A cosmetic ruling?

In a case that draws in counterfeiting, trademark infringement and the controversial field of sponsored links, the UK High Court has found that eBay is not liable for auctioning counterfeit L'Oreal goods on its European website. The ruling closes a chapter in the British stage of an IP dispute between the firms that has already spawned a German case - ending in a L'Oreal victory - and others in France and Belgium that eBay won. A Spanish case between the parties is pending.

Despite eBay's British win - which echoes the recent L'Oreal v eBay ruling by the Paris Tribunal de Grande Instance - the High Court has referred aspects of the case to the European Court of Justice (ECJ). The questions that have been referred to the ECJ all relate to the consistency of European legislation in the context of the case.

In June 2008, another Paris court awarded substantial damages against eBay to luxury brand Louis Vuitton Moet Hennessy (LVMH) after the auction site hosted sales of fake LVMH goods. eBay is currently appealing this ruling. In its French and British L'Oreal cases, eBay's success has hinged on its claim that it is a neutral hosting platform and not a content publisher.

Following the High Court's ECJ referral, IP experts will be anxious to see whether a pan-European ruling will benefit brand managers or eBay and its competitors. Any ECJ decision that backs eBay's neutrality could effectively rescind the earlier LVMH ruling.

L'Oreal's dispute with eBay encompasses a host of timely IP issues. In the British lawsuit, the cosmetics maker named a clutch of eBay subsidiaries - grouped together as 'eBay Europe' - as the first three defendants, plus seven individual eBay sellers. L'Oreal held eBay Europe jointly liable for the infringements alleged against the other defendants. These allegations concerned the sale of fake goods and other, real L'Oreal products parallel-imported from outside the European Economic Area - a practice that constitutes infringement. eBay Europe was also held liable for the use of specific link marks that led users to L'Oreal-related sponsored links on major search engines, plus other L'Oreal product-sales on eBay.

While Mr Justice Arnold found that eBay Europe did not jointly infringe L'Oreal, he supported the infringement allegations against the other defendants. However, in order to clarify a dispute with a strong European dimension, he also left open key areas for ECJ referral, asking:

1. Can the European Trade Marks Directive be interpreted to include the sale on eBay of testers and unboxed products?
2. Has eBay Europe, under the Trade Marks Directive, infringed marks by using them in connection with sponsored links?
3. Does eBay Europe, under the European E-Commerce Directive, have a credible defence?
4. With regards to the infringing sellers, what scope of relief, under the E-Commerce Directive, is L'Oreal entitled to?

In a statement, eBay trust and safety chief Richard Ambrose said: 'This is an important judgement because it ensures that consumers can continue to buy genuine products at competitive prices on eBay.' Turning to L'Oreal, he added: 'Following [our] legal victories - we reiterate again that cooperation and dialogue is what is needed, not litigation. Only by working together can we collectively address the issues that concern eBay, rights owners and consumers.'

L'Oreal, meanwhile, welcomed the ruling for different reasons. 'Since L'Oreal has maintained that eBay cannot benefit from the regime of liability for [service] providers under the E-Commerce Directive,' said the firm, 'it is satisfied to note that the [High] Court preferred its view before referring the matter to the ECJ.

'The parties,' it added, 'will now propose to the UK High Court of Justice the precise formulation of the questions to be referred to the ECJ for further guidance. L'Oreal trusts that the Judge's comments will be considered [and] remains confident of a positive outcome.'

eBay's IP clashes have not been limited to Europe: in July 2008 its US branch won a case brought by designer brand Tiffany, again over the sale of counterfeit goods on the site.