YouTube guilty but not liable for late removal of infringing material

Author: Catherine Jasserand (University of Amsterdam, Institute for Information Law (IViR))

TF1, TF1 Video, TF1 droits audiovisuels, LCI and e-TF1 v YouTube (RG: 10/11205), Tribunal de Grande Instance, Paris, 29 May 2012

Journal of Intellectual Property Law & Practice (2012), doi: 10.1093/jiplp/jps128, first published online: 17 September 2012

No obligation of monitoring subsequent publications is inscribed in law; however, French courts have a tendency to impose such an obligation on hosting providers shifting from a notice and take down rule to a notice and stay down rule.

Legal context

Article 6 of the French law on digital economy (Law No 2004-575 of 21 June 2004, known as the LCEN) implements Articles 12 to 15 of the E-Commerce Directive (Directive 2000/31).

Article 6-I-2 of the LCEN defines hosting providers as natural or legal persons offering, even for free, the storage of signals, images, written material, sounds or messages supplied by the users of the services. Hosting providers cannot be liable for the information they store unless they had actual knowledge (or were informed) of the presence of illegal content on their systems and did not promptly act to remove it or block access to it.

Article 6-I-7 of the LCEN states that persons mentioned in Article 6-I-1 and Article 6-I-2 of the LCEN (internet service providers and hosting providers) are not subject to a general obligation to monitor information they transmit or store, or to actively seek facts or circumstances indicating illegal activities.

Article 6-III-1 of the LCEN covers the case of professional and non-professional publishers (or content providers).

Article L.261-1 of the French Intellectual Property Code states that a broadcasting company must give its consent for any reproduction, sale, exchange, rental or communication of its programmes to the public against the payment of a fee.

Facts

TF1, a French TV channel, and its affiliated entities (TF1 video, TF1 droits audiovisuels, LCI and e-TF1) noticed that several of their TV shows and films were being made available on the YouTube platform. In March 2008 they sued YouTube before the Paris Tribunal de Commerce (commercial court) for copyright and related rights infringements, trade mark infringements as well as unfair competition/parasitic behaviour. The Tribunal rejected the case for lack of jurisdiction. In May 2010 the same plaintiffs referred the case to the Paris Tribunal de Grande Instance (civil court of first instance) on the same grounds.

Analysis

The Tribunal de Grande Instance rejected most of the claims brought by the plaintiffs as the court considered they were not sufficiently evidenced to establish the rights of TF1 and its affiliated companies. The court reduced the action to seven sport programmes for which TF1 claimed broadcaster's rights in application of Article L.216-1 of the French Intellectual Property Code. TF1 also invoked infringement of its copyright for the same programmes. However, the court denied that claim on the ground that a claim of copyright infringement could not be combined with a claim of violation of a related right with respect to the same subject matter. This statement is questionable: it is not based on any legal provision and the subject matter of the related right at stake (broadcasting right) is different from the subject matter of the copyright. The broadcasting right relates to the programmes as messages or signals, whereas the copyright relates to the programmes as protectable works. The programmes should therefore have benefitted from both classifications and received two separate (but cumulative) protections.

Having established the ground on which TF1 was entitled to sue YouTube, the Tribunal de Grande Instance ruled on the status of YouTube. The court had to determine whether YouTube was to be considered as a hosting provider or a publisher (content provider) in order to assess its liability regarding the videos available on its platform. The court referred to the criteria set forth by the French Supreme Court (Cour de Cassation, Société Nord-Ouest & UGC Images v Dailymotion, 1st civil chamber, 09-67.896, Decision 165, 17 February 2011) and by the Court of Justice of the European Union (Case C-360/10, SABAM v Netlog) to determine that YouTube had a passive role. First, the platform did not perform an a priori monitoring of the posted videos. Secondly, the selection of material was made automatically via algorithms. Finally, the fact that YouTube made commercial profits (through the sale of advertisements) could not be considered as a criterion to classify the platform as a content provider. The court concluded that YouTube was a hosting provider subject to Article 6 of the Law on Confidence in the Digital Economy. In application of this article, its liability was limited to its knowledge or awareness of the presence of illegal material on its website. Once informed of its presence, YouTube had the obligation to promptly remove it (or disable access to it). Neither the Directive nor the French law specify what constitutes a prompt removal. However, in the present case, the judges considered that removing the videos five days after their notification was not reasonable.

