On July 12, 2011, the Court of Justice of the European Union (ECJ) issued its on the long-standing dispute between cosmetics manufacturer and concerning the illegal sale of ��’O��é���� products on the online marketplace.

��'������� on the basis that eBay had failed to prevent their users from violating ��'�������'s��trade-mark rights. The violations cited by the company included the sale of cosmetic samples meant for free distribution and the unauthorized sale of products intended for markets outside the EU to citizens of EU Member States (an infringement known as ). In addition, ��'������� claimed that eBay assisted users in locating goods on the site that infringe ��'������� trade-marks by purchasing keywords from online referencing services such as . In response, eBay asserted that, as mere hosts of the transactions, they were exempt from liability under the governing (Directive).

After numerous dismissals at the national level (the most recent of which came from the ), the ECJ found in favour of ��'����é����, holding that online market operators such as eBay cannot rely on the exemption from liability under the Directive if it has played an “active role” in the infringement by optimizing or promoting the items for sale. Moreover, the court noted that, even if the operator has not played an active role, it cannot rely on the exemption from liability if “it was aware of the illegal nature of the sales their sites facilities” and, once aware, “failed to act promptly to remove the data concerned from its web site or to disable access.”

With this ruling, the ECJ has added much needed clarity to the EU IP regime and bolstered the protections afforded to brand owners in online marketplaces. By holding operators accountable for their negligent failure to prevent and remove trade-mark infringing content, the Court has forced companies like eBay to integrate proactive measures into their policies to ensure IP rights are respected by their users.

Furthermore, the ECJ has upon EU Member States to hold operators of online marketplaces accountable under EU IP law, noting that, under the , Member States must “take measures intended not only to bring to an end infringements of intellectual property rights but also to prevent further infringements of that kind.” To achieve this goal, the ECJ has permitted national courts to issue injunctions against operators who refuse to bring an end to infringements of IP rights and prevent further violations from occurring.

This ruling has been praised by commentators such as as a much-needed modernization of European trade-mark law, which has been "strained under the pressure of…the internet age… and the rise of online commerce."

The post L'Oreal v. eBay Ruling Gives Trademark Holders An Ally In Their Fight For Online Brand Protection appeared first on IPOsgoode.

Today’s post will be of interest to anyone who has ever extensively compared prices on big-ticket items before making a purchase.

The US Supreme Court recently announced that it will review the case of (Omega v. Costco) on the issue of international copyright exhaustion and the First Sale Doctrine.

Omega filed suit against Costco when it discovered that Costco was selling a particular Omega watch for $1300, 35% off the manufacturer’s suggested retail price (MSRP) of $2000.�� How did Omega watches end up at Costco, you ask?�� The paper trail is as follows: Omega manufactures its watches in Switzerland and sells them worldwide through a network of authorized dealers.�� Omega sold the watches in question to authorized dealers overseas.�� Then, in the words of Circuit Judge Milan D. Smith, Jr., “unidentified third parties” bought the watches and imported them into the United States.�� ENE Limited, a company based in New 91��ɫ, bought the watches upon importation.�� Costco subsequently purchased the watches from ENE, which is how they ended up in Costco’s California retail outlets for $700 less than the MSRP.

Specifically, Omega sued Costco for copyright infringement of the “Omega Globe Design” on the back of the watch under 17 U.S.C. §§ 602(a) (unauthorized importation of a copyrighted work), and 106(3) (distribution rights) of the United States Copyright Act. ��Costco claimed the First Sale Doctrine in defence. ��

The First Sale Doctrine is a limitation on copyright, codified in . It allows the holder of a legitimate copy of a copyrighted work to transfer or sell that copy without the permission of the copyright owner. It can be used as a defence to copyright infringement in specific situations.�� In , the Supreme Court held that the First Sale Doctrine is a defence in cases of imported copies manufactured domestically.�� In Omega v. Costco, the Ninth Circuit further clarified that the Doctrine is a defence in cases of imported copies legally manufactured overseas, if those foreign-made copies have already been sold domestically with the copyright owner’s permission, thus “exhausting” the copyright.

Omega watches are made in Switzerland, and Costco sold them in the US without authorization from Omega, thus invalidating the First Sale Doctrine as its defence to �����𲵲�’s claims.�� The Ninth Circuit found in favour of Omega, reversing the preceding decision of the district court.

The Supreme Court’s review of Omega v. Costco is important because its decision will either aid big box stores and consumers seeking the best possible price for a particular product, or international brands seeking to rein in unauthorized distribution and sales of their products.

