EBay wins French lawsuit over sales of L'Oreal fakes

EBay Inc, the world’s largest Internet auctioneer, isn’t liable for sales of counterfeit L’Oreal SA perfumes on its Web site, a Paris court said on Wednesday.

EBay meets its obligations to combat fake products, the court in Paris ruled. The tribunal called for the companies to go to mediation to develop a plan to work together on the issue that would be filed with the court on May 25.

By establishing “means to fight counterfeits on its online platform” EBay “has fulfilled its obligation in good-faith,” Judge Elisabeth Belfort wrote in a 24-page decision today. “Preventing counterfeits will only be effective through a close collaboration between rights holders and EBay.”

The ruling is EBay’s first victory in a French court after being ordered to pay compensation to Hermes International and LVMH Moet Hennessy Louis Vuitton SA. L’Oreal, the world’s largest cosmetics maker, sued EBay in France and four other countries, claiming the site profits from sales of fakes and goes too far by asking brand owners to help police auctions.

“This is a clear legal victory for EBay,” said Alexander von Schirmeister, an EBay general manager in France, by telephone. Fighting counterfeit sales “has to be a shared responsibility.”

L’Oreal had asked for ¤3.5million ($4.8 million) for undermining its distribution system and the appointment of an expert to tally up its lost income to counterfeiters.

“L’Oreal very willingly accepts the mediation requested by the court to specify a common accord,” the company said in an e-mailed statement.

Shares in San Jose, California-based EBay gained as much as 1.3 per ent in pre-market trading. L’Oreal gained 48 cents, or 0.8 per ent, to¤57.82 at 1:10 pm in Paris, recovering from a 1 per ent slip in earlier trading.

L’Oreal argued EBay’s software bids on behalf of buyers, handles payments and ensures the delivery of goods, making it a participant in sales, not just the venue where they’re sold.

LVMH based its suit against EBay before Paris’s commercial court on the grounds that the company mislabeled itself as a host, saying it was a party to the sales and therefore bore greater responsibility for verifying the products sold.

The verdict today, by the Paris civil court specialized in trademark issues, said that EBay is a host site and bears limited responsibilities.

EBay says it does all it can to fight fakes, with a team of 2,000 people including seven former prosecutors, and an online crime-fighting budget of $10 million a year. Less than 0.2 per ent of the 2.7 billion listings on EBay’s site last year were identified as potentially counterfeit, the company said in a March report to the European Union.

Counterfeiting is a $200 billion-a-year industry, according to the Organistion for Economic Cooperation and Development.

EBay has had mixed results in Europe on the legal fights over its responsibility for sales of counterfeit items. In addition to a court win in Brussels, EBay won a dispute with Rolex Group in Germany over counterfeit watches.

The Paris commercial court last year agreed with LVMH that EBay does more than provide a site for sales.