However, the court did not fine YouTube for this late removal. The judges considered that the conditions of Article L.216-1 of the French Intellectual Property Code (on which the claim was based) were not satisfied. To apply the article, access to the platform should not have been free! This argument does not sound very strong. The court also added that YouTube had provided the means (via its system called Content ID) of preventing a notified material from being reposted online and had performed its duties as a hosting provider.

Practical significance

This decision is interesting in many respects.

First, the judges no longer apply the criterion of commercial benefit or exploitation of a platform through advertisements to qualify the provider's/publisher's content.

Secondly, the court follows a trend that has been observed for several years. In 2007 the Paris Tribunal de Grande Instance ruled that hosting providers could be held liable for subsequent publications of material subject to one-time notification even if the material had been posted by different internet users (TGI Paris, Nord-Ouest Productions v Dailymotion, 13 July 2007). This position was affirmed by the Paris Court of Appeals in four decisions issued the same day (CA Paris, 2nd Chamber, 14 January 2011, Google Inc v les Films de la Croisade, Goatworks Films; Google Inc v Compagnie des phares et balises; Google Inc v Bac Films, the Factory; and Google Inc v Bac Films, the Factory, Canal +). The obligation of monitoring specific content is neither inscribed in French law nor in the E-Commerce Directive. In the present case, the judges acknowledged that YouTube had performed its duty by providing technical means of preventing new publication of notified material. This duty was created by the judges themselves, and they do not hesitate to fine hosting providers for non-compliance. The court hereby confirms a shift from a notice and take down rule (derived from the law) to a notice and stay down rule (liberally established by the courts).

ISPs cannot be ordered to adopt general and preventive filtering systems

Authors: Enrico Bonadio (City University London) and Mauro Santo (M&R Europe, Milan)

Case C-70/10 Scarlet Extended SA v SABAM—Société belge des auteurs, compositeurs et éditeurs SCRL, Court of Justice of the European Union (ECJ), 24 November 2011

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps004, first published online: March 2, 2012

In Scarlet Extended SA v SABAM, the ECJ held that EU law precludes the imposition of an injunction by a national court which imposes on internet service providers (ISPs) the adoption, at their expense and for an unlimited period, of a general and preventive filtering system with a view to preventing the illegal sharing of electronic files containing musical, cinematographic, or audiovisual works. In reaching its decision, the court stressed the need to strike a fair balance between copyright protection and the right of ISPs to conduct business freely as well as the right of their customers to protect personal data and receive or impart information.

Legal context

In this reference for a preliminary ruling, the ECJ was asked to assess the lawfulness under EU law of injunctions against ISPs requiring them to apply filtering tools aimed at detecting and blocking the transfer of files which allegedly infringe copyright. In particular, the ECJ had been asked to interpret certain provisions of, inter alia, the following directives.

(i) Directive 2000/31 on certain legal aspects of information society services (‘E-Commerce Directive’);

(ii) Directive 2001/29 on the harmonization of certain aspects of copyright and related rights in the information society (‘Info-Society Directive’);

(iii) Directive 2004/48 on the enforcement of IP rights (‘Enforcement Directive’).

Facts

The proceedings were brought before the Court of Brussels (Tribunal de première instance) in 2004 by the collecting society SABAM against the ISP Scarlet, which provided its customers with access to the internet (without offering other services such as downloading or file-sharing-related services). SABAM claimed that Scarlet's customers infringed copyright by engaging in peer-to-peer file sharing and asked the national court to order Scarlet to bring such infringements to an end by blocking or making it impossible for its customers to send or receive in any way such files using peer-to-peer software. SABAM also asked that Scarlet inform it about the details of the measures it would apply in order to comply with the order. In June 2007, the Court of Brussels ordered Scarlet to terminate the infringements, imposing certain filters to prevent users from sharing and downloading files. Scarlet appealed to the Court of Appeal of Brussels, arguing that the requested measure was technically impossible and would also impose a general obligation to monitor communications on its network, which was at odds with the E-Commerce Directive and several fundamental rights. The Court of Appeal referred the case to the ECJ.

