eBay ruling is good news for brand owners - but evidentiary burden is increased

France

In eBay Inc v LVMH Fragrance Brands (11-10505, May 3 2012), the French Supreme Court has partially annulled a decision of the Paris Appeal Court in which the latter had found that eBay was liable for the sale of counterfeit products on its online platforms.

In September 2010 the Paris Appeal Court had confirmed that eBay was liable for the sale, between 2011 and 2006, of Louis Vuitton, Christian Dior Guerlain, Givenchy and Kenzo perfumes, but had reduced the amount of damages from €38 million (set in June 2008 by the court of first instance) to €5.7 million.

In its May 3 2012 decision, the Supreme Court confirmed that the French courts had jurisdiction over eBay's UK website, 'ebay.co.uk'. The Supreme Court considered that the Appeal Court had justified its decision by taking into consideration the fact that French internet users were encouraged to go on the UK website to widen their search and that the French and UK sites complemented each other.

However, the decision of the Paris Appeal Court was overturned insofar as it concerned the jurisdiction of the French courts over the US company eBay Inc. The Supreme Court found that the Paris Appeal Court had concluded too hastily that the extension '.com' was a "generic top-level domain which is intended to target any public" and that "French internet users can view the ads displayed on 'ebay.com' from the 'ebay.fr' website and are even encouraged to do so". Therefore, according to the Supreme Court, the Appeal Court had not justified its jurisdiction over facts concerning, or referring to, the US website, and had decided by "improper reasons" that 'ebay.com' directly targeted the French public.

However, the Supreme Court confirmed the Appeal Court's decision regarding eBay's French and UK websites. The Supreme Court considered that eBay did not qualify for protection from liability as a mere 'host':

"eBay was not only a host but, independently of any option chosen by the sellers, it played an active part that was likely to give it the knowledge or control of the data that it stored, and to deprive it of the exemption from liability provided by Article 6.1.2 of the Law of June 21 2004 and Article 14(1) of Directive 2000/31."  

This part of the court's decision was eagerly awaited, since the court had to decide whether eBay's actions had a passive or active character.

This question had already been examined by the Court of Justice of the European Union (ECJ) in L’Oréal SA v eBay International AG (Case C-324/09) and Google France (Joint Cases C-236/08, C-237/08 and C-238/08), in which the ECJ had stated that the hosting exemption applied only if the operators did not play an active role with regard to the content of the ads.

In this respect, the French Supreme Court set out the different ways in which an operator can be found to play an active part in an online auction - namely:

  • providing information to sellers to allow them to optimise their sales;
  • sending spontaneous messages to buyers in order to encourage them to make some purchases; and
  • sending invitations to unsuccessful bidders to view similar ads.

The Supreme Court considered that eBay was liable due to its active part in the auctions, which was "likely to give it the knowledge or control of the illegal offers of sales that it stored".

However, the amount of damages that eBay must pay to LVMH will be reduced, since the decision is limited to eBay's activities through the French and UK websites; the amount of damages must still be confirmed, and the final amount will be set by the Paris Appeal Court, to which the case has be remanded (the case will be re-examined by different judges). On remand, the Appeal Court will have to:

  • consider whether eBay's activities through 'ebay.com' can be linked to French consumers and form a basis for damages; and
  • re-examine the injunction forcing eBay to prevent internet users from using the trademarks of Dior, Kenzo, Givenchy and Guerlain in their ads.

A final point considered by the Supreme Court was the selective network distribution established by LVMH. The court stressed that "sales made by individuals cannot constitute an infringement of a ban on resale outside a selective distribution network".

It is interesting to see that eBay's activities through its UK website were not protected, contrary to those through 'ebay.com'. This ruling means that brand owners suing a '.com' website will have to prove not only that the website is accessible from France, but also that it is, at least partially, aimed at consumers located in France. This creates a significant evidentiary issue, but allows to apply the ECJ's case law correctly from a legal and practical point of view.

However, users of a '.com' website should not think that this ruling protect them from the jurisdiction of the French courts if the site is aimed at the French public. The ruling is both good and bad news for brand owners, since it does not prevent them from suing the operator of a '.uk' - or even a '.com' - website, but it increases the evidentiary burden significantly. The solution - if the website is financially viable - would be for brand owners to request that the court order the website operator to pay their legal costs.

Richard Milchior, Granrut Avocats, France

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