Liability: Web market place owners - decision: Court of Justice of the EU
6/09/2011

In an article entitled “[t]he liability of Internet marketplace owners”, which appeared in the April 2011 edition of Without Prejudice, the author reported on an opinion issued by the Advocate General of the Court of Justice of the European Union (“CJEU”) on issues referred to it from the English High Court in the case of L’Oréal v eBay [2009] EWHC 1094 (Ch) (“L’Oréal v eBay”). Essentially, the Advocate General opined on whether or not eBay could be held liable or jointly-liable for trade mark infringement committed by its seller-users and by using trade mark incorporating keyword advertising to promote such sales. In what has been hailed as a major win for trade mark owners, the CJEU ruled on the relevant issues on 12 July 2011. This article is a brief update on those aspects of the CJEU’s ruling, which may be relevant to South African legal development.

The CJEU’s main findings were that:
• concerning primary infringement under article 5(1)(a) of the Trade Marks Directive, a proprietor of a trade mark is entitled to prevent an online marketplace operator from advertising, on the basis of a keyword that is identical to the proprietor’s trade mark and that has been selected in an internet referencing service by that operator, goods bearing that trade mark and that are offered for sale in the marketplace. This applies where the advertising does not enable reasonably well-informed and reasonably observant Internet users, or enables them only with difficulty, to ascertain whether or not the goods concerned originate from the proprietor of the trade mark or an undertaking economically linked to the proprietor or, on the contrary, originate from a third party;
• for the purposes of article 5 of the Trade Marks Directive, the operator of an online marketplace does not ‘use’ signs or marks that are identical to or similar to trade marks appearing in offers for sale displayed on its website; and
• the exemption of liability of Internet service providers in terms of The Internet Service Provider Directive, must be interpreted as applying to the operator of an online marketplace where that operator has not played an active role allowing it to have knowledge or control of the data stored. In this regard, the operator plays an active role when it provides assistance that entails optimising the presentation of the offers for sale or promoting them. The operator is, furthermore, not exempt if it was aware of facts or circumstances on the basis of which a diligent economic operator should have realised that the offers for sale in question were unlawful and, in the event of it being aware of that fact, failed to act expeditiously in accordance with “take down” provisions of The Internet Service Provider Directive.
In short, the CJEU has decided that, in the EU, an online marketplace owner who assists trading clients in relation to their marketing of the goods or services could be liable under national laws. It may also be liable if it is aware of unlawfulness.
The South African Position
A South Africa Internet marketplace owner’s exposure to liability may flow from legislative and common law sources, such as the Trade Marks Act 194 of 1993, the Copyright Act 98 of 1978, the Counterfeit Goods Act 37 of 1997 and the Consumer Protection Act 68 of 2008 and delictual liability for those who instigate, aid or advise a delict.

If the CJEU’s decision is followed in South Africa, perhaps South African online marketplace owners will not be accountable under our primary trade mark infringement provisions for allowing listings that infringe trade mark rights to appear on their websites. Similar considerations could apply in terms of the Copyright Act 98 of 1978 and the Counterfeit Goods Act 37 of 1997. Because the legislation has, to our knowledge, not been tested by our Courts, the position under the Consumer Protection Act 68 of 2008 is unclear.

Finally, the Electronic and Communications Act 25 of 2002 regulates the liability of Internet services providers by providing conditions for eligibility for liability exemption in terms of acting as a mere conduit, caching and hosting. The Act lays down principles relating to take-down notifications and also enshrines the principle that Internet service providers are not under a “general obligation to monitor”. A competent court may, notwithstanding the exemption from liability, order a service provider to terminate or prevent unlawful activity in terms of any other law and the CJEU’s decision may provide guidance on the application of other laws.
Theuns van de Merwe
Associate
theuns-v@adamsadams.co.za