European Brand Owners Still Playing Hardball Against eBay

A few years ago, eBay (NSDQ: EBAY) won a big victory in U.S. courts with its case against Tiffany’s, but can’t seem to replicate that win in Europe, where courts continue to be more friendly to trademark-owners. Today, an EU court ruled that online marketplaces can indeed get in trouble if they don’t take sufficient steps to halt sales that violate trademark law.

eBay has a pretty extensive anti-fraud program already, but some trademark owners–especially luxury goods makers like L’Oreal, who filed this case–have said the company doesn’t go far enough.

It’s important to note that the luxury-goods companies aren’t just going after fakes. Reports from the Guardian and Bloomberg note that L’Oreal also wants to shut down practices like “parallel importation” — also known as sales on the “gray market.” That’s when a re-seller offers up legitimate, non-pirated goods that are simply imported from another market, without the trademark owner’s permission.

Gray-market goods work like this: imagine someone buying legitimate L’Oreal products at a low price in a developing country Egypt or China, and then re-selling them into Europe via eBay or another online marketplace. The re-seller can turn a profit and the European consumer can get a deal.

Selling gray-market goods is usually legal in the U.S., but European courts have taken a more strict view, as with many trademark issues.

L’Oreal is upset that eBay is using L’Oreal trademarks in various ways, such as purchasing advertisements that are keyed to Google (NSDQ: GOOG) searched on keywords that are also the perfume company’s trademarks. A U.K. court ruled that eBay was in the clear back in 2009, but asked the EU Court of Justice based in Luxembourg to weigh in on the dispute as well. The EU court ultimately saw things differently than the U.K. court.

It will be up to national courts in the EU to enforce any punishments against eBay or other online market that don’t obey trademark rules. The ruling today simply says that national courts may enforce such regulations, and that online marketplaces aren’t going to get the kind of widespread exemption from such scrutiny that they have received in the U.S.

Online marketplaces could be liable in situations in which they take an “active role” in encouraging or promoting deals that violate trademark laws. More importantly, online marketplaces will be able to get in trouble in some cases where they don’t take an active role, if the company was aware of relevant evidence and “should have realised that the online offers for sale were unlawful,” stated the court.

An eBay spokesman played down the decision, telling Bloomberg that “a lot of cases will still have to be assessed by the national courts.” In any case the company has “moved on — we fulfill most of these conditions now anyways.”