LVMH wins compensation from eBay over counterfeits

PARIS (Reuters) - A French court ordered eBay Inc to pay 38.6 million euros ($61 million) to luxury goods group LVMH for allowing the sale of fake merchandise, in a ruling immediately appealed by the online auction website.

Monday’s decision, a month after eBay was ordered by another French court to pay handbag and scarves maker Hermes 20,000 euros for allowing the sale of counterfeits, is the latest episode in a long fight between luxury goods makers and the world’s biggest online auctioneer.

“We will fight all these decisions in the name of eBay users, and we have decided to appeal,” eBay said.

“If counterfeit goods are put up for sale on our site, we scrap them as soon as possible,” it said.

EBay accused LVMH of having a hidden agenda.

“Today’s decisions are not about fighting counterfeiting. It’s about LVMH’s desire to protect commercial practices that exclude all competition,” it said.

LVMH claimed damages of about 50 million euros because it said eBay’s French arm had not done enough to prevent sales of counterfeit items.

“For the first time in France it (the court ruling) clearly states the principle under which auction sites that operate on the web have to ensure that their activities do not permit unlawful dealings,” LVMH said.

“The court has dismissed as without foundation the argument used by eBay to exonerate itself that its clients are solely responsible for their illegal undertakings when transacting. eBay is not a host but a broker,” it added.

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Monday’s ruling covered separate cases by several different LVMH brands -- LVMH and Dior Couture as well as perfume brands Dior, Guerlain, Givenchy and Kenzo.

Ebay has been sued by jewellers Tiffany, which accused it last year of turning a blind eye to sales of counterfeits, and faces action from L’Oreal over the sale of perfumes on the site.

The issue, which potentially has important implications for online commerce, has particular resonance in France which has some of the world’s biggest luxury goods makers and which has been at the forefront of efforts to fight counterfeit goods.

Luxury goods groups accuse eBay, which earns a commission on sales made through its site, of facilitating forgeries and counterfeits by providing a marketplace for vendors who knowingly sell fake items.

EBay says it has stepped up efforts to fight counterfeits through programs that analyze suspicious sales patterns by particular vendors as well as VeRO, or verified rights owners, a system that helps block sales of counterfeits.

But the group, which saw around $60 billion worth of goods sold across its platforms last year, says that as a host for independent vendors, it has only a limited responsibility and capacity to regulate what is sold on its site.

The conseil des ventes, the group that represents mainstream French auctioneers, has also sued eBay, which it accuses of trying to circumvent laws regulating the auction sector by claiming to be a broker.

In Germany, eBay lost a six-year counterfeit goods case to Montres Rolex SA last year when a federal court there ruled that eBay must do more to halt the sale of fake Rolex watches in cases of blatant trademark infringement.

Customers leave a Louis Vuitton store in Hollywood, April 25, 2008. REUTERS/Fred Prouser

LVMH filed suit against eBay in 2006 shortly after winning an earlier French court ruling against Web search leader Google Inc, which it accused of allowing counterfeit makers of Louis Vuitton handbags to advertise on its site.

In the Google case, the Paris Court of Appeals awarded LVMH 300,000 euros from Google for trademark counterfeiting and unfair competition. Earlier in June, the European Union’s highest court agreed to hear an appeal of the Google-LVMH case.

Google has faced dozens of advertising trademark cases in France alone. EBay said the total number of suits brought buy luxury brands against it are less than a dozen.

EBay and Google have sought protection in U.S. and European laws (EU E-Commerce Directive) which provide safe-harbor to Internet services as long as they take action when informed of specific incidences of infringement or counterfeiting.

(Reporting by Thierry Leveque, writing by Swaha Pattanaik and Dominique Vidalon; Editing by David Cowell and Erica Billingham)

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