Analysis

The ECJ was asked to verify whether under EU law ISPs can be subject to an injunction imposing the adoption of a preventative monitoring system requiring them to apply filtering tools with a view to detecting and blocking copyright infringement. In principle, Article 8(3) of the Info-Society Directive allows ‘injunctions against intermediaries whose services are used by a third party to infringe a copyright or related right’. The monitoring system in this case, however, was (i) referred to all electronic communications passing via the ISP's services, in particular those involving the use of peer-to-peer software; (ii) applied indiscriminately to all its customers; (iii) a preventive measure; (iv) exclusively at the ISP's expense; and (v) for an unlimited period.

The court first noted that the lawfulness of such a system should be assessed taking into consideration the principle laid down in Article 15 of the E-Commerce Directive. The latter provision states that ISPs which offer internet-related services are not required to monitor the information which they store or transmit, nor are they under a general obligation actively to seek facts or circumstances indicating unlawful activities. The court considered that the monitoring system in question infringed this provision of the E-Commerce Directive, as it would require the ISP to (i) identify the peer-to-peer files within all the electronic communications of all its customers; (ii) identify the allegedly infringing files; and (iii) determine which files are illegally transferred and block them. Such preventative monitoring, the court emphasized, would require ISPs proactively to check all electronic communications transmitted on their network, adding that this mechanism was not compliant with Article 3(1) of the Enforcement Directive, according to which the measures, procedures, and remedies necessary to ensure the enforcement of IP rights (IPRs) should be fair and equitable.

The court then took pains to stress the need to strike a fair balance between copyright protection and other fundamental rights protected under EU law. In this regard, the court explicitly referred to its finding in Promusicae (Case C-275/06), where it held that ‘the protection of the fundamental right to property, which includes the rights linked to intellectual property, must be balanced against the protection of other fundamental rights’. Indeed, as the court said, IPRs are protected under Article 17(2) of the Charter of Fundamental Rights, but such protection is not absolute and should be subject to limitations under certain circumstances.

In particular, the court noted that the order to install the contested filtering system would limit the freedom of ISPs to conduct their business, which is protected at EU level by Article 16 of the Charter of Fundamental Rights. As a matter of fact, such injunction would require ISPs to install a complicated, costly, and permanent computer system, which would have a negative impact on ISPs' overall economic activity. This would also be contrary to Article 3(1) of the Enforcement Directive, according to which the required measures should not be unnecessarily complicated or costly.

The court also considered the principle of proportionality and the need to strike a fair balance between copyright protection and the right of ISPs' customers to have their confidential data protected as well as to receive or impart information (the right to privacy of communication and the right to protection of personal data are protected by Articles 7 and 8 of the EU Charter of Fundamental Rights, and the free speech right by Article 11). The court thus stated that an injunction requiring ISPs to install the described filtering system would break this balance. Indeed, that system would involve a systematic analysis of all contents and the collection and identification of users' IP addresses used to exchange the files. Those addresses, the court recalled, are protected personal data as they allow those users to be precisely identified. Moreover, the ISPs' customers' freedom to receive and impart information could also be potentially jeopardized as the filter mechanism in question might not adequately distinguish between unlawful content and lawful content, with the result that its implementation could lead to the block of lawful communications.

Practical significance

This decision stresses the need to strike a fair balance between several rights and interests, ruling that copyright does not have a superior rank vis-à-vis the right of ISPs to freely conduct business as well as the right of their customers to protect personal data and receive or impart information.

The court's findings constitute a victory for ISPs, which cannot be forced by copyright owners to install cumbersome and costly filtering mechanisms aimed at detecting and stopping copyright infringements committed by their users (though ISPs are not prevented from voluntarily introducing a filtering system as a consequence of an agreement struck with right holders). The decision has also been welcomed by digital freedom organizations and hailed as being capable of boosting free speech online: in their eyes, this decision confirms that invasive and general monitoring of internet users' activities is unfeasible and unacceptable. The court's ruling stresses instead the need and relevance of a neutral and open internet environment which respects fundamental rights.

