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Clarification of liability under trade mark law for electronic marketplaces

Clarification of liability under trade mark law for electronic marketplaces

The European Court of Justice ruled on the liability under trademark law of operators of electronic marketplaces. The Court clarified the liability of enterprises like eBay that manage electronic marketplaces on the internet for the trademark infringements committed by their users.

The question was: is eBay liable for the sale by third parties of perfumes and cosmetic products on its electronic marketplace, also if they have not previously been put into circulation in the EU by the trademark holder? And is eBay liable for advertisements (among other means via AdWords) for the sale thereof? These questions were central to the ruling of the ECJ.

May private sales be banned?

May the trademark holder prohibit a natural person from selling a trademark product via an electronic marketplace without this transaction taking place within the context of a commercial activity? No, said the Court, but it did clarify that such a seller participates in economic transactions if it concerns “sales made on such a marketplace which, owing to their volume, their frequency or other characteristics, go beyond the realms of a private activity”. This economic activity is necessary for the trademark holder to be able to take legal action.

May the sale of trade mark products designated for third countries be banned?

If it concerns the sale on an electronic marketplace of trademarked products designated by the trademark holder for sale to third countries (outside of Europe), does European trademark law still provide for possible legal action against the seller? Yes, said the Court, if the sales offer is targeted at consumers residing in the European territory for which the trademark is registered. It must therefore be investigated whether the sale that takes place via the electronic marketplace, which is accessible from the territory where the trademark is valid, is designated for consumers of that territory.

It is unclear, however, when the sale is intended for consumers in the territory covered by the trade mark – certainly if the sale is accompanied by a statement concerning the countries to which the seller is prepared to ship the product.

May testers be offered on electronic marketplaces?

This question also came up for discussion in the eBay proceedings. The Court ruled that if the trademark holder has made testers available to his approved distributors for demonstrating products to consumers at approved retail outlets, as well as small bottles, such as free samples, the trademark holder may oppose the offer of these testers on electronic marketplaces, barring notice to the contrary.

May products without packaging be offered on electronic marketplaces?

When the packaging in any case contributes to the product’s image in the same way as the product itself, the products without the packaging may not be offered as such. The Court ruled that it must be expected that the trademark holder is able to guarantee the quality of the products sold under the trade mark. Also, if evidence is produced that the removal of the packaging negatively affects the image of the product and therefore negatively affects the reputation of the trademark, the trademark holder may act – if specific mandatory information that must be stated under specific regulations, or if it is established that the removal of the packaging has damaged the image of the product and, hence, the reputation of the trade mark.

May eBay use AdWord advertisements for products offered by customer-sellers via its website?

Yes. However, the AdWord advertisements must in any case state the identity of the manager of the electronic marketplace, as well as the fact that the trademarked products that are the object of the sale are offered on the marketplace managed by the manager. If not, then trademark infringement exists, according to the Court.

Does eBay or its customer-sellers use the trade mark?

The sales around which this case revolves relate to sales by the customer-sellers and not by the manager (eBay) itself. The trademark holder must, according to the Court, in principle appeal to the customer-sellers if it wishes to take legal action based on the trademark.

May the electronic marketplace be held liable for trade mark infringements committed by customer-sellers?

The Court determined when service providers like eBay may and may not rely on a limitation of liability incorporated in law. In short, it is about whether such a service provider restricts itself to providing a neutral service via mere technical and automated processing of customer data or whether it has a more active role, by which it has knowledge of and exercises control over those data. In the case of eBay, assistance is rendered by eBay to optimise or promote certain sales offers. According to the Court, it must be assumed in that case that eBay does not assume a neutral position, but rather plays an active role as a result of which knowledge of or control over data relating to sales offers is acquired. As regards those data, the electronic marketplace may not rely on the statutory limitation of liability.

The statutory limitation of liability does not apply if the electronic marketplace has had knowledge of facts or circumstances from which the unlawful character of the activities or information is clearly evident. That must be reviewed on a case-by-case basis by the competent national court. There is also no action for damages on the part of the trademark holder (or the holder of other specific rights or intellectual property rights) if the electronic marketplace has no such knowledge or if, after having received such knowledge, the electronic marketplace has acted promptly to delete the information or to make access thereto impossible. However, if the electronic marketplace in its role of “diligent economic operator” should have realised that the offers for sale in question were unlawful and, in the event of it being so aware, failed to act expeditiously, it may be found liable.

These rules apply, according to the Court, in principle to situations in which the electronic marketplace itself discovers unlawful activities, but also if third parties (such as the trademark holder) inform it thereof.

Which measures can be taken against electronic marketplaces?

Courts must be able to order the electronic marketplace to take measures that not only contribute to the discontinuation of the infringements on intellectual property rights committed by the users of that marketplace, but also to the prevention of new infringements of that nature. These orders must be effective, proportionate and dissuasive and may not create any impediments to legitimate trade, so said the Court.

How new infringements can be prevented precisely, is unclear. It may not be demanded of online service providers that they actively monitor to prevent every future infringement of intellectual property rights for every customer. In other words, no general surveillance obligation exists. In this case, a general, permanent ban may also not be imposed for the sale of trademarked products on the marketplace.

Nonetheless, if the electronic marketplace does not, of its own accord, deter infringers from its site in order to prevent new infringements of the same nature, a ban to that end may be issued by the court, according to the ECJ. Electronic marketplaces must therefore deter repeat infringers, or so it appears.

Furthermore, the electronic marketplace may be ordered to take measures for the purpose of establishing more easily the identity of its customer-sellers. Although the protection of personal information must be respected, thus ruled the Court, it must be possible to clearly establish the identity of the infringer. This can help in the prevention of infringements if customer-sellers repeatedly operate on the electronic marketplace under other names and with new, altered accounts.

Joost Becker

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