The UK eBay decision - raises more questions than it answers?

L’Oreal made three key claims against eBay in the proceedings:

that eBay was jointly liable with infringing users for trade mark infringement, in relation to the sale of counterfeit products on its website;
that eBay was primary liable for the infringement of specific marks, by eBay’s use of sponsored links on third party search engines and on the eBay site itself; and
even if eBay was not liable for trade mark infringement on either ground, that L’Oreal was entitled to an injunction against eBay to restrain future infringements under the EU Enforcement Directive.

In terms of joint liability, the Court found that eBay had not acted as a joint tortfeasor with users selling counterfeit products because eBay had not participated in a common design with those users. Although the Court acknowledged that eBay in fact facilitated the infringement of third parties’ trade marks by users, and that eBay knew of and profited from such infringements, it held that facilitation with knowledge and an intention to profit was not enough to prove joint tortfeasorship. This accords with the Australian position on joint tortfeasorship, as in 2006 the Federal Court held that the operator of an open-air market was not liable as a joint tortfeasor with infringing stallholders, because the operator and stallholders were not acting pursuant to a common purpose: Louis Vuitton Malletier SA v Toea Pty Ltd (2006) 237 ALR 118.

However, the Court was not as confident in dismissing eBay’s liability in relation to eBay’s use of trade marks in sponsored links. Sponsored links involve eBay “purchasing” key words (such as “L’OREAL”) from search engines such as Google and Yahoo, meaning that when a user types “L’OREAL” into the search engine, an advertising link to a list of L’Oreal products listed on eBay will be displayed. The Court held that it needed further guidance from the ECJ before deciding whether eBay’s use of marks such as “L’OREAL” in sponsored links rendered eBay primarily liable for trade mark infringement under the EU Trade Marks Directive. The key problem for the Court was whether the Directive’s prerequisite that there being an “infringing act” required the relevant goods to actually be placed on the market in the UK, being the territory protected by the registration.

Finally, the Court asked for further guidance from the ECJ on whether L’Oreal was entitled to an injunction against eBay under the EU Enforcement Directive. Article 11 of the Directive specifically refers to injunctions against intermediaries whose services are used by a third party to infringe an intellectual property right. However, the Court was unsure what the scope of an injunction granted under Article 11 should be. In particular, the Court needed the ECJ’s guidance on whether an Article 11 injunction should only apply to prevent repetition of a clearly established infringement, or whether it should apply in a broader manner as a general obligation to monitor.

Although the decision has been characterised as a win for eBay and a victory for consumers, in truth, the UK decision is only a partial win and is far less resounding than eBay’s victories in the US, France and Belgium. As well as leaving open key questions about eBay’s liability for the ECJ to decide, the Court suggested a list of ten ways in which eBay could do more to prevent or minimise sales of counterfeit products on its site, whilst acknowledging that there was no legal obligation on eBay to do so.

The take home message from the UK eBay decision therefore seems to be that online hosts are unlikely to be liable for trade mark infringement in relation to the sale of counterfeit goods on their websites. However, online hosts should exercise caution in their use of registered marks in sponsored links, as the jury is still out on whether such use could render hosts directly liable for infringement.