Online marketplaces can be liable for sales of counterfeit products

Online market places, such as eBay and Amazon, will be liable for the sale of counterfeit products by third party sellers on their websites if they play an active role in the promotion of those products, including if they assist in the promotion of, or the optimisation of the presentation of, those products. This is so regardless of whether the service provider had reason to believe the products to be counterfeit.

WHAT’S HAPPENED?

The ultimate arbiter on European law, the European Court of Justice (“ECJ”) has given its ruling on a number of questions referred to it by the English High Court in a case brought by L’Oreal against eBay concerning the sale on eBay of both counterfeit and grey imports of L’Oreal perfumes.

There have been a number of cases around the world in which major brands, such as L’Oreal, Tiffany and Louis Vuitton, have sued eBay alleging that it is liable for the sale of counterfeit products on its marketplace. While the actual sellers of such products are clearly liable for trade mark infringement, suing such entities can be a thankless task, owing to their number, their often being based in unfavourable jurisdictions and their uncertain financial position.

Generally, courts in European countries have held that online market places (and other service providers) can only be liable for the offering for sale of a particular product after they are put on notice that it is infringing. The European E-Commerce Directive (2000/31/EC) provides a “Hosting” exemption for information society service providers, meaning that sites such as eBay, Amazon and Google are not liable for the sale of infringing products on their platform so long as (i) they do not have actual knowledge of the illegal activity (or knowledge of facts which make the illegal activity apparent), and (ii) upon being notified of the illegal activity, they act expeditiously to disable access to the infringing products. This places an obligation on brand owners to notify the likes of eBay of particular products which are infringing – an endless task for the big brands.

However, the ECJ has now stated that an online market place will not be able to rely on the “Hosting” exception (i.e. it can be liable for the infringement) if it has played an “active role” in the offering for sale of the products – i.e. it has done more than merely process the data automatically. Examples the ECJ gave of playing an active role were (i) assisting in the optimising the presentation of the offers for sale and (ii) promoting those offers. 

Even if the online market place has not played an active role, it can still be liable if it was aware of facts or circumstances from which “a diligent economic operator” would have realised that the products were infringing.

COMMENT

This ruling will be welcome for brand owners, as it means online market places could now incur joint liability with the sellers of infringing products if they have taken any active role in relation to the listing of that product – such as giving it priority over other listings, or using a Google advert to link through to that listing.

This, along with the voluntary Memorandum of Understanding which the major e-commerce retailers recently signed with a number of major brand-owners (see here), suggests that real progress is being made in the (once seemingly unwinnable) battle against the sale of counterfeit goods through online market places.

If you would like to find out more about this area please contact Peter Nunn on +44 20 7440 7437 or by e-mail.