On February 18, eBay France was unsuccessful in the face of charges that it has enabled the sale of counterfeit goods and harmed Louis Vuitton's reputation, receiving a fine of €200,000 in damages, including an award of €30,000 in costs, and a fine of €1,000 for each future violation.
When we last discussed the online auction giant's French site in 2007, it was facing an objection from the regulatory authority for auction houses in France, the Council of Sales, which sought to hold eBay to the same standards as those that apply to France's traditional auction houses. The latest objection, brought by the owner of the Louis Vuitton brand, LVMH Moët Hennessy Louis Vuitton SA (LVMH) has resulted in a judgment against eBay France.
The basis of the objection stemmed from eBay's payments for certain keywords to generate links to eBay's site in search engines such as Yahoo and Google. The practice of paying for keywords in itself was not the issue. Rather, it was the fact that eBay was paying for misspellings of "Louis Vuitton" (such as "Vitton"), that LVMH asserted are often used to advertise the sale of counterfeits, to generate results pointing to eBay.
The argument for using such misspellings is that potential buyers may simply be unaware of the correct spelling, or inadvertently type the name incorrectly. Rather than have a bad customer experience, eBay sought to ensure that such misspellings still direct the potential buyer to some listings. By the same token, some frequent users of eBay often intentionally misspell designer names in their searches as a deliberate strategy for good bargains, under the theory that the results will be viewed by fewer buyers and they will have less competition in the bidding.
Brand owners, however, object to this practice under the theory that the sellers who utilize misspellings do not have poor spelling skills, but use them intentionally when dealing in counterfeit goods. Consequently, allowing third parties to pay for misspellings associated with counterfeit goods enables the counterfeit marketplace.
In the end, the balance weighed in favor of LVMH. So far, this decision in France is an outlier. In the US, the use of another's trademark as a keyword in Google AdWords has generally not been found to be a violation of trademark law, even when it involves competitor's trademarks. However, this decision in France may very well have turned on the fact that the keywords in question were closely tied with dealing in counterfeits, even though they actually were not protected trademarks of another party.
In its response to the decision, eBay stated that the decision did that very thing which it sought to protect against—it harmed consumers by preventing them from buying and selling authentic items online.
Perhaps the final word on the issue is yet to come in the EU. A decision from the Court of Justice due to issue in late March is expected to provide more clarity as to whether this use of Adwords interferes with the rights of trademark owners.
Vol. 53, June 2010