This decision seems to be in line with the criticisms expressed on the other side of the Atlantic by several commentators vis-à-vis the recently proposed Stopping Online Piracy Act (SOPA), which was introduced in the US House of Representatives on 26 October 2011 (also known as Enforcing and Protecting American Rights Against Sites Intent on Theft and Exploitation Act). This bill would compel ISPs to adopt filters to prevent their customers reaching pirate websites easily. It is believed by several commentators that the bill's vague wording might leave open the door to intrusive forms of filtering, which would multiply costs and performance problems for ISPs and expose their users to a violation of their privacy (see The Economist, 26 November 2011).

It should, however, be borne in mind that in Sabam v Scarlet, the ECJ did not prohibit per se the adoption of other (and future) blocking and filtering measures which respect the fundamental rights at issue. This echoes the reasoning adopted by the AG in his opinion, in which he had stressed that any law interfering with the exercise of the fundamental rights in question would be allowed if it is adopted on a national legal basis and is ‘accessible, clear and predictable’ as to the nature and scope of the measures applicable.

This ruling also reflects the general view shared by the ECJ in previous case law, ie that the duty to detect and stop IP infringements in the online world is exclusively placed upon IPRs owners, as it occurs in the offline environment.

NewzBin2: the first section 97A injunction against an ISP

Author: Darren Meale (SNR Denton UK LLP)

Twentieth Century Fox Film Corp & Others v British Telecommunications Plc [2011] EWHC 1981 (Ch) (28 July 2011), Chancery Division, England and Wales

Journal of Intellectual Property Law & Practice (2011), doi: 10.1093/jiplp/jpr153, first published online: September 19, 2011

After many years of fighting online piracy, the film studios finally deploy, successfully, section 97A of the Copyright, Designs and Patents Act 1988 (‘CDPA’) to force internet service provider BT to block its customers' access to an online service used for mass copyright infringement.



Legal context

Online copyright infringement remains one of the key copyright-related issues, if not the key issue, of the modern age. Film studios and record labels have been fighting piracy on the internet for more than a decade, and despite many victories, infringement still persists. One of the greatest problems rightsholders face is that, almost every time a significant infringer is defeated, another simply rises in its place. When this happened in this case, the Studios successfully made use of an until-now unused power under the CDPA to require ISPs to prevent their users from accessing the offending service.

Facts

Over a year ago, in Twentieth Century Fox v Newzbin Ltd [2010] EWHC 608 (Ch) (29 March 2010), the Studios scored a significant victory when the High Court held that NewzBin was committing primary and secondary infringements of the Studios' copyright in major Hollywood films on a grand scale. For more information on the first NewzBin decision, see "Copyright: Online service provider's liability for the activities of its users", Journal of Intellectual Property Law & Practice (2010) 5(7): 491–492. NewzBin was turning over £1 m a year and generating significant profits by charging users for a service which greatly facilitated their downloading of copyright-protected films and other material from the Usenet, a bulletin board system predating, but less popular than, the World Wide Web.

Following the High Court's ruling, NewzBin very quickly shut down. But shortly thereafter, under different ownership, a sequel service was created named, as Hollywood convention dictates, NewzBin2—which provided exactly the same infringing service as its predecessor. Rather than bring the same costly infringement action again (in circumstances where NewzBin had now moved itself entirely out of the jurisdiction), the Studios instead sought to rely on section 97A of the CDPA, which provides simply that ‘The High Court … shall have power to grant an injunction against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright.’ The Studios thus brought a test application before Mr Justice Arnold, targeting the largest ISP in the jurisdiction, BT, which opposed the application.

Analysis

Section 97A was inserted into the CDPA in 2003 by the implementing regulations for Directive 2001/29 (the Information Society Directive), Article 8(3) of which provides that rightsholders must be ‘in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright’. Section 97A(1) is set out above and section 97A(2) essentially provides that ‘actual knowledge’ is to be determined having regard to all the circumstances.

