In sharp contrast to the outcome of a similar lawsuit has resolved in the United States, the Paris Court of Appeal has upheld a 2008 verdict holding that online auctioneer eBay is liable for the sale of counterfeit goods or goods that are selected for special distribution via its online auction website. eBay Inc. and eBay AG v. Louis Vuitton Malletier; eBay Inc. and eBay AG v. Parfums Christian Dior; eBay Inc. and eBay AG v. Christian Dior Couture (CA Paris, March 9, 2010).

LVMH is the parent company of around 60 luxury brands, including popular perfume brands such as Christian Dior, Guerlain, Kenzo and Givenchy. The company sells these perfumes through a selective distribution system. This allows perfume manufacturers to sell their products only to distributors selected on the basis of specific criteria. Several companies of the LVMH group sued eBay for failing to take effective measures to prevent the selling of counterfeit goods and for violation of Article L. 442-6,1,6° of the Commercial Code, for failing to ensure that its business activity did not cause any breach of the plaintiffs’ selective distribution networks. In June 2008, the Paris Commercial Court determined that eBay was liable.

On appeal, eBay claimed that it was only providing hosting services because its activities are restricted to allowing users of its websites to place advertisements, without any intervention from eBay on the drafting and the content of these ads. eBay argued it should not be held liable for the content of these ads on the basis of Article 14 of Directive 2000/31/EC of June 8, 2000 on e-commerce (the Directive) (transposed into French law in the Law of June 21, 2004 on the trust in e-economy). In short, eBay claimed that it should benefit from the limited liability scheme granted to hosting service providers.

In rejecting eBay’s appeal for limited liability, the court noted that eBay has developed an online auction sale system that allows any seller or buyer to negotiate on eBay websites. eBay also provides assistance to sellers in defining and describing the products and by suggesting ways to improve their visibility. As a result, eBay’s role consists of promoting products actively and optimizing the likelihood of a transaction (on which eBay will receive a commission). The hosting of ads is only part of a technical process that is necessary to eBay’s online business.

The Paris Court of Appeal relied on the European Court of Justice’s March 23, 2010, decision in the Google Adwords case. (See IP Update, Vol. 13, No. 4) There, the ECJ found that Article 14 of the Directive must be interpreted as meaning that it applies to limit liability to an internet referencing service provider only if that service provider has not played an active role that would give it knowledge of, or control over, the data stored. Appling the ECJ decision, the Paris Court of Appeal determined that because eBay provides assistance, monitoring and promotional services to its users, it was acting as a broker, not a passive hosting service provider.

Having determined that eBay acted in the capacity of a broker, the court determined that eBay should have investigated and confirmed that the plaintiffs’ LVMH perfumes to be sold online were not subject to a selective distribution regime. Because eBay did not do so, the court confirmed that eBay was liable under Article L. 442-6, 1, 6° of the French Commercial Code.