Ebay Fined $61M By French Court For Sales of Fake Goods

A court in France ordered eBay to pay more than 61 mega-dollars to the parent company (LVMH) of Givenchy, Fendi, Marc Jacobs and Louis Vuitton, because a user sold fake goods on the website. eBay has been sued by other 'luxury goods' vendors (such as Tiffany's (US), Rolex (Germany) and L'Oreal (EU)). Problems stem from some companies demanding that their merchandise (even legal merchandise) not be displayed nor sold as it is a violation of their 'property.' Others have complained that eBay is too slow to take down claims. Apparently eBay was hit with two violations: 1) eBay illegally allowed legitimately purchased and owned products made by LVMH to be resold on its website by 3rd parties not under the control of LVMH, and 2) not doing enough to protect LVMH's brands from illegal sales. eBay has said it will appeal. So eBay is to know what products every company allows to be sold before allowing them to on auction?

(There's also coverage at Yahoo News.)

Update: 07/01 17:15 GMT by T : That's LVMH throughout, rather than LVHM, as originally rendered.

Comments

Not 'property'

[twatter]

It doesn't matter that the term is enclosed in quotes in the submission. We're talking about trademarks here. If these companies don't take action regarding this they will be allowing their trademarks to be diluted, making them more and more difficult to defend.

This has nothing to do with IP.

Any defendant in court for trademark infringement can bring up the fact that the plaintiff is allowing eBay to sell thousands of cheap imitations. And they would win the case based on that, probably.

Trademark law pretty much requires things like these be done, and the companies have no choice but to go after the entity facilitating the sales.

It's not nice, but that's what it is.

Re:Reason to love America

[MadKeithV]

You can't acquire counterfeit goods legally. The summary is inflammatory because it casually lumps in numb-nuts lawsuits from manufacturers who want their stuff off of e-bay with the courtcase, which happened because people were selling *fake* goods.

Laughed Out of Court

[Anonymous Coward]

This would get laughed out of court in the United States.

First Sale doctrine.

God Bless America!

Re:Laughed Out of Court

[gowen]

That's simply not true. The illegimate goods part of the case would, in all likelihood be equally upheld. Breach of trademark is breach of trademark, and ebay are facilitating this.

The problem with the legitimate goods on sale on ebay.fr is that they're grey market goods -- reimported against the condition of export sales. And the US Supreme Court has already refused to rule on whether non-US-manufactured copyrighted goods (which these are, as the logos are both trademarked and copyrighted) imported into the US as grey market goods are subject to the doctrine of first sale (QUALITY KING DISTRIBUTORS, INC. v. L'ANZA RESEARCH INTERNATIONAL, INC.)

Note also, that the before appeal District Court denied the first sale doctrine in all such cases, so a ruling just like this one has ALREADY been made in the US Court, but struck down on appeal.

Received from eBay yesterday, revised terms!

[ciscoguy01]

Received from eBay yesterday, revised user agreement and privacy policy terms. What a coincidence!

Received: Jun-30-08
Changes to the eBay User Agreement and Privacy Policy

I'm writing to let you know that the eBay User Agreement and eBay Privacy Policy have been updated, effective immediately for new users and on August 13, 2008, for current users.

The most important thing to keep in mind about this update is that your rights, and our responsibilities, under the User Agreement and Privacy Policy have changed very little. This update was spurred by an international project, rolling out now, that will make the user agreements and privacy policies for eBay platforms around the world much more consistent. This way, when you interact with any eBay platform around the world, you can be sure that very similar policies apply to you no matter where you do your transactions.

There is one substantive change to our User Agreement I'd like to point out. We changed the "Content" and "Liability" sections to accommodate a new program we're rolling out worldwide. That program makes catalogs of content and product descriptions available to sellers, so they can easily include complete and up-to-date product information for the items they list.

Similarly, we've revised the Privacy Policy's "Disclosure" section to make sure that the language we've used there accurately reflects the ways in which we're transferring information between companies in the eBay Inc. corporate family to streamline services, fight fraud and provide you with the best, most relevant experience when you use any of the sites or services of the eBay corporate family.

With these changes, we continue to make sure that our legal documents are consistent with the ways our sites and services are evolving and that we meet the needs of our user community. We hope you'll agree that these changes will make the eBay sites and services work better for you. If you accept the new User Agreement and Privacy Policy, you don't need to take any action. If you do not wish to accept the new User Agreement or Privacy Policy, please refer to our Help pages for instructions on how to close your account.

Thank you for using eBay and we look forward to many more successful transactions!

Sincerely,

Scott Shipman Senior Counsel -- Global Privacy Practices eBay Inc.