The Studios' case was that there was already a finding of copyright infringement against NewzBin1. NewzBin2 was an identical service to NewzBin1. BT was aware of both the judgment and NewzBin2, and there was evidence that BT's users were accessing it. This provided the requisite knowledge and an injunction should be granted requiring BT to block access to NewzBin2 using the same system it deploys to block access to other unlawful websites, such as those containing child pornography: (1) IP address blocking, using the unique IP address of a website to block a user's access to it; and (2) Deep Packet Inspection (‘DPI’) based URL blocking, which monitors internet traffic to block users destined for particular internet pages.

BT disagreed, advancing five arguments against an imposition of a block. Each failed to convince the judge.

• BT's service was not being used to infringe copyright

BT contended that its users were using NewzBin2, not BT's internet service, to infringe copyright. This argument failed in light of Tele2 Case C-557/02 [2009] ECR I-227, a judgment of the Court of Justice of the European Union (ECJ) which held that providers whose services provide merely internet access are nevertheless to be regarded as ‘intermediaries’ for the purposes of Article 8(3) of the Information Society Directive, and thus injunctions were available against them.

• BT does not have actual knowledge

BT contended that its ‘actual knowledge’ must be of its service being used to commit a particular infringement of a particular work by a particular identified individual. Arnold J rejected this contention. Noting that the wording of section 97A was of a general and open-ended nature he held that, while knowledge that a particular infringing act was being committed, that a particular work was being infringed, or that a particular individual was infringing would all be indicators towards a finding of actual knowledge, it was not necessary to establish one or all of these facts in order to make such a finding. The more information the service provider can be shown to have about infringing activity, however, the more likely a finding of actual knowledge.

BT, the judge held, had actual knowledge in this case: it knew that users of NewzBin2 infringe copyright on a large scale (including the copyrights of the Studios); those users include BT subscribers; and those subscribers use BT's service to receive infringing copies of works made available to them by NewzBin2.

An injunction would be contrary to Article 12(1) of Directive 2000/31 (the E-commerce Directive)
This Article provides an exclusion of civil and criminal liability for service providers who are ‘mere conduits’. A service provider is a mere conduit where information merely flows through its service without the provider knowing what it comprises, in circumstances where the provider neither initiates the information flow nor modifies that information. The Article does not, however, prevent an injunction being imposed—in fact Article 12(3) specifically preserves such jurisdiction. Given the wording of Article 12(3), BT's reliance on the exclusion failed.

• An injunction would be contrary to Article 15(1) of the E-commerce Directive

Article 15(1) forbids Member States from imposing general obligations on providers to monitor the information which they transmit. An injunction which required BT to block access to a particular website would, BT contended, amount to a general obligation to monitor. The Studios argued that no monitoring was required and that even if it were, the obligation would be specific and limited, not general. Arnold J agreed with the Studios, drawing on the ECJ's judgment in L'Oréal v eBay Case C-324/09, in which the ECJ noted that ‘a general obligation to monitor’ meant ‘an active monitoring of all the data of each of a website's customers in order to prevent any future infringement via that provider's website’: this would not be the effect of the injunction the Studios sought.

An injunction would be contrary to Article 10 of the European Convention of Human Rights (‘ECHR’)
Article 10 of the ECHR provides the right to freedom of expression, subject to such restrictions as are ‘prescribed by law’ and are necessary in a democratic society in the interests of security, public safety, and so on. BT contended that the injunction sought by the Studios was not ‘prescribed by law’. Arnold J again disagreed, considering that the injunction sought fell well within the range of orders which would foreseeably be ordered pursuant to section 97A.

• Could but should not?

Having rejected the above arguments, Arnold J satisfied himself that he could make the order sought. BT then tried to dissuade him from exercising his discretion to do so on three grounds, but failed in each case.

