On 13 May 2009, eBay, the world’s largest online auctioneer, claimed a landmark victory against L’Oréal after the Tribunal de Grande Instance de Paris (Paris first instance civil court) ruled that eBay was not liable for selling counterfeit products and luxury goods imported from outside the European Union on its website.

L’Oréal sued eBay in Belgium, France, Germany, Spain and the United Kingdom, alleging that eBay was profiting from the sale of fake L’Oréal products or those imported from outside the European Union. In the context of the French case, L’Oréal argued that the auction site went too far in asking brand owners to help police auctions. L’Oréal also claimed that eBay was an actual participant in its customer’s sales rather than merely a venue through which sales were conducted, as its software bids on behalf of buyers, handles payments and ensures the delivery of goods. In response, eBay argued that it actively polices its website to combat counterfeit goods by employing a team of 2,000 people and allocating an online crime fighting budget of U.S. $10 million a year.

The Court ruled that by “establishing means to fight counterfeits on its online platform”, eBay had “fulfilled its obligations in good faith”. According to Judge Elisabeth Belfort, preventing counterfeits would “only be effective through a close collaboration between rights holders and eBay.” The Court asked the companies to engage in mediation in order to develop a course of a action, which must be placed before the Court for approval by 25 May 2009.

The win follows a similar victory against L’Oréal in Brussels, which ruled in favour of the auction website in August 2008. Decisions are still awaited in Spain and the United Kingdom. Although courts in other European countries are not bound to follow the French decision, the decision may support eBay’s contention that it is taking sufficient steps to combat counterfeiting.

The ruling is a major victory for eBay in France. Last year, after a two year legal battle with LVMH, a French court ordered eBay to pay €40 million in damages for selling fake luxury goods on its website. The court ruled that eBay had committed “serious faults” through its failure to exclude counterfeit goods from its site and that eBay had damaged the reputations of Louis Vuitton and group company Christan Dior Couture by selling counterfeit products.

The English High Court gave its judgement on 22 May 2009 which has referred a number of legal questions to the European Court of Justice. For a detailed review of this judgement please see next months EU IP Bulletin.