Just some initial thoughts; more to come.
Today’s Wall Street Journal story reads: “EBay Fined Over Selling Counterfeits”; and stories in yesterday’s editions of The New York Times and Women’s Wear Daily were headlined, “EBay Ordered to Pay $61 Million in Sale of Counterfeit Goods” and “Battle of the Titans: LVMH Awarded $61.3M In EBay Counterfeit Case” respectively. EBay has been prominently associated with “counterfeits”.
Can you think of anything that could be more damaging to the reputation of an Internet marketplace? EBay should have gone to extraordinary lengths to explain to the public that its interest in this dispute is the public’s interest as well.
There should be no question that foisting counterfeit trademarked goods on the public is a bad thing and should be punished. The trademark laws generally impose upon the trademark owner the responsibility to police the market and bring infractions to the attention of the governing authority. These laws generally recognize that governments usually have very limited capacity to recognize a fake, to regulate it and to determine who is selling it. That’s one reason why the owner, who is awarded the premium on the sale of its branded goods, is expected to underwrite the cost of enforcement as a cost of doing business.
But these cases involved far more than the sale of fake goods and it is in these areas, in particular, that the impact of this French decision, if extended to other courts and jurisdictions, would be devastating to the Internet market place.
EBay might have educated the public to know that the so-called “counterfeit goods” that were the subject of this lawsuit include genuine branded goods (like the LVMH fragrances) which are being sold by vendors outside the authorized LVMH distribution system. There is nothing fake or counterfeit about these goods. The consumer is not being defrauded in these sales. The trademark on the goods is a proper indication that the goods originate from a source common with goods purchased in the LVMH distribution.
EBay might have educated the public to know that often times these goods are being sold on eBay by independent sellers, people like you and me, who may be selling a legitimate branded item which we have bought or have been given and which we cannot return, and who believe we can do better selling these items through an auction rather than by giving them away.
EBay might have educated the public to know that many of the sales are sales of used branded items, which are also now prohibited by this ruling.
Most importantly, eBay should have educated the public that the virtual world of the Internet, the world in which eBay operates, is in many respects different from the terrestrial world in which most luxury goods have grown and perfected their marketing. Consequently, before imposing trademark, distribution and competition rules for this new world, we have a responsibility to examine their likely impact.
Trademark laws generally impose upon the owner of the mark, the brand owner, the responsibility to police the proper use of its mark. The legal rational is that the monopoly, which the law grants to the trademark owner is justified by the benefit to which the consumer gains from knowing and relying on the fact that all products bearing the same mark emanate from a common source. Unlike copyright laws, which are about property, intellectual property, trademark laws are about business, consumer protection and orderly marketplaces.
One of eBay’s raison d’etres is that it empowers ordinary people to become buyers and sellers in a reliable market place. Turning this marketplace over to the interests of the large and financially powerful brand owners runs in many ways counter to the justification for establishing market places like eBay in the first place.
While I am often not an ardent fan of eBay, in this instance they walk on the side of the angels. Its interests in these lawsuits are very much aligned with the public interest, with the interests of ordinary, honest buyers and sellers who patronize eBay. But those people handling eBay’s public relations, those who are entrusted with its brand, permitted the brand owners to publicly marry eBay to the devil. And this association may ultimately prove more damaging to eBay than the setback of the underlying lawsuits.
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