Scope of the injunction too wide

Relying on the reasoning of Kitchin J in the first NewzBin case for declining to grant a section 97A injunction against NewzBin1, BT argued that the Studios were interested only in that part of NewzBin2 that involved infringement of film and television material. That only accounted for 70 per cent of NewzBin2's content, and so the Court should not grant an injunction which covered 100 per cent of the content including the 30 per cent in which the Studios had no legal interest but which was owned by an uncertain number of third parties not parties to the case. Arnold J, however, considered that the injunction sought would be certain, as it would require NewzBin2 to be blocked. While it would benefit third party rightsholders, this was a reason in favour of the injunction, not against it.

Floodgates will open

A flood of requests for blocking orders from rightsholders against BT would follow were the Studio's application to be granted, warned BT. Arnold J felt this concern unfounded: the Studios had only got this far by taking a separate action against NewzBin1 and then bringing this second action, all at considerable effort and expense. Although this was a test case, success in it would not, he thought, lead to a section 97A free-for-all. Instead he considered that rightsholders would not undertake future applications lightly and would concentrate their resources on the ‘more egregious infringers’.

Circumvention is too easy

BT contended that a block on NewzBin2 would have little effect as it would be too easy to circumvent. The Studios accepted the block it wanted BT to impose—a mix of IP address blocking and DPI-based URL blocking—could be circumvented by determined users (a proxy server might be one method). Although a real issue, Arnold J did not think that every user would circumvent, or would have the ability to circumvent, the block, which would be justified even if it only prevented access by a minority of users. Circumvention might require users to pay for a further service (such as a good proxy server) and that, once that cost was added to the cost of NewzBin2 membership, users might be persuaded that, economically, they would be better off simply paying to obtain content lawfully.

Practical significance

It is surprising that it has taken the content industries so long to deploy section 97A in their war against internet piracy. On the face of it, it is a straightforward provision with little get-out for the ISP once it has been proven that a website is infringing copyright. And there are many such websites where infringement is beyond doubt. With this success, the Studios will ask (or, failing that, force) all other major UK ISPs to also block NewzBin2. Provided they can do so in a cost-effective manner, the Studios (and other rightsholders) are likely to bring further applications against ISPs in respect of other infringing websites.

Whether the floodgates will be opened may depend on perceptions of how effective the block really is. The simplest of Google searches will reveal a list of possible circumvention methods and, four months before the judgment was handed down, NewzBin2 announced a new web address to which users can navigate (utilizing the free-of-charge TOR anonymous network) which, it says, is impossible for ISPs to block. If that method works, this may be but another pyrrhic victory for the film and television industry.

For reasons that were never clear, the Digital Economy Act 2010 was originally intended to include provision for website blocking, notwithstanding that section 97A long pre-dated it. After much controversy, in August 2011 the Government dropped plans for those new measures. This followed a report from Ofcom which noted that, while blocking was possible, current methods were imperfect and technically challenging, with circumvention of all techniques possible by users and site owners—the latter often being able to relocate their services fairly easily. Ofcom considered the same methods which are available pursuant to section 97A, so while rightsholders may now have an old (but previously unused) weapon to add to their anti-piracy arsenal, it is evidently far from the silver bullet that will stop infringement dead. The war will continue.

L'Oréal v eBay: a warning to online marketplace operators

Authors: Joel Smith and Joanna Silver (Herbert Smith LLP)

L'Oréal SA v eBay International AG, Court of Justice of the European Union, Case C-324/09, 12 July 2011

Journal of Intellectual Property Law & Practice (2011), doi: 10.1093/jiplp/jpr144, first published online: 25 August 2011

The Court of Justice of the European Union (‘ECJ’) has provided clarification on the liability of companies operating internet marketplaces for trade mark infringement committed by users, holding that, in certain circumstances, the operator may be liable for trade mark infringement as a result of the postings of its users. National courts must be able to order those companies to take measures intended not only to bring to an end infringements of IP rights, but also to prevent further infringements of that kind.

Legal context

Directive 89/104 (the ‘Trade Marks Directive’) and Regulation No 40/94 (the ‘Trade Marks Regulation’) were repealed and replaced by Directive 2008/95 and Council Regulation 207/2009. However, by virtue of the material dates in this dispute, it continues to be governed by the Trade Marks Directive and the Trade Marks Regulation.

Article 5 of the Trade Marks Directive and Article 9 of the Trade Marks Regulation deal with the rights conferred by a trade mark.

