EBay ordered to pay LVMH €38.6 million
By Doreen Carvajal
PARIS: A French court on Monday ordered eBay, the online auction giant, to pay €38.6 million in damages to LVMH, the French luxury goods company, saying eBay had done too little to stop the sale of counterfeit goods over the Internet.
The decision thrusts France, the home of many prominent luxury houses, further into the forefront in the battle against brand piracy.
Legal experts were surprised by the amount of damages awarded, the equivalent of $60.9 million, and said the ruling could have repercussions outside France, encouraging fashion brands to pursue new lawsuits against eBay or other Internet companies.
"It's quite unusual," said Patrice de Candé, a lawyer specializing in intellectual property issues in Paris who represented LVMH in its effort to challenge the search engine Google for posting advertising of counterfeit LVMH products. "I've never seen such an amount of damages in French law in my 23-year career."
From its offices in Paris, LVMH Moët Hennessy Louis Vuitton cast its legal victory as an "important step in protecting brands and products from parasitic practices" and praised the court for "a precious contribution to protect creative works that are important to our national heritage."
But eBay pledged to appeal the ruling, which allocates damages to a number of brands in the stable of the LVMH, which is headed by its chairman, Bernard Arnault, including the leather goods maker Louis Vuitton, Christian Dior couture and four perfume makers.
It was the second ruling of its kind that eBay has lost this year in France. Hermès International in Paris successfully sued eBay over fake bags that had been sold online.
In that case, another French court fined eBay €20,000, or $31,600, in June for not properly vetting the sales.
In the LVMH case, the court also threatened to impose a fine against eBay of €50,000 day if it failed to stop the advertising of fake goods.
Sravanthi Agrawal, a spokeswoman for eBay's European corporate division, cast the battle in far different terms than LVMH, which argues that it loses millions of euros a year to fake products.
She argued that the luxury goods leader is trying to stifle the sales of individuals who simply want to sell their mothers' used Louis Vuitton bags online.
"We are getting a clear sense from the owners and manufacturers that the problem is not counterfeiting," she said Monday from eBay's offices in Paris. The bigger issue, she contended, is one of control, because eBay is not one of the manufacturers' authorized distribution outlets.
LVMH argued that 90 percent of the designer goods sold on eBay were fakes, but Agrawal said the company had made great strides in improving its anticounterfeiting measures, removing more than two million sellers who had violated the trademarks of rights holders.
Ebay has faced similar lawsuits in other countries, including a pending case pressed by Tiffany & Co. in New York and another lawsuit pursued successfully by Rolex in Germany, over a breach of its intellectual property rights.
But France has proved to be particularly welcoming to brand owners on this issue, with challengers ranging from small online travel companies to the cosmetics manufacturer L'Oréal. LVMH has been one of the most aggressive litigators against Internet companies, previously winning a ruling against Google for permitting ads promoting Web sites selling fake LVMH goods.
LVMH employs investigators who troll the Internet in search of violations, and the company sends regular alerts to eBay. But the court agreed with its view that eBay bears responsibility for filtering the system and demanding assurances of authenticity.
Ebay is also appealing the judgment in the Hermès case, issued by a court in Reims.
"France has been at the forefront in the fight of counterfeiting through the Internet," said Fabio Angelini, a lawyer in Rome specializing in intellectual property issues.
Since 1994, French authorities have sought to root out brand counterfeiting through legislation that makes it criminal to buy and sell fake goods. For, example, tourists entering France could technically have their fake Louis Vuitton bags confiscated at the border by customs agents.
Jeff Hardy, coordinator of an anticounterfeiting campaign called BASCAP, which is run by the International Chamber of Commerce, said the French court ruling could influence other companies to follow the lead of LVMH.
"It will have enormous impact," he said. "The Internet is introducing new technologies and new marketplaces and new market actors that didn't exist before. I think this is the beginning of establishing new rules that will keep up with these evolving technologies and marketplaces."
Bruce Sunstein, a Boston attorney specializing in intellectual property issues, said that courts in the United States had found that eBay had a requirement, under trademark law, to remove counterfeit products. But the French are raising the bar by seeking "to impose an obligation on the auction site to vet an offer to sell goods before the offer is posted on the site."
"If the French ruling stands," he added, "then it may provide some incentive for a U.S. court to reach a similar conclusion."
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