On 1 July 2008, a judge in Paris handed down the most significant judgment to date in the ongoing battle between Ebay and some of the world's most famous luxury brands. Paris District Court held that Ebay had been guilty of “culpable negligence” for failing to prevent the sale of counterfeit Louis Vuitton handbags on its famous auction site, and awarded €40m (nearly £30m) to LVMH, the parent company of Louis Vuitton.
In addition, and more significantly, Ebay has been prevented from allowing the sale of LVMH products and those from its subsidiary companies including Christian Dior, Guerlian, Kenzo and Givenchy. Ebay indicated that it would be appealing the judgment, a significant move given that Ebay has also recently won a case in America brought against it by Tiffany. The Parisian case is being heralded as a victory for those seeking to protect their intellectual property; however Ebay noted the more damaging aspects of the French judgment which should be of concern to those who are running auction and peer-to-peer sales sites online. This aspect of the ruling found that LVMH should be allowed to limit distribution of its perfumes and products, preventing the sale of even genuine products on Ebay and other auction sites. If this decision stands, or, more worryingly, is used as a precedent in other jurisdictions, it would give brand owners almost unbridled power to block consumer selling of branded goods online.
It was this point which led to the decision of the New York court to find in favour of Ebay, in the parallel case brought by luxury jeweller Tiffany in the US. The New York District court found that Ebay's policy of removing counterfeit items as soon as it was aware of them was proportionate and sufficient to deal with the issue of "genuine fakes" which dogs the luxury goods market. However, it emphatically denied the right of Tiffany to "protect the brand" by attempting to limit Ebay's right to allow consumers to re-sell genuine Tiffany products to each other. As a result, the Court found for Ebay, causing a worrying discrepancy in treatment of the site between Europe and the US.
This case is interesting both for the placing of the onus on distributors to prevent peer-to-peer online selling of counterfeit goods, but in addition, argument over whether luxury goods companies should be able to limit the selling of their goods between consumers. By taking the battle to the auction sites, LVMH and other luxury goods companies are arguably seeking to protect the reputation of their brands, however, it could also be said that in this situation they are limiting the ability of customers to sell to each other at reduced prices.
Ebay has indicated its intention to appeal the Parisian judgment, which will be watched with interest by both other brands, and the consumers who may wish to trade their possessions. In the meantime, Ebay has announced a "counterfeit summit", to be held in London, the aim of which is to find a rational solution between the aggrieved parties.