EBay dealt blow on fake Rolexes by German court

By Eric Auchard

SAN FRANCISCO (Reuters) - EBay Inc disclosed on Friday that Germany's top court ruled several months ago that the world's largest online auctioneer must do more to halt the sale of counterfeit goods on its site.

The ruling by the German Federal Supreme Court came in an appeal by plaintiffs Montres Rolex SA and affiliates in a six- year-old dispute over the sale of counterfeit Rolex watches on eBay's German site, according to an eBay financial filing.

EBay had won successive court rounds leading up to the appeal before the country's top court. The suit alleges unfair competition. Rolex was seeking an order enjoining the sale of Rolex-branded watches on eBay and damages from eBay.

"The court's decision found that eBay must take reasonable measures to prevent recurrence once it is informed of clearly identified infringement," eBay said in a quarterly regulatory filing with the U.S. Securities and Exchange Commission.

"EBay may in certain circumstances be liable upon first notice of infringement," the filing added.

The Federal Supreme Court, based in Karlsruhe, referred the case back to the Higher Regional Court of Duesseldorf, which had rejected Rolex's appeal in an earlier decision in 2004, according to eBay.

At issue is whether a low starting price in an eBay auction -- the court decision cited a new price of less than 800 euros -- is sufficient evidence to show that Rolexes were fake.

EBay warned that court ruling could lead to further cases against it in Germany, the company's second largest auction market after the United States.