eBay vs. L’Oreal – Because Brands are worth it

Online Auction giant eBay has seen its fair share of disputes since its launch in 1995, facing claims of facilitating fraud, hosting auctions of terrorist material and forcing their members to use PayPal, but the vast majority of claims it has faced have been brought by high-profile brands who claim that eBay profits from infringement of their Intellectual Property Rights (IPRs) through allowing counterfeit goods and illegal copies of DVDs and software to be sold by anyone at auction.

eBay responded by introducing the VeRO program, which allows rights holders to force eBay to remove auctions from the site and provide details of the users who set them up so that action can be taken against them. Even so, many famous brands believe that the program does not go far enough and have launched separate claims against the site in courts across the world.

The most significant cases in recent years involved Louis Vuitton obtaining an injunction from the Paris Courts prohibiting any further sale of their perfumes on the site, whether or not they were counterfeit and Tiffany & Co. suing for Trademark Infringement. The Tiffany case, however, went in eBay’s favour, with a US court ruling that it was up to brands to protect their own marks and that eBay could not be held liable for trademark infringement simply because it may have been occurring generally on the site.

Earlier this week, the latest dispute to hit the headlines saw L’Oreal fail to persuade the Courts to hold eBay responsible for the sale of counterfeit goods in France after a judge ruled that eBay had done all it could to clamp down on infringing activity.

IPRs are dealt with differently in each country around the world, even though we have international treaties such as the Berne Convention to guarantee minimum protection for rights across national borders. The reason for the difference in the previous US and French decisions stemmed from the fact that European Trademark law is more draconian than the American systems and does not contain a defence of “fair use”, which allows for the use of a registered Trademark to identify a third party product. 

The French decision in the Louis Vuitton case was a major blow to eBay and may thought that this would be the start of a movement which would force the end of auctions for branded goods, but after a Belgian case went in their favour recently, the Judge in this case has sent out a clear signal that eBay will not always be held liable for the sale of counterfeit goods and cannot be forced to take pre-emptive action against users who may be selling counterfeits.

eBay spend a considerable amount on deterring counterfeit sales every year, and the Judge suggested that the best way forward is for eBay and brands to work together to solve the problem. Brand owners are understandably disappointed but the message to them at this point has to be that the price of brand value and reputation will continue to be eternal vigilance for the foreseeable future and for anyone who suspects that their goods are being counterfeited and sold via eBay to make use of the VeRO program and take whatever action you can against the Counterfeiters themselves. If you’re willing to spend time and money developing a brand and registering a trademark (which is very commercially valuable as it gives you a monopoly on the use of the mark in question), you will need to be willing to spend money to enforce it.

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