Matthieu Bourgeois, KGA Avocats

Matthieu Bourgeois, KGA Avocats

Lessons drawn from this decision will encourage online marketplaces like eBay, to act with the utmost caution particularly on the following cases:

- the online sales of demonstration samples and of unboxed products (from which the outer packaging has been removed);
- the reservation from platforms like eBay, of keyword comprising trade marks.

The facts behind this decision

Having found that a series of its trade marked products were offered for sale on eBay, some of them without their packaging and the other ones, demonstration samples not intended for sale, the L’Oréal company assigned before the English courts (High Court of Justice) the individuals responsible for these sales, as well as the various companies from the eBay group, alleging an infringement of its trade mark rights.

L’Oréal accused them of having sold some testers not intended for sale, as well as unboxed products, and was also complaining that eBay had rent to Google several keywords (AdWords) consisting of trade marks owned by L’Oréal, among which Shu Uemura and Matrix Hair. Thus, internet users entering these trade marks into the Google search engine could see displayed commercial links pointing to the eBay site and, more specifically, to advertisements on these trade marked products offered for sale on the website.

eBay and individuals defendants, for their part, put forward the theory of exhaustion of rights according to which the owner of a trade mark cannot prohibit the use of it for products that have already been marketed with his consent within the European Union: in giving his approval, he has exhausted his rights, except for a "legitimate reason", which in practice equals to the marketing of products under a altered form (repackaging not taking into account the requirements of the manufacturer, or otherwise infringing the brand image because of its poor quality...).

eBay also denied any wrongdoing by renting as AdWords several of L’Oréal’s trade marks, in that, such use did not affect the essential function of the trade mark which is to guarantee the origin of products, since these keywords did actually refer to some products from the L’Oréal brand offered for sale on the eBay platform.

Believing that the case required guidance from the CJEU, the High Court of Justice sought advice from the former with a series of questions that can be summarized in the following (and non exhaustive) way:

- Can the product samples available from L’Oréal’s authorized distributors be considered as "marketed" and therefore can they be sold freely on the eBay website without L’Oréal being able to object to it?
- Can the removal of the outer packaging of some of the cosmetic products be considered as a "legitimate reason" justifying a refusal from L’Oréal and thus hindering the free reselling of products?
- Can the fact that eBay reserved on Google some keywords containing some trade marks owned by L’Oréal be considered as an illegal use of these trade marks?
- Can the service provided by a sales platform like eBay be qualified has a hosting service, to which is attached a system of limited liability?

The lessons from the decision

On the first point, the CJEU’s answer is a traditional one: it considers that "the supply by L’Oréal to its authorized distributors of demonstration samples bearing its mark is not, in the absence of any evidence to the contrary, a proof of placing on the market" thus rejecting the exhaustion of rights theory and giving L’Oréal the possibility to oppose to their resale.

In a previous ruling of June 3rd, 2010 (Case C-127/09) the CJEU had adopted a similar position about testers distributed by the Coty Group, in Germany.

On the second point, the response of the CJEU was quite clear in stating that the unboxing of a product is not in itself unlawful "but that it becomes unlawful when the consequences are that vital information, such as the identification of the manufacturer or the name of the person responsible for the marketing of the cosmetic product are no longer available".

The solution adopted here by the CJEU seems more flexible for the sale of a repacked product, for which compliance with the following four conditions had been set in a decision of the Court on 11 July 1996 (Case C-427/93, C-429/93 and C-436/96):

- repackaging should be "necessary" to market the product in the importing Member State, for example under a national rule requiring a certain type or size of packaging;
- the product’s state of origin should not be altered;
- the name of the entity who repacked the product must be clearly indicated on the new packaging;
- the trade mark proprietor must have received notice before the repacked product is offered for sale.

On the third point, the Court recalls here the principles established in its Google Judgement of March 23, 2010 (Cases C-236/08 to C-238/08), namely:

- the reservation of keywords corresponding to trade marks enabling the display of a sponsored link leading only to the eBay site (home page) does not constitute, for the latter, a reprehensible use in the domain of trade mark laws because the service provided by eBay is not identical or even similar to the activity of L’Oréal;
- on the contrary, when these same keywords lead to the display of a link pointing directly to products offered for sale placed on the eBay platform, the use of the trade mark is then characterized; the Court stating that the fact according to which the products sold are proposed by internet users using the eBay site, and not by eBay itself has no effect and that the latter is indeed making "use" of these trade marks;
- finally, this practice is illegal if it is "likely to undermine one of the functions of the mark", an infringement that exists "when advertising does not enable or makes it difficult for reasonably well-informed and observant internet users to ascertain whether the goods concerned originate from the proprietor of the trade mark or from a linked business or, on the contrary, originate from a third party" in this case, the Court did not rule on the fact whether the trade links pointed to announcements posted on the eBay site and concerning the products in question, generated or not the afore mentioned confusion.

Finally, and on the fourth point, the CJEU considers that a platform like eBay should benefit from the system of limited liability applicable to a hosting site provided it does not play an "active part" giving it "a knowledge or a control of stored data", a condition which is left to the appreciation of national courts.

The Court notes, however - and this is perhaps not neutral - that eBay "performs a processing of the data which it has stored at the request of its customer advertisers" and that it "also provides assistance such as optimising the presentation or promoting some of the online offers"...

It is on this last point that online marketplaces will have be the most careful in order to avoid, like Google, moving away from the classification of hosting site and to the system of limited liability which is attached to it.

The balance of electronic commerce, on which much of modern economy now depends, is in the hands of national judges... surely a topic to be followed very closely.