Recent court rulings first against and then in favour of eBay over the sale of fake luxury goods have left the online auction industry facing an uncertain future, Paul Carlyle, an IP lawyer at Shepherd and Wedderburn, told CBR.
In June 2008, eBay was ordered by a French court to pay 40m Euros (£31.3m) to LVMH over the sale of fake items from designer retailers such as Christian Dior, Guerlain, Givenchy and Kenzo. LVMH is a luxury brand group whose portfolio includes Louis Vuitton, Donna Karan and TAG Heuer. LVMH successfully argued that eBay did not do enough to stop the sale of fake goods on its site.
But in July 2008, a similar case by jeweller Tiffany was dismissed by a US court, after eBay argued that it does remove fake items if a complaint is received. It also claimed to spend $20m a year and employs 2,000 people to police the sale of counterfeit goods. Tiffany has vowed to appeal the ruling.
Carlyle says the different rulings could have drastic implications for eBay and the online auction market in general. The French court says eBay must do more to police the sale of fake goods, but the US court decided that eBay is doing enough. We don’t know where the law will go next, but the rest of the EU is likely to go along with the French ruling, he said.
If that does happen, Carlyle says, eBay will be faced with increased costs of policing its site, which may be passed on to users.
However, in early August 2008, L’Oreal lost a similar case against eBay in Belgium.
Carlyle says the situation is similar to cases involving Viacom and Google over copyrighted videos on YouTube, as well as the recent efforts by Virgin Media and other ISPs to crack down on the file-sharing of copyrighted material on peer-to-peer networks.
Carlyle believes that any court cases in the UK are more likely to focus on music and film file-sharing than online sale of luxury goods. I don’t think we’ll see many [similar cases] in the UK. We don’t produce a huge number of luxury goods and are not a big producer of Internet sites. We are a strong music producer however, so it is possible that we’ll see future court cases along those lines, he said.
The UK has seen cases like this before. In 1987, CBS took legal action against Amstrad over the release of equipment for high-speed tape to tape copying. CBS argued that the equipment enabled people to make copies of tapes and as Amstrad had manufactured the machines, the company was authorising users to infringe copyright laws.
The court decided that Amstrad could not control what people did with its equipment and therefore did not authorise users to make illegal copies — the case was thrown out.
Carlyle believes cases such as this may be more difficult to resolve these days. The Internet is international, but laws are national. Legislation differs from country to country. It will be difficult to establish exactly who is responsible for policing of sites such as eBay, he said.
One of the big issues faced by both eBay and IP owners is the attitude of the people who buy fake goods, Carlyle says. People are buying this stuff by the truckload, he said. The public doesn’t seem too bothered whether goods are counterfeit or not, they’re just interested in the price. People need to accept that it is illegal to own fake goods. The problem will remain until that mindset is changed.