-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --
By Eric Auchard
LONDON, June 2 (Reuters) - Google officials face a criminal trial in Italy this month over a teen bullying incident that was posted to a Google video site, an extreme example of the trouble Internet firms have had in European courts.
The new economy finds itself caught in a trap between European Union policies that promote open competition and free speech against local laws and mores that are designed to protect traditional business and cultural practices.
But, after a decade of legal-wrangling and setbacks, the debate is shifting to European courts. That should help clarify the role of Web services providers in facilitating commerce between online buyers and sellers. A critical mass of cases is finally making its way to the European Court of Justice which should help define the rights and responsibilities of online service providers.
That's little comfort for the four Google officials who face up to three years in jail if convicted for failing to block the video from being posted to the Google Video site that showed a teenager with Down Syndrome being taunted by other youths.
At issue in the trial set to begin in Milan on June 23 is a question as old as the World Wide Web itself. Should publishers be held strictly liable for screening user-submitted text, photos or videos before publishing it on their sites? Is Google to blame or are the users or advertisers who actually post such material responsible?
In theory, the EU's nine-year-old E-Commerce Directive and similar laws in the United States provide a legal safe-harbour to Internet services in trademark cases as long as they take action when informed of specific incidences of infringement or counterfeiting. But, in practice, the issue is fuzzy, leading to a proliferation of cases against Web firms, especially by makers of luxury goods or big advertising brands.
The issues can't be settled by patchwork precedents. Nearly a quarter of the world's Internet users are European. The Web plays a growing role in Europe, where surveys find that 80 percent of consumers say online activity influences their buying decisions.
It may seem like a leap from video bullying to advertising trademark showdowns, but as the intermediary stuck in the middle of such disputes, the "Web hosting" defence is critical to ensuring consumer services can operate as neutral middlemen.
The wheels of change grind slowly in matters of law. Any substantial resolution of these controversies is likely to take several years to play out. Only then will Internet services be able to see the making of a more consistent legal framework.
USER-GENERATED CONTROVERSIES
In recent weeks, eBay Inc has claimed tentative legal victories in France and the UK against cosmetics maker L'Oreal, which alleged the online auctioneer has failed to stop the sale of fake goods on its site.
The UK court referred questions to the European Court of Justice about whether the protections eBay enjoys as an enabler of ecommerce should insulate it from competing trademark enforcement claims. Plaintiffs' lawyers say the lower court ruling is ambiguous and they could still show on appeal that eBay unfairly profits from sales of counterfeit L'Oreal goods.
Companies like eBay and Google say they have procedures for responding to specific complaints about trademark or copyright infringement, the sales of counterfeit goods or other illegal activity on their sites.
There is a balance to be struck here. Brand owners need to work with Web services providers to target actual offenders rather than demanding that Internet market makers police their customers for them. In exchange, Internet services must do more to show that when illegal activity occurs, they are willing to hand over any profits from such activity. Clearly, they should have incentives to run healthy marketplaces.
Last year a UK judge threw out a similar case against Yahoo Inc that tested how far trademark rights extend when consumers search the Web and are shown related advertising. In that case, the court ruled trademark law should not prevent competitors from placing advertising alongside rival brands.
Google has appealed three similar cases in France to Europe's high court involving accusations its online advertising system promotes trademark infringement. In the most high profile case, Google lost a lower court ruling where LVMH Moet Hennessy alleged Google's keyword advertising system was used by rivals to promote counterfeit Louis Vuitton handbags.
Luxury goods makers have attempted to shift the burden for policing their intellectual property online to Internet middlemen like eBay and Google, saying it is uneconomical, even impossible, to go after pirates or counterfeiters themselves. This is hardly fair. It smacks of the protectionist thinking toward business that has kept prices high and competition low between countries inside the European Union.
European regulators have begun to question whether some brand owners are abusing trademark protections to eliminate alternative distribution channels, both online and at discount stores.
The European Union could rewrite some of its policy directives to clarify these issues. But this is unlikely before a new EU administration arrives next year. Where policy has not kept pace with technology and the rules remain unclear, European courts will have the final say in resolving these conflicts.
-- At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. For previous columns, Reuters' customers can click on --
(Editing by David Evans)