L'Oreal v eBay judgement puts IPRED to the test

A court ruling in favour of eBay last week in the UK High Court puts the IPR Enforcement directive, known as IPRED, to the test. The case, brought by cosmetics firm L'Oreal, is likely to go to the European Court for a further ruling.

The complaint brought by L'Oreal concerned sales of alleged counterfeit goods on the eBay online auction site. The judge ruled that eBay is not liable for infringements by eBay users, and that was the headline in most of the media coverage. However, reading the judgement, it is evident that there are other issues at stake here.

In particular, the L'Oreal case rests on Article 11 of the IPR Enforcement directive. This says, in plain English, that

where someone is found to have infringed a trademark, the court may order them to stop trading, and fine them if they do not comply. The judgement would appear to be significant because it found the individual traders liable - and therefore they have to stop trading - but it did not find eBay liable - therefore eBay can carry on.

The eBay barrister asked for a referral to the European Court of Justice, and the judge agreed. Another issue for eBay concerns the use of the brand names as keywords for search engine optimisation. The exact questions to be put to the ECJ are in the process of being decided.

The judgement said:

"For the reasons given above I have concluded that this case raises a number of issues of Community law upon which the guidance of the ECJ is required. Since this court is not a court of last resort, I have a discretion as to whether to make a reference or to attempt to decide the issues myself. In my judgment, in the circumstances of the present case it is clearly better to make a reference myself, for the following reasons.

? First, I consider that there are clearly some issues of law which are difficult and important even though others appear more straightforward. If I did not refer, I consider that it is highly likely that the Court of Appeal would do so on any appeal. Thus refusing to refer now would simply entail further delay and costs for the parties.

? Secondly, as I have observed, this is one of a number of cases around Europe both between the same parties and between other parties raising the same or similar issues. Interflora v M & S is another one. The sooner the courts of Europe are able to arrive at common answers to these issues, the better. Accordingly, the ECJ should be asked to rule on these issues as soon as possible."

IPRED was steered through the European Parliament by Janelly Fourtou, the ALDE (Liberal) MEP and wife of the CEO of Vivendi.

The matter is interesting for me because I regularly buy goods on eBay, including branded goods, and I occasionally sell items that I already own, but which may be branded. For the purposes of selling, I note that even L'Oreal would class me as a private seller, and I think that means any sales I make would be outside the scope of their legal action.

What concerns me therefore, is the sellers whom I rely on to supply me with goods. I buy on eBay because I cannot get the goods I want locally even if I wish to make the journey into Maidenhead, Windsor or Marlow, where there are shops.

Ebay sellers - even Power Sellers - are small businesses. In many cases, eBay provides them with an opportunity to increase their revenue, and in these times of recession, having an outlet like eBay to sell off old stock or find new customers, may even be a way to keep a business alive. If they are selling branded goods, they have to use the brand name as a keyword, because that is what their customers will look for. Many of my saved searches, for example, include a brand name - including one garment manufacturer that L'Oreal owns.

Reading the judgement closely, there are a number of aspects of the L'Oreal claim which could be damaging for small businesses if the courts do not uphold their rights. I note that none of the eBay traders who were named as defendants had representation in court. Of course not, they cannot afford the £1000 plus per day for a barrister.

It is concerning the L'oreal demand that eBay filter its listings, and that it obtained an out-of-court - and therefore non-public - settlement in the French courts against a rival French auction site.

L'Oreal's claim is more about control of the market than about counterfeit as such. It should be regarded as an anti-competitive move. The courts should not permit companies to use IPR enforcement as an excuse to frighten small companies out of business. Unfortunately, it is a sign of the times that governments and public regulators are increasingly trying to leave it to the courts determine issues like this which should be dealt with as a matter of public policy.

IPR Enforcment Directive 2004/48/EC (IPRED)

Article 11

Injunctions

Member States shall ensure that, where a judicial decision is taken

finding an infringement of an intellectual property right, the judicial

authorities may issue against the infringer an injunction

aimed at prohibiting the continuation of the infringement. Where

provided for by national law, non-compliance with an injunction

shall, where appropriate, be subject to a recurring penalty payment,

with a view to ensuring compliance. Member States shall

also ensure that rightholders are in a position to apply for an

injunction against intermediaries whose services are used by a

third party to infringe an intellectual property right, without

prejudice to Article 8(3) of Directive 2001/29/EC.

Read the full judgement: L'Oreal SA v eBay International

This article is licensed under a Creative Commons Attribution Non-commercial-Share Alike 2.5 UK:England and Wales License. http://creativecommons.org/licenses/by-nc-sa/2.0/uk/ It may be used for non-commercial purposes only, and the author's name should be attributed. The correct attribution for this article is: Monica Horten (2009)L'Oreal v eBay judgement puts IPRED to the test http://www.iptegrity.com 29 May 2009.