Ben Baker/AP
L’Oréal CEO Jean-Paul Agon

L’Oréal Latest to File Counterfeit Suit Against eBay

March 10, 2009 05:14 PM
by findingDulcinea Staff
Online auction site eBay is again being sued for failing to regulate the sale of counterfeit goods on its site; previous decisions have been contradictory.

L’Oréal Begins Proceedings Against eBay

French cosmetics company L’Oréal began proceedings against eBay in the High Court in London Tuesday, accusing the online auction site of not doing enough to prevent to selling of counterfeit L’Oréal products. It is the fifth such case filed by L’Oréal against eBay, following cases in France, Belgium, Germany and Spain.

In a statement, L’Oréal said it “chose to take legal action in order to protect consumers and also to maintain and defend the reputation of its brands, the products of which are guaranteed for safety and quality within legal distribution channels,” the Times of London reported.

L’Oréal lost its case against eBay in Belgium, where a court ruled that eBay acted diligently to remove counterfeit items that were brought to its attention and does not have a responsibility to monitor all items. The decision in the French case is due April 8.
In similar cases filed against eBay by other companies, decisions have been inconsistent. The auction site recently won a case in Germany against watchmaker Rolex and won a case in July against jewelry company Tiffany in a U.S. court. However, it has lost cases against fashion conglomerate LVMH and fashion house Hermès in French courts.

“This inconsistency,” writes the Financial Times, “is increasing the pressure on the EU,” which will consider relaxing rules that allow manufacturers to control distribution of its products. A change would give online distributors like eBay greater leeway in selling products.

Manufacturers are opposed to a change, arguing that the rules are vital in shaping brand image and preventing counterfeits. The Financial Times concludes that, “More clarity is needed over the circumstances in which manufacturers can restrict the supply of goods and challenge sales through online sites.”

Background: eBay counterfeiting cases

The company has faced several prominent lawsuits in which it was accused of facilitating the sale of counterfeit goods. In June 2008, it lost two separate cases in French courts.

French fashion house Hermès, known for such signature items as the pricey Birkin bag, won $30,000 in damages from eBay and sellers over auctions of two counterfeit Hermès bags. The court cited eBay for “failing to act within their powers to prevent reprehensible use of the site.”

Later that month, it lost a case to fashion conglomerate LVMH—owner of high-end labels Louis Vuitton, Dior and others—which had found that some 90 percent of Dior and Louis Vuitton goods auctioned on eBay were fakes. The court awarded $63 million to LVMH for what it deemed eBay’s “culpable negligence,” and required eBay to pay nearly $20 million in additional damages for unauthorized sale of the brand's perfumes.

In two more recent cases, however, eBay has won. In a case filed by jewelry company Tiffany, a U.S. disrict court judge ruled that, “Tiffany must ultimately bear the burden of protecting its trademark.”

Last month, a German court ruled ruled in favor of eBay against watch company Rolex on the grounds that the company had removed from its site auctions of counterfeit watches.

Court spokesperson Ulrich Egger told Bloomberg, “EBay now uses a filter program to detect offerings that blatantly violate trademark rights. … EBay doesn’t have to review each item before it gets posted on its site, because it would jeopardize the whole business model.”

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