Take a scroll through the cosmetics section of an online auction market, and you’re likely to run across some questionable goods. Want a used tube of lipstick sans packaging? Counterfeit eye shadow? Loads of samples and testers labeled “not for resale”? You can probably find it.
Cosmetics and perfume giant L’Oréal wasn’t happy about these sales. It also was finding that some of its goods that were never intended to be sold in Europe were ending up there through eBay sales. Unhappy with eBay’s response to its concerns, in 2007 L’Oréal sued the online auction marketplace in Belgium, Britain, France, Germany and Spain, alleging trademark infringements.
The heart of the ruling concerns the circumstances under which online operators such as eBay can rely on a liability exemption of Article 14 of the E-Commerce Directive, adopted by the European Commission in 2000. The ECJ said an online operator is exempt only if it maintains a neutral role, providing “merely technical and automatic processing of the data provided by its customers.” Once they take on an active role—“in particular, optimizing the presentation of the offers for sale in question or promoting those offers,” the court wrote—they are no longer exempt from liability.
The ECJ in L’Oréal v. eBay also clarified a question of jurisdiction for online advertisers. It confirmed that if ads are targeted in part to consumers in the EU , EU trademark laws apply, even if the advertisers are located in other regions. It’s an important finding, considering the worldwide nature of the Internet, online business and jurisdiction-specific trademark laws. Where companies are advertising their goods on an international basis, they may be subject to EU rules of trademark infringement liability.