Jul 7, 2008

Courts in the Europe and the U.S. have been trying to decide who is responsible when counterfeit goods are sold on online auction sites. The question they've been asking is should site owners like eBay be liable for trademark infringement, or is it up to manufacturers to police such sites for knock-off versions of their merchandise?

Most recently, a French court ordered eBay to pay approximately $61 million to LVMH, the parent company of luxury brands like Louis Vuitton, Dior and Givenchy. The damages are intended to compensate LVMH for the sale of counterfeit goods that it says eBay should have prevented.

But, according to some (including eBay itself), the real debate isn't over protecting intellectual property -- it's about online business models.

Here's an excerpt from the statement eBay issued in response to last week's ruling in the LVMH case: 

If counterfeits appear on our sites we take them down swiftly, but today's ruling is not about our fight against counterfeit; today's ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers everyday.

We believe that this ruling represents a loss not only for us but for consumers and small businesses selling online, therefore we will appeal. It is clear that eBay has become a focal point for certain brand owners' desire to exact ever greater control over e-commerce. We view these decisions as a step backwards for the consumers and businesses whom we empower everyday.

We believe that the overreach manifests itself through an attempt to impose, in France, a business model that restricts consumer choice through an anti-competitive business practice.

The ruling also seeks to impact the sale of second-hand goods as well as new genuine products, effectively reaching into homes and rolling back the clock on the Internet and liberty it has created. The attempt to use the ruling to confuse the separate issues of counterfeit and restrictive sales suggests that counterfeit suits are being used by certain brand owners as a stalking-horse issue to reinforce their control over the market.

While those words may be directed at the French court, eBay no doubt hopes they'll be heard by the judge in another case as well...eBay is awaiting the ruling in its legal battle with luxury jeweler Tiffany & Co. That lawsuit, which dates back to 2004, is still pending and could set a precedent here in the U.S.

For more on the LVMH suit, check out this report from Reuters.

Tags: counterfeit, eBay, ecommerce, France