eBay not liable for trade mark infringement of its users, but use in sponsored links needs a further ruling – L’Oréal v eBay, High Court

eBay has survived the latest skirmish relating to whether it is responsible for unlawful actions of its users. L’Oréal showed evidence to the High Court that out of 287 test purchases it had made on eBay involving its brand, only 84 products were legitimately intended for sale within the European Economic Area. The others were either counterfeit or had not yet been put on sale in the EEA with L’Oréal’s consent. L’Oréal argued that the Internet auction giant should be responsible for the actions of the users. eBay countered that it had a scheme called VeRO (Verified Rights Owner) designed to help brand owners police infringement of their trade marks, but L’Oréal did not participate in that scheme because it objected to having the onus of policing its brand. Its view was that eBay had made a lot of money on the back of unlawful use by users and so it should be eBay rather than the brand owners who should be responsible.

The High Court had some sympathy with L’Oréal’s arguments, but it said that English case showed that eBay could not be liable for merely being aware that the majority of users would act unlawfully. Mere knowledge of infringement of intellectual property rights does not make the supply of the relevant goods or service unlawful. The Court referred to the leading case of CBS v Amstrad in 1988 in which the House of Lords ruled that Amstrad’s provision of a double-decker tape recorder was not unlawful even though it knew that the majority of people would be likely to use the machines for copyright infringement.

eBay did not have it all its own way, however. The judge did suggest that eBay could to more to stop infringing sales, though, with better filtering, obtaining more information about sellers’ identities, taking measures to restrict high risk goods (such as perfumes) and taking tougher action on infringing users. In addition, the High Court agreed to ask the European Court of Justice to rule on whether eBay’s use of L’Oréal’s brand in sponsored links to direct users to listings for infringing goods on its site constituted trade mark infringement and, if so, whether eBay had a defence under the E-Commerce Directive for acting as a mere host without actual knowledge of the infringing activity.

Meanwhile, eBay has won another case in France against L’Oréal. The French court said that eBay had done all it could to stop counterfeit sales. The French court did order both companies to work together more to stop the problem occurring. In the last couple of years, eBay has fought several cases in different countries. It won against L’Oréal in Belgium and against Tiffany in the US, but lost a couple of other cases in France including being ordered to pay €39 million to LVMH.