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Publication

CJEU issues key ruling on the liability of online intermediaries

Nick Rose
13/07/2011

Locations

United Kingdom

The Court of Justice of the European Union (“CJEU”) has handed down its long awaited judgment in the case of L’Oreal v eBay. This ruling has a potentially far reaching impact on both the operators of online intermediary businesses and trade mark owners alike.

Background

L’Oreal is a well known manufacturer and supplier of cosmetics, beauty products and perfumes. In 2007 they wrote to eBay expressing their discontent about the number of sales by users of eBay’s online marketplace of counterfeit L’Oreal products. L’Oreal was also concerned about the sale by users of eBay’s service within the European Union (“EU”) of products intended for sale outside the EU.

This resulted in L’Oreal issuing trade mark infringement proceedings against eBay in France, Spain, Belgium and the UK. The CJEU’s judgment arises from a referral to it from the English High Court of a number of questions relating to EU trade mark legislation and the liability for infringement of eBay as an online intermediary. Many of these have wider implications for other online businesses that operate as intermediaries.

CJEU ruling on liability

The EU E-Commerce Directive provides a so-called ‘hosting exemption’ from liability for infringing content where a host holds information supplied by a user. This is one of the ‘safe harbour’ provisions available for online intermediaries within the EU. The host is exempt provided that they do not have actual knowledge of unlawful activity or information, and that they do not have constructive knowledge that makes it apparent that an unlawful activity is taking place; or upon obtaining such actual or constructive knowledge, the service provider acts expeditiously to remove the unlawful information.

Following its earlier 2010 decision in the leading Google France case regarding the online purchase of keyword advertisements the CJEU has held that the operator of an internet marketplace does not itself ‘use’ trade marks within the meaning of the EU legislation if it provides a service consisting merely in enabling its customers to display on its website, in the course of their commercial activities, signs corresponding to trade marks.

However, in its judgment the CJEU has held that online marketplaces cannot benefit from the hosting exemption in instances where they play an active role in relation to data supplied by a user, such as promoting or optimising offers for sale.

The CJEU has further limited the application of the hosting exemption by holding that even if an online marketplace does not take an active role, it is not entitled to the protection of the hosting exemption if it was aware of facts or circumstances which would have alerted a diligent economic operator to the illegality and, in the event of being so aware, it failed to act expeditiously to remove or disable access to the infringing data.

Application of the ruling

The CJEU has made it clear that the discretion for the application of its ruling rests with the national courts of each Member State to apply on a case by case basis.

It has, however, made it clear that under the EU Directive on the enforcement of intellectual property rights (“the IP Enforcement Directive”), the courts within EU Member States responsible for the enforcement of IP must have the ability to order the operator to take measures which contribute, not only to bringing to an end infringements of those rights by the users, but also to preventing further infringements of that kind. Further, any injunction will have to be effective, dissuasive, fair and proportionate, without being excessively costly or creating barriers to legitimate trade.

Conclusion

The effects of the judgment are likely to be felt more widely than the present case as it places online intermediaries at a far greater risk of being held liable for the activities of their users even if their role is truly passive.

While no obligation to monitor or police the activities of users is imposed in the ruling by the CJEU which expressly acknowledges that a general monitoring obligation would be incompatible with both the E-commerce Directive and the IP Enforcement Directive, in practice operators of online intermediary services will need to ensure that they remain diligent and alert to circumstances which could be considered to provide them with constructive knowledge of infringing and illegal activities being carried out by users on their services. Upon becoming aware, they must then act expeditiously to remove or disable access to the infringing data.

For more information contact Nick Rose, James Martin or David Naylor.