Internet auction marketplace eBay may be liable for trademark infringements committed by users on its site if it plays an active role in their use, Europe's highest court ruled on Tuesday.
The auction site may also have to actively monitor its customers to ensure their offers for sale are lawful, the court ruled.
The case relates to allegations of trademark infringement through the sale of branded goods on eBay, lodged by L'Oreal, the world's largest cosmetics maker.
One of L'Oreal's complaints was over the sale on eBay of samples or testers explicitly marked "not for sale." The cosmetics giant also criticized the level of protection offered by eBay against the sale of counterfeit goods and the availability of goods to consumers in the European Union that were meant for other markets.
The court ruled that EU trademark rules do apply to offers for the sale of goods located outside the bloc if it is clear that those offers target EU consumers.
It said EU national courts should assess if any offer did target EU markets, but that in some cases exemptions from liability offered by EU laws may might not apply.
This would be the case particularly when an online service provider, such as eBay, "plays an active role" in managing information related to sale offers.
"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," the court said in a statement.
The court also ruled that an online market provider could be liable if it had enough information to judge that an offer was unlawful and failed to prevent access to it.
The court found that under EU law, member states had to ensure that national courts could order market operators to take measures that help to end trademark infringements by users of a marketplace such as eBay, as well as preventing further infringements of that kind.
"Those injunctions must be effective, proportionate, and dissuasive and must not create barriers to legitimate trade," the court said.
(Reporting by Michele Sinner; Writing by Justyna Pawlak; Editing by Hans-Juergen Peters)
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