Court finds that eBay benefits from hosting services provider defence

In L'Oréal SA v eBay (13th May 2009) the Paris Court of First Instance rejected L'Oréal SA’s claims of trademark infringement against eBay. The decision comes less than a year after eBay was ordered to pay compensation to Hermès and LVMH for the sale of counterfeit goods on its auction platform.

As in previous cases, eBay claimed that as a hosting services provider, it should benefit from the defences set forth by the EU E-commerce Directive (2000/31/EC), as implemented in France by Law 2004-575. eBay thus argued that it could not be held liable unless: 

• it had actual knowledge of the unlawful character of the content; 
• it was aware of facts and circumstances that made such unlawful character apparent; or 
• it had failed to remove the content promptly once it had knowledge of such unlawful character.

In the LVMH decision the Paris Commercial Court had held that eBay could not benefit from these defences, as it was not only a hosting provider, but also a broker. In contrast, the court in the present case ruled that eBay was acting as a hosting provider in supplying announcement spaces against remuneration. The court pointed out that even though eBay played the role of intermediary between sellers and buyers, this role was purely technical and eBay had no say in the content of the offers, the negotiations between sellers and buyers or the performance of the contracts.

However, the court did not determine whether eBay was liable under the specific regime for hosting services providers, calling for the parties to go to mediation. The court noted that preventative measures against infringement are indispensable, but "will be effective only through a close collaboration between trademark rights holders and eBay".

L'Oréal also claimed that eBay was liable under the law of torts on the grounds that it had failed to implement technical measures to prevent or reduce the sale of counterfeit goods on its auction platform. In contrast to the commercial court, in the present case the court dismissed L'Oréal's claim, holding as follows: 

• eBay had only a "best efforts" obligation to ensure that its website was not used for illegal activities. Under the directive, there is no general obligation on internet service providers to monitor transmitted or stored information. 
• eBay demonstrated that it had taken significant steps to fight trademark infringement.

In particular, the court noted that: 

• eBay had implemented the Verified Rights Owner policy; 
• specific contractual clauses had been put in place; 
• eBay sent warning messages to sellers and buyers; 
• users were able to report illegal auctions; and 
• eBay conducted random searches of terms such as "fake" or "imitation" to detect counterfeit goods.

Although the court ruled in favour of eBay, it did not completely close the door to infringement claims against it. The court distinguished the various activities carried out by eBay and considered that the offering of promotional tools to boost sales (eg, banner ads and commercial links) could not benefit from the specific regime for hosting services providers. In particular, the court found that eBay played an active role in this respect, as these tools are intended to promote the products put on sale on its auction platform and attract visitors (in contrast, eBay played a passive role as a hosting services provider). The court found that these activities were not indispensable to eBay's role as a hosting services provider and thus fell outside the specific liability regime. Consequently, such activities could give rise to liability for trademark infringement under the French general liability regime. However, as L'Oréal had not specifically mentioned which activities were susceptible to meet these criteria, the court rejected L'Oréal's claim.

Proceedings between the parties (and other companies in similar positions) are still pending in several EU jurisdictions - in France, another court has been asked to examine the use of commercial links on eBay’s auction platform.