Did French Retailers Win ‘Hometown’ Verdict Against eBay?

[WSJ_law_blog]

A French court today cracked down on counterfeits — and an outlet that sells them — ordering eBay to pay Louis Vuitton and other luxury brands — Kenzo, Guerlain, Dior and Givenchy — $63.1 million in damages for auctioning fake goods. Here’s the early story from WSJ.

LVMH Moët Hennessy Louis Vuitton and sister company Christian Dior had accused eBay of not taking the necessary steps to ensure that the accessories sold on its Web site weren’t counterfeit. “It is a major first, because of the principles that it recognizes and the amount sought,” said Pierre Gode, an aide to LVMH president Bernard Arnault. The amount is a significant upward departure from the 20,000 euro judgment that Hermes — another French retailer — won against eBay earlier this month for facilitating the sale of fake Hermès products.

“Today’s ruling is not about our fight against counterfeit; today’s ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers,” eBay said in a statement. “It is clear that eBay has become a focal point for certain brand owners’ desire to exact ever greater control over e-commerce.” EBay said it will appeal the ruling.

“I was really surprised by the number,” J. Michael Huget, the head of IP at Butzel Long, told the Law Blog. “There’s definitely a hometown flavor to it. I don’t know how you get there on a disgorgement of profit basis, unless there’s some unique penalty provision that exists under French law. But even with that, it’s not like it’s a company that’s gone over there and hurt people. You don’t want to discount the value of a brand, but that’d be a huge number even in our system.”

As for perfumer-plaintiffs Kenzo, Guerlain, Dior and Givenchy, the judge ruled that, even though the perfumes sold by eBay were legitimate, the company was liable for unauthorized sales. LVMH strictly limits their distribution to authorized dealers such as perfume chains and department stores.

Back on the home-front (a/k/a the SDNY), a decision is pending in a similar case brought last year against eBay by Tiffany, alleging that eBay has ?facilitated the promotion and sale of counterfeit Tiffany goods by providing a forum for, and actually promoting, such sales.? According to Huget, a favorable decision for Tiffany would stretch the U.S. trademark laws to a place they haven’t gone before. “As far as I know,” he said, “no one has found a Web site operator, like eBay, liable for being the host for somebody else’s selling of a counterfeit. The flea market cases haven’t been applied in the Online world yet.”

In the past, according to WSJ, eBay has defended itself against accusations from brands by touting a program it put in place several years ago, whereby companies can report items they think are suspicious. However, the sheer volume of branded goods being sold on auction sites online has been too hefty for most companies to monitor.