A savvy consumer or will tell you that 20% off is the largest discount one can expect from an authorized dealer selling a watch listed at its full retail price.�� This makes Costco’s offering of Omega watches at 35% off the retail price extremely tempting.�� The problem with purchasing a watch from an unauthorized dealer (in this case, Costco) or second-hand is that such a purchase often invalidates the warranty on the item (see , , and websites for such warnings).�� Obviously the issue of an invalid warranty on a watch isn’t enough to deter consumers from making such a purchase, or else online markets like eBay would not be thriving.

While �����𲵲�’s lawsuit may appear to be a thinly-veiled attempt to control the prices at which its watches are sold under the guise of copyright infringement, the issue of brand dilution likely played a role in Omega filing suit as well.�� Costco is known for selling items at prices significantly lower than other retail outlets, and at a high volume – two characteristics with which a higher-end watch brand like Omega would not want to be associated.

As a student, often with limited funds, buying a big-ticket item at the best available price is important to me.�� At the same time, I’m not sure that I would feel comfortable divulging the source of my high-end purchase if that source was a deep-discounter.�� In the case of luxury goods, provenance is everything.

How do you think the US Supreme Court will decide the case?�� Leave your thoughts in the Comments.

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Canadian Law Perspective

Such practices are legal under Canadian Trade-mark law.�� In Consumers Distributing Co. v. Seiko, , the Supreme Court of Canada held that because the trade-mark owner first placed the goods on the market, no distinction is to be made between such goods and the goods sold by authorized distributors.�� That is, the doctrine of exhaustion of rights applies – the manufacturer’s rights have been exhausted when the goods were first sold, wherever that may be.

However, this has not stopped trade-mark owners from trying to use other legal tools to stop grey-market goods. ��For example, in Euro-Excellence v. Kraft Canada, ,��an authorized distributor of chocolate bars unsuccessfully claimed copyright infringement in the logo on the packaging of the goods to stop the parallel imports. ��Also, trade-mark owners typically use restrictive contracts with their foreign distributors so as to penalize them if ��their goods enter grey-markets.

These examples show how much of a problem this is for trade-mark owners and authorized distributors.����Specifically, it shows the extent to which they are willing to go to stifle a grey-market.����

Why is Parallel-Importing Not Illegal?��

From a policy standpoint, there are competition and consumer-interest reasons to maintain the grey-market. In most instances, the grey-market goods are identical to their authorized counterparts so there is no possibility of confusion in the mind of the consumer as to the actual origins of the goods.�� Thus, the grey-market allows consumers to purchase goods at cheaper prices.����

Counting the Costs

Where problems arise is when counterfeit goods can’t be distinguished from legitimate grey-market goods.�� In a recent in Lawyers Weekly, Teresa Scassa described 3 scenarios when goods are seemingly grey-market, but are in fact counterfeit: (1) when trade-mark owners outsource manufacturing to a factory, and the factory runs an illegal extra shift to create unauthorized goods; (2) when rejected first quality goods are to be destroyed, and such goods end up being sold; and (3) when second quality goods are sold without adhering to the disposal requirements (such as black-lining trade-marks on tags and labels).

The problem is an inability to ascertain, at the time of import, the legitimacy of the way in which the imported goods were acquired.�� To that extent, The Gray Blog in the U.S. that “at least some portion of��...�� seizures are genuine parallel market goods which [U.S. Customs and Border Protection] detains under dubious claims that they may be counterfeit.”

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Update: If you are unable to view the above video, please follow the link below to launch the video in Windows Media Player.

Link to video

This lecture assesses how the Supreme Court is interpreting Canada’s intellectual property laws and how its decisions may affect legislative policy. The Court has become more interested and competent in this field than was the case even a couple of decades ago. Two decisions of the Court, Compo Co. Ltd. v. Blue Crest Music et al. (1979), and Euro-Excellence Inc. v. Kraft Canada Inc, are particularly compared. The former contains propositions which unintendedly cast a baneful influence over later law, while the latter sees the Court split four ways in a case where copyright law was used unsuccessfully to attempt to block parallel imports of chocolate bars into Canada. The lecture concludes that such decisions, among others, expose how inadequately successive governments have monitored intellectual property law developments, and calls for an independent commission to develop a more coherent intellectual property code that will advance Canadian economic interests and be readily understood by its users.

Editor's Note: This lecture was first delivered on Oct. 24th, 2007 when Osgoode Hall Law School welcomed back one of its former faculty members to deliver the Lewtas Lecture.

This is cross-posted to http://www.thecourt.ca

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