The important change is in the liability section:

Liability
You will not hold eBay responsible for other users' content, actions or inactions, or items they list. You acknowledge that we are not a traditional auctioneer. Instead, the sites are a venue to allow anyone to offer, sell, and buy just about anything, at anytime, from anywhere, in a variety of pricing formats and venues, such as stores, fixed price formats and auction-style formats. We are not involved in the actual transaction between buyers and sellers. We have no control over and do not guarantee the quality, safety or legality of items advertised, the truth or accuracy of users' content or listings, the ability of sellers to sell items, the ability of buyers to pay for items, or that a buyer or seller will actually complete a transaction.

We do not transfer legal ownership of items from the seller to the buyer, and nothing in this agreement shall modify the governing provisions of California Commercial Code 2401(2) and Uniform Commercial Code 2-401(2), under which legal ownership of an item is transferred upon physical delivery of the item to the buyer by the seller. Unless the buyer and the seller agree otherwise, the buyer will become the item's lawful owner upon physical receipt of the item from the seller, in accordance with California Commercial Code 2401(2) and Uniform Commercial Code 2-401(2). Further, we cannot guarantee continuous or secure access to our services, and operation of the sites may be interfered with by numerous factors outside of our control. According

This hurts eBay how?

[dada21]

eBay, while not a friend of mine, is a great tool to ascertain value in various markets. I use eBay daily to judge pricing for items I want to buy, or items I may wish to sell, notably collectibles (I hate collectibles, but own some). eBay's overhead is always passed on to sellers.

When eBay gets hit with a judgment for allowing someone else to sell a product, that judgment will only be passed on to sellers in the future. $60m is not a big figure, and considering that eBay lists hundreds of millions of items annually, the cost to offset this judgment as passed on to sellers is less than a penny per item. Not a huge cost to eBay.

The trademark holders are the ones who have a lot to fear, though, which is why they're going after eBay in friendly jurisdictions. I've seen some knockoff items sold online, and they're fairly good, and in some cases better quality, than the originals. With the coming economic recession, I'm sure many previous buyers of the overpriced consumer goods are likely pulling out of buying new products, so the trademark holders need these judgments collected just to keep their heads above water.

eBay should fight this, strongly, because they are merely a middle man, and they do offer the ability of a company to pull auctions if they're deemed illicit or illegal. Yes, eBay is probably slow on pulling every auction, but the fact that the market shows a demand for a given product, even a knock-off, means that the market isn't going away. Surely it will only hurt the trademark holders more when the news media tells consumers that knock-off products are so readily available and so cheap.

Good luck, eBay, I hope you win the appeal. If not, you'll just pass the cost on to sellers, and no one will be concerned a year or two from now.

Could you fix the Company name in the Summary ?

[brufar]

Summary calls it LVHM, but the company website AND both news stories call it LVMH.

http://www.lvmh.com/

At the very least if you are going to capitalize the company reference multiple times throughout the article, please work on getting the 4 letters in the correct order..

Re:Reason to love America

[elrous0]

You didn't read up on this case very well. The suing companies were not only saying that ebay had the obligation to remove counterfeit goods bearing their name, but unauthorized sales of LEGITIMATE goods as well. In other words, the companies were claiming the right to control ALL AVENUES of sale and resale of their goods (asserting that only they can authorize any sale or resale of their original product). And, sadly, the court agreed with them.

Re:france is rapidly making itself irrelevant

[Alpha Whisky]

Well, I have to call bullshit, every business meeting I ever went to in France was conducted in English, and I was working for a half French company!

Re:Even by petty French standards, this is sad

[gnick]

So basically like what we have in the music and software worlds pretty much? You don't quite own that CD, you're just allowed to use it because the product they leased to you is on it ... something like that?

I know what you're getting at but, under normal circumstances, there's nothing stopping you from buying and selling used CDs. Now, copying/distributing the content on those CDs via different media - That's where the system falls apart.

Re:france is rapidly making itself irrelevant

[jacquesm]

Actually they do not.

English is not even the official language of the US, I only have wikipedia handy as a reference and we all know I could have just edited that page:

http://en.wikipedia.org/wiki/Languages_of_the_United_States

But I swear I didn't, really...

eBay doesn't care about finding real fakes

[sjbe]

I understand forgeries, as it could tarnish the brand names. But for legit items let them resell them.

You are right of course but eBay's problem is that eBay cannot be bothered to seriously check. The ONLY way to be reasonably sure an item is not a fake is to inspect it in person and have a full documentation trail detailing who bought it, where they bought it, and when. This is what they do in the art world to authenticate pieces. Since eBay never physically inspects ANY merchandise sold on their site, there is no way they can possible determine if an item is a fake.