Article 14(1) of Directive 2000/31 (the ‘E-Commerce Directive’) restricts the liability of service providers in relation to the ‘hosting’ of information provided by the recipients of its services.

Article 11 of Directive 2004/48 (the ‘Enforcement Directive’) provides that Member States must ensure that rights holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an IP right, as well as against infringers.

Facts

L'Oréal brought proceedings against eBay and a number of its users in various Member States, including before the High Court of England and Wales, alleging widespread infringement of its IP rights on eBay's European websites. In particular, L'Oréal sought a ruling that:

• eBay and its users infringed L'Oréal's trade mark rights by the sales of counterfeit products, samples provided to distributors free of charge, unboxed products, and non-EEA products;
  
• by purchasing keywords corresponding to the names of L'Oréal trade marks from paid internet referencing services (such as Google AdWords), eBay directs its users towards goods that infringe L'Oréal's trade marks which are offered for sale on its website; and
  
• even if eBay was not liable for the infringements of its trade mark rights, L'Oréal should be granted an injunction against eBay by virtue of Article 11 of the Enforcement Directive.

In May 2009 Arnold J held that eBay was not liable as a joint tortfeasor for acts of trade mark infringement, through the sale of infringing products by its users, despite there being, in the judge's opinion, more that eBay could have done to prevent such sales from occurring. However, the judge felt that he could not make a decision as to whether eBay was liable for trade mark infringement as a result of its use of sponsored links on third party search engines and its own site, insofar as they lead people to postings for infringing products, without a reference to the ECJ. Guidance was also sought as to whether sales of testers and unboxed goods constituted trade mark infringement, as well as to the scope of injunctive relief available under Article 11 of the Enforcement Directive.

In December 2010 the Advocate General issued an Opinion that eBay was not liable for the trade mark infringements of its customers, but could become so if it failed to take further action once notified of the infringing use and the use continues or is repeated. Further, under Article 11 of the Enforcement Directive, injunctions may be available against marketplace operators such as eBay in order to prevent continued or repeated infringements by the same user in relation to the same trade mark.

The ECJ gave its decision on 12 July 2011.

Sale of infringing products
The ECJ stated that the proprietor of a trade mark may rely on his exclusive right as against an individual who sells trade marked goods online only when those sales took place in the context of commercial activity.

EU trade mark rules apply to offers for sale and advertisements relating to trade marked goods not previously marketed within the EEA with the proprietor's consent as soon as it is clear that those offers for sale and advertisements are targeted at consumers in the EU. It is for national courts to assess whether there are any factors on the basis of which it may be concluded that an offer for sale on an online marketplace is targeted at consumers in the territory covered by the trade mark.

The ECJ found that, in the absence of evidence to the contrary, testers and other sample products provided to distributors free of charge and marked ‘not for sale’ are not ‘put on the market’ within the meaning of the Trade Marks Directive or Trade Marks Regulation.

Further, the proprietor of a trade mark may, by virtue of the exclusive right conferred by the mark, oppose the resale of luxury goods on the ground that the reseller has removed their packaging, where the consequence of that removal is that essential information, such as information relating to the identity of the manufacturer, is missing. Where the removal of the packaging has not resulted in the absence of that information, the trade mark proprietor may nevertheless oppose the resale of an unboxed perfume or cosmetic product bearing his trade mark, if he establishes that the removal has damaged the image of the product and, hence, the reputation of the trade mark.

Infringement by use of sponsored links
The ECJ considered the proper construction of Article 5(1)(a) of the Trade Marks Directive and Article 9(1)(a) of the Trade Marks Regulation. It held that a trade mark proprietor is entitled to prevent an online marketplace operator from advertising for sale goods bearing its trade mark using a keyword which is identical to the trade mark, where that advertising does not enable reasonably well-informed and observant internet users to ascertain (easily) 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.

Insofar as eBay used keywords corresponding to L'Oréal trade marks to promote its own services as an online marketplace, that use was not made in relation to goods or services identical or similar to those for which the trade mark is registered. However, use by eBay of keywords corresponding to L'Oréal trade marks to promote its users' postings is use in relation to identical goods or services. That use is not just by the eBay users, it is also by eBay itself in order to promote goods which its customer is marketing with the assistance of that service, where the use is such that a link is established between the sign and the service.

