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Physical marketplaces and the duty of the operator to stop trade mark infringement by pitch holders

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21/09/2016

In the groundbreaking case of L’Oréal v eBay [1], the European Court of Justice ruled that eBay could be held liable to account for trade mark infringing activity that had taken place in its online marketplace.  The Court held that eBay (and other online marketplace providers) cannot rely on the “hosting” defence where they have played an active role in the promotion or sale of trade marked goods or gained knowledge of facts or circumstances that should have put them on notice that the offers of sale were unlawful and they failed to act expeditiously to remove them.  Since that ruling, injunctions have been available for brand owners against infringing activity in online marketplaces.

The Court of Justice of the European Union (CJEU) (by which name the European Court of Justice has since become known) has recently considered the application of the L’Oréal v eBay ruling in the context of the physical, as opposed to the online, marketplace.

In this case [2], Tommy Hilfiger and others applied for an injunction to stop Delta Center, the tenant of ‘Pražská tržnice’ (Prague Market Halls), from letting stalls at the market to traders who were selling counterfeits.  The application was brought under Article 11 of the Enforcement Directive [3], which allows trade mark proprietors to bring an action against intermediaries whose services are used by a third party to infringe their trade mark.

The Czech Supreme Court referred to the CJEU the question of whether it was possible, and if so on what basis, to order the operator of a physical marketplace to take measures to stop pitch holders from committing trade mark infringement.

The CJEU ruled that an operator that provides a service to third parties relating to the letting or subletting of pitches in a marketplace, and which thus offers the possibility to those third parties of selling counterfeits in that marketplace, was an intermediary for the purposes of Article 11 of the Directive.  It was immaterial for the purposes of Article 11 whether the infringing trader in question was operating in an online or a physical marketplace: the considerations laid down in L’Oréal v eBay applied to the physical as well as the online environment.

Accordingly, the operator of a physical marketplace can be compelled to take steps to stop trade mark infringements by pitch holders. The Court stated that the principles applicable to any such injunction are the same as those applicable in the physical environment, namely that the injunction must be, at the same time, effective and dissuasive yet also equitable and proportionate.  Further, the terms of the injunction must not require the intermediary to exercise general and permanent oversight over its customers.  However, the intermediary may be compelled to take measures which contribute to avoiding new infringements of the same nature by the same market trader.  The Court also stated that the injunction must ensure a fair balance between the protection of intellectual property and the absence of obstacles to trade – which may offer some “wiggle room” for marketplace operators, who will not welcome this ruling.

The case has been referred back to the Czech Supreme Court for that court to apply the ruling to the facts.

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[1] Case C-234/09
[2] Case C-494/15
[3] Directive 2004/48/EC

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