Internet Merchants owe a Greater Duty of Care to their European Clients - Louis Vuitton v. eBay [France] in contrast see Tiffany v. eBay [NY, US]
eBay was founded in 1995 by a French-born Iranian computer genius, Mr. Pierre Omidyar. On eBay, people and businesses trade a broad variety of goods. eBay is a publicly traded corporation on NASDAQ with revenues of over $8.5 billion in 2008. eBay was launched in France late in 2000 several years after the initial launch in the United States. A majority of the sales on this platform are conducted using a set-time auction format, and a small number of sales are done via a “Buy It Now” system of instant buy at fixed price from virtual stores.
For some, a site like eBay is a legitimate online store, taking an active role in commercial transactions, offering online “floor space” where goods from different sources are sold after indexing and supply control. For others, eBay is a computer interface used by owners of goods, to reach buyers. A transactional fee is paid instead of a one time payment for the software. The difference in point of view is key to a recent split in decisions across the Atlantic.
Louis Vuitton v. eBay [France]
In 2004, luxury brands Dior, Kenzo, Givenchy, Guerlain, Christian Dior Couture, and Louis Vuitton Malletier united against eBay in France and filed a suit in Paris for trademark infringement and unfair trade practice. The owners of these famous marks argued that the goods sold by eBay were often of questionable origin, and that most high-end products were, in fact, counterfeit goods. These retailers argued that eBay knows that a large portion of the goods are not legitimate, benefits from these sales, and has a duty much like any store owner to actively monitor goods known to be suspect.
On June 30, 2008, the Tribunal de Commerce of Paris delivered a series of decisions sanctioning eBay and awarding these brands over 40 million Euros. Louis Vuitton received the lion’s share by collecting over 8 million euros in damages, 10 million euros in punitive damages, and 1 million euros in reparation to moral prejudice. The court ordered eBay to publish the judgment in three nationwide newspapers, and display for three consecutive weeks the judgment on the home page of eBay.fr in both French and English. Finally, the court awarded attorney fees and costs.
In a very harsh opinion, the Court noted that eBay cannot be perceived simply as an Internet service provider or a simple computer platform used by sellers where buyers are left on their own. Much like the famous auction house Hotel Drouot located in Paris, an online auction house has a civil responsibility under French Law for the goods it sells. The court stated that resellers must require that frequent suppliers be registered with the commerce and trade ministry, these sellers must be listed on the union trade charters, and behaviors of sellers should be monitored to ensure only legitimate goods are sold.
The tribunal put the onus on eBay to enforce adequate measures to prevent illicit goods from entering the market. For example, sellers could be asked to provide receipts of purchase or even certificates of authenticity. eBay could also be made to notify customers when the origin of a good appears doubtful.
As a result of this decision, on the website eBay.fr, a notice is now prominently displayed below the eBay search box that reads, “Counterfeit goods are a plague. Let’s stop it! To know more...”).
The link contains information on how to report a counterfeit product, very clear statements that eBay opposes illicit conduct, and a guarantee of up to 1,000 euros if the good purchased turns out to be counterfeit. eBay now proactively searches for counterfeits, and tries to eliminate them from the auction list. An appeal of these judgments is pending.
Tiffany v. eBay [New York, USA]
In stark contrast, on this side of the Atlantic, the Jeweler Tiffany sued eBay, Inc. in the Southern District of New York (04 Civ. 4607 (RJS)). Tiffany alleged that thousands of counterfeit silver jewelry items were sold on eBay’s website from 2003 to 2006 in violation of the law. Tiffany argued that eBay was liable for direct and contributory trademark infringement.
Judge Richard J. Sullivan ruled that eBay’s use of Tiffany’s trademarks, even when associated with counterfeited goods, is a protected fair use and that no infringement occurred. The court reminded Tiffany that the standard for liability was not a reasonable anticipation of possible infringement, but rather if eBay continued to supply its services to sellers when it knew or had reason to know of infringement by those sellers.
In the United States, the burden is placed directly on Tiffany to warn eBay of possible infringing uses. Evidence was introduced to show that each time eBay was notified, it promptly and preemptively removed listings. The court concluded: “Tiffany must ultimately bear the burden of protecting its trademark. Policymakers may yet decide that the law as it stands is inadequate to protect the rights of owners in light of the increasing scope of Internet commerce and the concomitant rise in potential trademark infringement. Nevertheless, under the law as it currently stands, it does not matter whether eBay or Tiffany could more efficiently bear the burden of policing the eBay website.” Tiffany v. eBay, 576 F. Supp. 2d 463 (S. D. N.Y., 2008).
On April 1, 2010, the Court of Appeals for the Second Circuit affirmed the claims for trademark infringement. Tiffany v. eBay, 08-3947-cv (2nd Cir., 2010). The Appeals Court wrote “The more difficult issue, is whether eBay is liable of contributory trademark infringement—i.e., for culpably facilitating the infringing conduct of counterfeiting vendors.” The court concluded that Tiffany had failed to demonstrate that eBay was supplying its services to individuals who it knows or had reason to know were selling counterfeit Tiffany goods. The court did make a finding that “eBay appears to concede that it knew as a general matter that counterfeit Tiffany products were listed and sold through its website,” but this general knowledge was not sufficient to trigger liability. The liability appears to trigger only when specific individuals (i.e., sellers or stores) are engaged in the counterfeiting of goods, and can be notified to eBay. An appeal is also pending.
This decision implies that eBay, to shield itself from contributory trademark liability in the United States, must take action against any individual or store actively infringing the rights of the trademark owner. eBay provides sufficient information as to the seller of goods for owners to document a pattern of illegal activity by certain sellers. Notification to eBay should not only include the item number but should also include the seller’s trade name. eBay will have to take action against the seller once a pattern has been observed and notified.