EBay Inc. can be held liable for trademark infringement on its online marketplace, the European Court of Justice ruled today. The ruling also applies to operators of other e-commerce marketplaces, says the court, the highest judicial body in the European Union.

The eBay case involved sales of products from French cosmetic and beauty supply company L’Oreal SA. The brand distributes its products through authorized distributors, but individuals sometimes seek to sell L’Oreal items on eBay. More than three years ago, L’Oreal brought a claim through the U.K. High Court that said the sale of its products through eBay infringe the French company’s trademarks; the products included samples of perfume and cosmetics that L’Oreal meant for free distribution but not for sale to E.U. consumers on eBay. The U.K. court asked the European Court to clarify the obligations of online marketplaces in such matters. The U.K. case also involves sales of counterfeit L’Oreal goods on eBay.

The European Court today ruled that online marketplace operators must follow E.U. trademark law, and  that liability applies to online marketplaces selling to consumers within the European Union, even if those offers relate to goods being sold from non-E.U. states. The European Court also said that online marketplaces can be held liable for trademark infringement if they knew or suspected that specific online sales were unlawful. “Even in cases in which the operator has not played an active role of that kind, it cannot rely on that exemption from liability if it was aware of facts or circumstances on the basis of which a diligent economic operator should have realized that the online offers for sale were unlawful,” reads the ruling.

The ruling goes on to say that national courts in E.U. member  states can issue injunctions to prevent online marketplaces from infringing on trademarks. The ruling made no mention of specific damages or other penalties in such cases. “Those injunctions must be effective, proportionate, and dissuasive and must not create barriers to legitimate trade,” the ruling says.

L’Oreal said it was satisfied with the ruling.

“The judgment provides some clarity on certain issues, and ensures that all brands can be traded online in Europe,” says Stefan Krawczyk, senior director and counsel, government relations, for eBay Europe.  “As a marketplace, eBay provides a level playing field for all online sellers and will continue building constructive partnerships to expand the range of brands being sold on eBay.”