back to Upstream USA – European business issues - July 2008
previous article  next article

Topic:Brands

Who: eBay France - eBay International AG v. Hermes International

When: June 4, 2008

Where:France

Law stated as at: 30 June 2008

What happened:

In a judgment rendered on June 4, 2008, the High Civil Court of Troyes ("Tribunal de Grande Instance de Troyes") condemned eBay France and eBay International AG ("eBay") jointly with a French member seller, to pay Hermes International 20,000€ as damages for the sale of four counterfeit Hermes bags on the French website www.ebay.fr.
The issue at stake was eBay's liability when it appears that a transaction made on the eBay auction website infringes a third party's trademark rights.

The basis of the claim:

In its claim against eBay, Hermes alleged mainly that:

• eBay participated in trademark infringements by collecting commissions generated on the illegal sales,
• eBay played an incentive role in promoting the buying of counterfeit products,
• eBay acted as an editor when controlling the display of offers and when making profits out of the use of the content of the information published. As an editor and pursuant to the French Press Law, eBay should be automatically liable for illegal information published on its website.

Ebay principally argued in its defence that:

• the "Vero process" implemented in its website, which enables an owner of intellectual property rights to denounce infringing advertisement, was sufficient to protect owners' intellectual property rights,
• Hermes did not use the Vero process and therefore, Hermes was not entitled to seek eBay's liability under the Law of June 21, 2004 requiring internet services providers to properly remove or disable access to illegal information (the "Act" ), eBay does not control the content of the information and therefore could not be qualified as an editor.

The decision:

The judge rejected the characterisaton of eBay as an editor.

The judge held that eBay could not be considered as an editor within the meaning of the French Press Law since eBay only offers to its users, via a personal eBay account, to place an advertisement for the sale of items via an auction process, without any incentive role in the content of the information published.

Indeed, the seller has full discretion to choose the texts and pictures published in support of its advertisement and must guarantee that the advertisement published does not infringe other third parties' rights.

For the judge the fact that eBay provided the users with a technical assistance for the storage of such information and classifies such advertisements was not sufficient to confer on eBay  control over the content of the information so published.

This solution is in line with some recent decisions rendered against community platforms as Google or Dailymotion  and is likely to become a standard solution.

However, the judge took a new approach which does not seem to fall within the exact parameters laid down by the Act and considered eBay to have a dual role.

First, the judge held eBay to be a hosting provider and second as an "Editor of brokerage online communication services" . The judge found that, in addition to the storage of information activity, eBay carried on brokerage activity by connecting sellers and buyers and by providing them with a technical structure for the display of the items offered for auction.

Using this double status, the judges obviously enlarged the scope of the intermediary services providers' duties as provided for by the Act. The judge basically ruled that providers do not bear any general obligation to monitor the information they host, but on the other hand they should provide the appropriate means to ensure that their websites are not used for illicit purposes.

By ruling thus, the judge created a middle way between internet services providers and editors.

Regarding the specific issue of respect for third parties' intellectual property rights, the judge defined the scope of eBay's obligations, as follows:

• eBay shall request from the sellers that they include in their advertisements the necessary details for the identification of the products which are offered for sale, i.e. the references of the products, the serial numbers, the existence of a genuine certificate, etc.
• in case a seller is not able to provide such information, eBay shall request this seller to clearly mention that he is not able to confirm the origin of the product.
• eBay shall provide its users with the entire and pertinent information about the civil and criminal consequences of infringement acts, in such manner that such information is distinguishable from the terms of use.

The judge concluded that, when the disputed bid took place, eBay did not fulfil the above obligations and he ruled that eBay was liable for trademark infringement despite the absence of notification made by Hermes denouncing the product offer.

Why this matters:

This is the very first time that eBay has been condemned in France for trademark infringement.

The decision is subject to appeal but by enlarging intermediary services providers' duties, the verdict will give some level of comfort to the luxury goods world, which considers eBay as a huge channel for counterfeit goods. New decisions against eBay that should confirm this orientation are expected in the near future.

News arrives of another verdict against eBay

Indeed, news has just come in that the Paris court has ordered on 30 June, 2008 eBay to pay LVMH and various of its subsidiaries more than 38M€ in damages for negligence in allowing the sale of fake goods and for having violated the company's perfumes distribution network (Kenzo, Dior, Givenchy and Guerlain). eBay says it intends to appeal this decision but notwithstanding any appeal, the judgment is enforceable with a penalty of €50,000 for non compliance.

Whilst in the Hermes case, the damages level was not high and there might be doubts as to the effectiveness of the measures against the sale of counterfeit products which the judge required eBay to take, the exponentially higher damages award in the LVMH case, may well concentrate the minds of providers of these services.

Elise Weisselberg
Litigation team
Stehlin & Associés, Paris, a member of the Osborne Clarke Alliance

 

back to Upstream USA – European business issues - July 2008   previous article  next article