Intellectual Property

Counterfeit L'Oreal Products: eBay Not Liable

Cosmetic maker L'Oreal appealed a French court's ruling that found eBay wasn't liable for selling fake L'Oreal products on its auction Web sites.

EBay is the world's online marketplace; a place for buyers and sellers to come together and trade almost anything.

Selling on eBay

Here's how eBay works:

  • A seller lists an item on eBay, most anything from antiques to cars, books to sporting goods. The seller chooses to accept only bids for the item (an auction-type listing) or to offer the Buy It Now option, which allows buyers to purchase the item right away at a fixed price
  • In an online auction, the bidding opens at a price the seller specifies and remains on eBay for a certain number of days. Buyers then place bids on the item. When the listing ends, the buyer with the highest bid wins
  • In a Buy It Now listing, the first buyer willing to pay the seller's price gets the item

L'Oreal sued eBay for trademark infringement, claiming it didn't do enough to prevent the sale of counterfeit goods under the L'Oreal name. EBay argued it wasn't responsible for the actions of fraudulent third-party sellers. The Paris court found that eBay took reasonable measures to identify and remove Web site listings for counterfeit goods. The court sent the companies to mediation to work out a plan to prevent further fraudulent Internet sales.

Varied Results in Ebay Trademark Infringement Cases

Luxury product manufacturers have filed trademark infringement lawsuits against eBay in several countries, leading to varied results. In 2008, French courts ordered eBay to compensate LVMH Moët Hennessy Louis Vuitton and Hermès International.

However, that same year a US court held that eBay wasn't liable to Tiffany & Co. for online sales of counterfeit jewelry. That New York court held it was the trademark owner's responsibility to prevent potential counterfeiting, and eBay complied with its legal duties by removing those fraudulent listings that it was made aware of.

Ebay also prevailed against L'Oreal in trademark infringement cases filed in Belgium and the UK. But German courts sided with L'Oreal, and a case filed by L'Oreal against eBay in Spain is still ongoing.

What Is Trademark Infringement?

Several US laws protect intellectual property rights such as copyrights, patentstrade secrets and trademarks. Trademarks are the commercial brands, names, logos or emblems that identify particular products. Trademark infringement is when something is sold under a trademark that belongs to someone else. It could also occur when something is sold under a trademark that is very similar to an established trademark. Sales of counterfeit products is another form of trademark infringement. Owners may sue infringers for substantial civil damages.

Is Selling Counterfeit Goods Online a Crime?

There are criminal penalties for the sale of counterfeit goods. Defendants found guilty under the Trademark Counterfeiting Act can face up to ten years in prison and fines up to $2 million. The US Department of Justice is conducting an aggressive battle against counterfeit intellectual property, and victims are urged to report illegal activity promptly. The illegal online sale of counterfeit goods may be reported to government authorities through the Internet Crime Complaint Center.

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