In L’Oreal SA & Ors v Ebay International AG & Ors [2009] EWHC 1094 (Ch), the High Court of Justice, Chancery Division (HCJ) held that Ebay Europe, the second Defendant, is not jointly liable for infringement with the fourth to tenth Defendants. The question of Ebay’s primary liability was referred to the European Court of Justice (ECJ) along with questions relating to: the sale of testers, dramming products and unboxed products infringement, is advertising in the UK the same as ‘putting on the market’ pursuant to Article 7(1) of the Trade Marks Directive, does Ebay Europe have a defence under the E-Commerce Directive and what is the scope of relief required from the national courts.

Liability of the Fourth to Tenth Defendants

The fourth to tenth Defendants had been engaged in various activities on www.ebay.co.uk (“the Site”), including the listing of counterfeits, non-EEA goods, tester and dramming products, and unboxed products. While the claims against the fourth to tenth Defendants were not part of this case, the HCJ discussed their liability, before addressing joint liability. He found that the fourth to tenth Defendants were guilty of infringement by putting L’Oreal’s goods on the market outside the EEA without consent, or by selling counterfeits.

Defence to Infringement

The HCJ discussed whether Article 7(1) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (“the Trade Marks Directive”), which ‘shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community’, provided a defence to infringing use in relation to testers and dramming products. The question was whether the proprietor had realised the economic value of his trade mark because the goods had been put ‘on the market’.

According to case I ZR 63/04 Perfume Tester Bottles reported in English at [2009] ETMR 9 the Bundesgerichtshof (German Federal Supreme Court), if the proprietor of the trade mark has passed the tester bottles to the distributors, it has transferred the right to dispose of the goods, and realised the economic value. L’Oreal’s argument was that the economic value of the testers was only achieved if the testers were used to achieve a sale of the product itself, and the mere transfer of the tester did not achieve this. The HCJ felt that ECJ guidance is needed on this matter.

Unboxed Products

The HCJ also addressed L’Oreal’s contention that unboxed products damage the image of the products and the reputation of the relevant trade marks. Ebay relied on the opinion of the Advocate General in Stix-Hackl in Zino Davidoff SA v A & G Imports Ltd [1999] RPC 631, according to which a proprietor can only oppose the further commercialisation of his trade mark, if the right affected by the actions are rights specifically conferred by the trade mark. The ECJ in that case had not ruled on this question, and while the HCJ was inclined to accept L’Oreal’s argument, he preferred to wait for the ECJ’s ruling.

Ebay’s Joint Liability

The HCJ then turned to the question of Ebay’s joint liability with the fourth to tenth Defendants, most relevant in relation to non-EEA goods. L’Oreal argued that eBay Europe is guilty of participation in a common design (CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] AC 1013), because it actively promotes the listing of items for sale on its site, and is intimately involved in the sales transaction and profit from the sales. But the HCJ agreed with Ebay’s argument that there is no positive duty to prevent infringement, and that facilitation with knowledge is not sufficient for joint tortfeasorship.

Ebay’s Primary Liability

The critical question in relation to primary infringement, which the HCJ has referred to the ECJ, is whether advertising in the UK of non-EEA products amounts to ‘putting on the market’ pursuant to Article 7(1) of the Trade marks Directive. Ebay relied on Eli Lilly & Co v 8PM Chemists Ltd [2008] EWCA Civ 24, [2008] FSR 12, where it was held that infringement required ‘placing on the market’. L’Oreal argued that that case was concerned with goods in transit, where there had been no advertisement or offer for sale within the UK, which distinguished it from this case. Ebay argued that advertising was not the same as ‘putting on the market’ in the UK, as the advertisement could lead to a sale in a different market. While the HCJ favoured L’Oreal’s position, he referred this issue to the ECJ.

Ebay’s Defence

The HCJ considered whether Ebay have a defence under Article 14 of the E-Commerce Directive (European Parliament and Council Directive 2000/31/EC of 8 June 2000), pursuant to which an information provider is not liable for the hosting of information, as long as the provider has no knowledge of any illegal activity. L’Oreal contended that Ebay’s use went beyond the passive storing, as it actively manipulated the information, and the use of links went beyond ‘hosting’. It also argued that the recipient of the service is the seller who is under Ebay’s control, and therefore Ebay has knowledge of the illegal activity. The HCJ referred this to the ECJ, as the existing case law is not clear, and some cases are currently being appealed.

Remedy

Lastly the HCJ considered L’Oreal’s entitlement to a remedy under Article 11 of the Enforcement Directive. L’Oreal contended that it has a right to an injunction against Ebay, even if Ebay is not directly liable for infringement, as the fourth to tenth defendants are liable, and L’Oreal wants to prevent similar infringement by other parties. While the HCJ agreed that an injunction can be granted against an intermediary, in order to protect IP rights, the exact obligation on the host under Article 11 are not clear, and the HCJ referred this issue to the ECJ for guidance.