Online shopping sites may be liable for trademark infringements if they play an "active role" in promoting counterfeit products, European judges ruled today.
The verdict came in the latest of a series of cases brought by cosmetics giant L'Oreal in courts across the EU to defend its brand name.
The company is challenging eBay in the UK High Court, which asked the European Court of Justice in Luxembourg to clarify the obligations of internet marketplaces under EU law.
L'Oreal claims eBay is liable for the sales on its website of counterfeit goods and of "parallel imports" - L'Oreal-branded products not intended for the EU market.
Last December, the EU court's advocate-general said in a legal opinion that eBay should not be liable unless it had been notified by a trademark holder such as L'Oreal of an infringement, and the online offence continued.
In today's final verdict, the full panel of EU judges said it was the right of national courts to order companies such as eBay "to take measures intended not only to bring to an end infringements of intellectual property rights but also to prevent further infringements of that kind".
The ruling acknowledged that operators of online sales sites did not "use" trade marks within the meaning of the EU law, if they provided 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".
But the judgment went on: "Whilst making clear that it is for the national courts to carry out the assessment concerned (about liability), the court considers that the operator plays an active role of such a kind as to give it knowledge of, or control over, the data relating to the offers for sale, when it provides assistance which entails, in particular, optimising the presentation of the online offers for sale or promoting those offers.
"When the operator has played an 'active role' of that kind, it cannot rely on the exemption from liability which EU law confers, under certain conditions, on online service providers such as operators of internet marketplaces."
The judges said that even in cases where the operator had not played an "active role", it could still be liable for trademark infringement "if it was aware of facts or circumstances on the basis of which a diligent economic operator should have realised that the online offers for sale were unlawful and, in the event of it being so aware, failed to act promptly to remove the data concerned from its website or to disable access to them".
The judgment said L'Oreal's complaint against eBay included claims that, by buying keywords from paid internet referencing services (such as Google's AdWords) corresponding to the names of L'Oreal trade marks, eBay "directs its users towards goods that infringe trademark law, which are offered for sale on its website".
EBay, according to L'Oreal, had made "inadequate" efforts to prevent the sale of counterfeit goods via the website.
Other forms of alleged infringement included the offer for sale to consumers in the EU of L'Oreal goods which were intended by the cosmetics firm for sale outside the EU.
The court warned that EU trademark rules apply to offers for sale and advertisements relating to trademarked goods located outside the EU "as soon as it is clear that those offers are targeted at consumers in the EU".
Again, it was up to national courts to decide, on a case-by-case basis, whether a sale was targeted at EU consumers.
"For example, the national courts will be able to take into account the geographic areas to which the seller is willing to dispatch the product."
The judgment concluded: "The court holds that EU law requires 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 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.
"Those injunctions must be effective, proportionate, and dissuasive and must not create barriers to legitimate trade."
EBay Europe's senior director and counsel government relations Stefan Krawczyk said: "The judgment provides some clarity on certain issues, and ensures that all brands can be traded online in Europe.
"As a marketplace, eBay provides a level playing field for all online sellers and will continue building constructive partnerships to expand the range of brands being sold on eBay."
The legal battle between L'Oreal and eBay began in 2007 when L'Oreal filed linked lawsuits against eBay in Belgium, France, Spain and the UK.
In 2008, a Belgian judge ruled that eBay was not liable for trademark infringements by sellers on its site, and a French court delivered a similar ruling a year later, pointing out that eBay was fulfilling its "obligation" to try to prevent the sale of fake goods.
Then the UK High Court ruled that eBay was not "jointly liable" for trademark infringements committed by its users, but decided to ask the EU court for legal guidance about EU trademark rules.
Now the case returns to the High Court for a final hearing and ruling.