From my own experience I've sold some high end luxury goods on consignment through eBay. (Louis Vuitton, Gucci, Rolex, etc) In each case I had a full documentation trail, the parties were known to me or my close associates, and we had the items physically inspected by an expert in that merchandise to ensure authenticity. Through eBay's VeRO program we were accused several times of pedaling fakes even though we had the real thing. There was no opportunity for us to prove that we had authentic merchandise though we certainly could have done so were there any means to plead our case. Our auctions were summarily taken down and we were given strikes with no recourse of any kind. To be sure there are a TON of actual fakes on eBay but eBay sure as hell can't tell the difference. Worse, to avoid lawsuits they've given brand holders full power to remove auctions that they should have no power to influence under the first sale doctrine.

The problem is that eBay's incentives are all wrong - they just want their fees and no lawsuits - and they've handed responsibility (through VeRO) to trademark and brand holders whose incentives actually contradict the law. Louis Vuitton doesn't want ANY of their products sold via eBay regardless of authenticity. So eBay users get screwed in the deal either way. Sellers can have their auctions pulled for no good reason and buyers can't be reasonably sure of authentic products because eBay refuses to check. The winners here are definitely not you and me.

Re:First sale?

[NeutronCowboy]

Short answer: No. Long answer: there are a ton of things that are taken for granted in the US in terms of individual rights that are completely foreign concepts in France.

Presumption of innocence, right to self-defense, etc. - where the US is focused on the right of the individual, France is focused on the well-being of society.

It also helps to understand that macro-economic impacts of various policy decisions are largely poorly understood. The French won't understand the impact that this decision has until everyone and their brother decides that EULAs and similar concepts designed to kill second-hand markets are generally bad for everyone.

Re:First sale?

[Lord Crowface]

Indeed they do. It's called "Exhaustion of Rights" and is an EU-wide legal doctrine. At least in Germany, interpretations of this have gone so far as to completely void the "no resale" clauses in licenses for products like AutoCAD and various OEM releases from M$, but I'm not sure if the French interpret it quite as broadly.

Here's the Wikipedia article, for what its worth: http://en.wikipedia.org/wiki/Exhaustion_of_rights

Re:Quixotic lawsuits

[fosterNutrition]

Hey, I'm sorry to sound like a pedant here, but you might be interested in knowing that the expression is "cutting off your nose to spite your face."

Anyway, interesting story, and I'd be really interested to know where you took your business, since any competitor to eBay would be an interesting place to explore.

Re:Even by petty French standards, this is sad

[Man On Pink Corner]

Never buy anything with PayPal that you don't fund with your credit card. Then, when something like this happens, call your credit-card company and request a chargeback.

That will get PayPal's attention and your money refunded. PayPal doesn't understand any language that doesn't include the term "chargeback."

Re:Even by petty French standards, this is sad

[querist]

The "Not for Individual Sale" has to do with FDA regulations. Packaged food products sold in the USA are required to have certain information on the label, including, but not limited to, nutritional information and information about how to request a refund.

Those individual Reese cups do not have the nutrition information on the packages, and thus are not to be sold individually in the USA.

There are certain other types of products (health and beauty aids as well as medications) that fall under this general rubric as well. There are certain requirements on the labels that are needed to permit the sale of an individual package.

I find it curious that some stores where I live will sell individual cigarettes at a cost that is clearly about twice what the proportionate price from the pack would be. I have often wondered if that was illegal due to the Surgeon General's Warning required to be on all tobacco product packages.

Slightly different issue.

Summary is correct, you are not

[D.McGuiggin]

http://www.law.com/jsp/article.jsp?id=1202422673041

This ruling came down against eBay on two fronts. The court faulted the online company for "guilty negligence," for not doing enough to prevent fake goods from being sold on its site. The court also ruled that eBay was responsible for the "illicit sale" of perfumes from the LVMH empire, which can be sold only through the brands' "selective distribution networks."

The Yahoo blurb left that part out, which is where you got your misinformation from. So no, when you say "Still in France I can sell stuff I buy from LVMH, as soon as I buy it it is mine (first sale doctrine ?)" you are not correct.

Re:Even by petty French standards, this is sad

[Palinchron]

The difference is that on the cases you mention, you aren't contractually bound; instead, you are bound by the law. The people producing and selling these items don't set these restrictions, the government does.

Re:arrogant asshole

[ross.w]

Heh, I bought a fake Rolex in China for about $10. It was a nice looking watch, but the mechanism inside broke after two weeks. I've seen other fakes where the plating rubs off or water gets in after a short time. Basically, you do get a much better quality product with the genuine item (with watches, not so much with clothing, etc), but not $25,000 better.

Re:Even by petty French standards, this is sad

[geekboy642]

My dad raises sheep. Frankly I think if they weren't shorn regularly the poor things would turn into immobile bleating balls of fluff. If sheep were smart enough to know what giving permission meant I bet they'd trot right up to the clippers.