Ebay to suffer as EU ruling hits the marque?

Online marketplaces may land themselves in hot water if they promote counterfeit goods, says the European court.

by Dave Waller
Last Updated: 12 Jul 2011
The internet can be a tricky world to fathom, and who’s responsible for the stuff peddled by its growing army of independent retailers has always been a bit of a grey area. But following a ruling by the European Court of Justice, shopping sites like eBay may now find themselves liable for trademark infringements if they play an ‘active role’ in promoting knocked-off stuff. A potential hammer blow for online auctioneers?

This has all come about following a series of cases brought to the EU by L'Oreal, in a bid to defend its brand name. But it’s not the only brand to have suffered. The likes of Diageo have had terrible trouble in Asia with fake lines of Johnny Walker and VAT69 falling off of all manner of wagon, with all the obvious problems that uncontrolled substances may cause to the brand’s reputation (not to mention the end user’s health).

The booze firm will have a keen eye on what’s happening with L’Oreal. The latter is challenging eBay to clarify the obligations of internet marketplaces under EU law, and makes the fairly persuasive claim that eBay is liable for the sale on its website of counterfeit goods and of ‘parallel imports’ – L'Oreal-branded products not intended for the European market. The ruling could have huge implications for e-commerce, handing power to national courts to order online retailers to stop such infringements and prevent similar incidents in the future.

eBay may claim it has nothing to do with it – that it’s merely the platform through which people sell their stuff, rather like a landlord would be to a shop in the physical world. But L'Oreal contends that, by buying corresponding keywords from internet referencing services like Google’s AdWords, eBay actually ‘directs its users towards goods that infringe trademark law, which are offered for sale on its website’. In other words, it’s like the aforementioned landlord standing outside the shop holding a big sign saying ‘fake golf sale’.

It’s the classic conundrum for legislators and policy-makers in these days where IP is all-important: how you do strike the right balance between protecting the rights of the manufacturer and discouraging rip-off merchants, while also reaping the benefits of increased choice and competitive price pressure that online marketplaces can offer? Answers on a (non-counterfeit) postcard to the ECJ.

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