Directive 2000/31]?
(10) Where the services of an intermediary such as an operator of a website have been used by a third party to infringe a registered trade mark, does Article 11 of [Directive 2004/48] require Member States to ensure that the trade mark proprietor can obtain an injunction against the intermediary to prevent further infringements of the said trade mark, as opposed to continuation of that specific act of infringement, and if so what is the scope of the injunction that shall be made available?’
The Court’s decision:
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.