Online Retailers Could Be Liable for Counterfeit Sales, Court Says

By Caroline Dobson
Caroline Dobson
Caroline Dobson
July 18, 2011 Updated: October 1, 2015

LIABILITY: A combo shows the logos of US online auctioneer eBay Inc. and French cosmetics giant L'Oreal. Responding to a lawsuit by L'Oreal, a European court ruled that companies like eBay may be held liable for sales of counterfeit goods on their sites.  (Jacques Demarthon-Franck/Getty Images)
LIABILITY: A combo shows the logos of US online auctioneer eBay Inc. and French cosmetics giant L'Oreal. Responding to a lawsuit by L'Oreal, a European court ruled that companies like eBay may be held liable for sales of counterfeit goods on their sites. (Jacques Demarthon-Franck/Getty Images)
According to the European Court of Justice (ECJ) in Luxembourg, online retailers such as eBay Inc. and Amazon.com could be liable for trademark infringement if they sell counterfeit products on their sites.

A L’Oreal spokesperson commented that the decision was "A step toward effectively combating the sale of counterfeiting brands and products via the Internet … This decision is in line with the position L’Oréal has taken for several years and is applicable in courts throughout the European Union."

Last week, the top European court ruled in favor of L’Oreal, after the leading cosmetic and beauty company accused eBay, the world’s largest online auctioneer, of selling counterfeit goods. The panel of EU judges decided that the national courts had the right to order companies like eBay, "To take measures intended not only to bring to an end infringements of intellectual property rights, but also to prevent further infringements of that kind.”

In this instance, the “active role” played by eBay was highlighted. "When the operator has played an ‘active role’ … it cannot rely on the exemption from liability which EU law confers, under certain conditions, on online service providers such as operators of Internet marketplaces,” said the court statement.

For instance, L’Oreal had argued that eBay purchased keywords from referencing services corresponding to L’Oreal trademarks, thus directing users to counterfeit items.

L’Oreal began legal action against eBay in 2009, however the High Court in the U.K. dismissed the case against eBay and asked the ECJ for further clarification regarding the obligations of Internet marketplaces based on European laws.

The crux of the ECJ’s decision is differentiating between users of online marketplaces selling one-off items as opposed to systematic and organized e-commerce activity where businesses are profiting from using the online platforms. This organized kind of activity is the type for which eBay and other online marketplaces are liable based on the EJC’s ruling.

A spokesperson for eBay Europe said that the judgment "provides some clarity on certain issues, and ensures that all brands can be traded online in Europe."

In a similar case against eBay, a French court previously awarded luxury giant LVMH Moet Hennessy Louis Vuitton SA $2.4 million. In another instance, a U.S. court ruled in favor of eBay in a case brought by jewelry maker Tiffany & Co.