29/07/2011

Ebay Can Be Liable For Fake Goods Sold Through Its Website If It Plays An ‘Active’ Role In Promoting Them

By Simon Bennett, Partner in Fox Williams LLP’s Commerce and Technology Department

Trading Standards report that an estimated 82 billion pounds is being spent online on fake goods. For luxury fashion brand owners like Chanel, Burberry and Gucci, stopping these online sales is a never ending battle.

Following the top European Court’s ruling on 12 July in the L’Oreal v eBay case , online marketplace operators like eBay will need to be more proactive in working closely with brand owners to protect brands.

The European ruling followed a series of cases brought by L’Oréal across Europe against eBay. L’Oréal’s position is that eBay should be liable for fake goods sold on its website and that eBay’s Verified Rights Owner or VeRO programme (which is supposed to protect brand owners) is unsatisfactory. The English High Court asked the European Court for guidance on when, under EU law, online marketplace operators will be liable for sales by its users of counterfeit goods.

The eagerly anticipated judgment will have far-reaching ramifications for e-commerce. The key findings were:

Online marketplace operators like eBay can be liable for sales of fake goods through its website if it plays an active role in promoting them. This will be deemed to give online marketplace operators knowledge of, or control over, the data relating to the fake goods and it will be liable for trade mark infringement.

Even where online marketplace operators don’t play an active role, they may still be liable for sales of fake goods through their website if they were aware or should have been aware of the sale of fake goods, and in the event of it being aware of this, they failed to act expeditiously.

The European ruling is not the end of the matter. The findings will now need to be applied by the English High Court in the case L’Oréal brought against eBay in the UK.

It is likely that the English High Court will hold that eBay will need to put in place procedures that stop users who eBay know sell fake goods and who are likely to continue selling fake goods from actually selling them. The practical and cost implications to eBay may be extensive.

The ruling is a victory for brand owners. Although until it is seen how the English High Court will actually apply the findings, it is difficult to measure in practical terms how much responsibility online marketplace operators will take in fighting online sales of fake goods.

Simon Bennett is a Partner in Fox Williams LLP’s Commerce and Technology Department. He can be contacted by email on SBennett@foxwilliams.com or by telephone on 020 7614 2522. Tamar Nathan is an associate in Fox Williams LLP’s Commerce and Technology Department. She can be contacted by email on TNathan@foxwilliams.com or by telephone on 020 7614 2655.

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