Infringement by use of signs corresponding to trade marks on the website of an online marketplace operator
Insofar as an operator of an online marketplace merely enables its customers to display signs corresponding to trade marks on its website in the course of their commercial activities, it does not itself ‘use’ those signs. That use is made by its customers. Accordingly, the role of the online marketplace operator in enabling the use made by its customers must be examined by reference to laws other than trade mark law.

Article 14(1) of the E-Commerce Directive restricts the liability of service providers in relation to the ‘hosting’ of information provided by the recipients of its services. The ECJ has previously held that this Article applies to the operator of an online marketplace where that operator has not played an active role that would allow it to have knowledge or control of the data stored.

While it is for national courts to carry out the assessment concerned, the ECJ considered that the operator plays an ‘active role’ which gives it knowledge of or control over the data relating to the offers for sale when it provides assistance such as optimizing the presentation of the online offers for sale or promoting those offers. When the operator has played an active role of that kind, it can no longer rely on the exemption from liability which Article 14(1) confers.

Moreover, even where the operator has not played an active role of that kind, it cannot rely on that exemption if it was aware of facts or circumstances on the basis of which a diligent economic operator should have realized that the online offers for sale were unlawful and, in the event of it being so aware, failed to act promptly to remove the data concerned from its website or to disable access to it.

Injunctions against the operator of the online marketplace
The final question referred to the ECJ was whether Article 11 of the Enforcement Directive requires Member States to afford the proprietors of IP rights with the right to obtain an injunction against operators of websites by means of which their rights have been infringed, such as an online marketplace, requiring that operator to take measures to prevent future infringement of those rights.

The ECJ held that, when an operator of an online marketplace does not itself decide to end infringements of IP rights and to prevent further such infringements occurring, that operator may be ordered to take measures making it easier to identify those customers responsible. Although it is necessary to respect the protection of personal data, when the perpetrator of the infringement is operating in the course of trade, not in a private matter, that person must be clearly identifiable. Consequently, the ECJ found that EU law requires Member States to ensure that national courts are able to order a website operator to take measures which contribute not only to bringing to an end infringements, but also to preventing further infringements. Those injunctions must be effective, proportionate, and dissuasive and must not create barriers to legitimate trade.

Analysis

This is a strong decision in favour of brand owners, as it places a much higher burden on online marketplace operators to police the content of their users' postings. Further, it endorses and applies the reasoning in Google France (Joined Cases C-236/08 to 238/08) in finding that liability for an online service provider is only triggered by advertising for sale goods bearing a trade mark, where that advertising does not enable a well-informed and observant internet user to understand if goods originate from the trade mark proprietor (or a linked business) or from a third party.

The issue will now be over the scope and breadth of the injunction that courts are prepared to grant. The ECJ has recognized that this is a matter for national law, but it remains to be seen whether Member States will apply this in a consistent manner.

Practical significance

Online marketplace providers can no longer hide behind the ‘hosting’ defence/exception to liability provided by Article 14 of the E-Commerce Directive to maintain that they do not have legal responsibility or liability for the acts of their users if they have:

• played an active role in the promotion or sale of the trade marked goods; or
  
• gained knowledge of facts or circumstances which should have put them on notice that the offers for sale were unlawful and they failed to act expeditiously.

Further, injunctions will now be available against future as well as past infringing activity on online marketplaces. We can expect further developments in the move by rights holders to prevent file-sharing by the users of major ISPs (such as proceedings between the MPA and BT concerning Newzbin) [Editor's note: on the Newzbin litigation, which was decided after this article went to print, click here].

Although the UK has not adopted specific rules to implement Article 11 of the Enforcement Directive in full, the High Court nevertheless will have to abide by the full text of Article 11 when granting an injunction and can injunct intermediaries such as marketplace operators. The injunctions must be effective, proportionate, and dissuasive—which may not be straightforward for the Courts to ascertain.