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Lancome Parfums et Beaute & Cie v. eBay International, Inc., et al.

[This summary was provided by Alexandra Neri, Partner and head of IP/IT in the Paris office of Herbert Smith LLP (alexandra.neri@herbertsmith.com)]

Cosmetics manufacturer L'Oréal lost a battle in its counterfeiting war against eBay. In its judgment of July 31, 2008, the Belgian Commercial Court dismissed all of L'Oréal's claims against the online auctioneer and, moreover, ordered the cosmetics company to pay court costs.

The claimant, Lancôme, a French company owned by the L'Oréal Group, purchased through its bailiff a hundred or so perfumes bearing its trademarks on the website eBay.be in order to measure the increase in sales of counterfeit goods, particularly perfumes on the website eBay.be. In fact, 77 perfumes ordered out of 85 turned out to be fake, which was not contested by the online auctioneer.

Lancôme then requested that eBay take the necessary measures to counteract the sale of counterfeit versions of its goods. Due to eBay's lack of action in this respect, the L'Oréal Group decided to sue eBay in Belgium for not doing enough to prevent users from selling counterfeit items on the site.

Lancôme's legal action against eBay was aimed, on the one hand, at forcing eBay to prevent the posting of unlawful offers on its website ebay.be, and, on the other hand, to obtain damages in compensation for the posting of such offers.

EBay contested this claim by pointing out that as a host it has no general monitoring obligation. EBay also claimed that its position as a host exempts it from liability regarding the contents of the offers posted on the website by sellers, so eBay could not be ordered to pay damages.

Lancôme refused eBay's claim of host status and requested application of common law of liability. Indeed, the main issue in this case was to determine the legal status of eBay's activities.

The Belgian court referred to the Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market, and especially Section 4 titled "Liability of intermediary service providers", and also to the Belgian law of 11 March 2003 transposing the directive to define a "host". In fact, a host is a service which consists in storing information supplied by a recipient of the service.

Indeed, eBay claimed that it stores the advertisements created and supplied by the sellers who want to sell goods, which is enough to qualify eBay as a host of these advertisements.

Lancôme argued that although a part of eBay's activities could be qualified as hosting activities, it must be taken into account that some other activities widely exceed a basic storing activity for third parties. However, the Belgian Court considered that only eBay's hosting activities were criticized by Lancôme, and not the other services offered by the online auctioneer such as help in writing advertisements or advice on buying or selling. The court also reminded the parties that according to the present state of community law and Belgian law, an intermediary service provider has to benefit from the liability exemption.

As a result, regarding the advertisings posted on the eBay website by sellers, the online auctioneer is considered to supply a hosting service, for which it can benefit from the liability exemption. Furthermore, the court ruled that eBay did not have "a general monitoring obligation" over what was on offer on its site.

The court dismissed Lancôme's attempt to forbid eBay from allowing unlawful offers to be posted on the website ebay.be since eBay would have to carry out active research of illegal advertisements, which is against the principles of the Directive and Belgian law.

Finally, the judge confirmed that eBay acted diligently when it received letters from L'Oréal to notify the online auctioneer of illegal activity on its website. Indeed, eBay showed it took measures to protect its website from counterfeit goods and cooperate with owners of intellectual property rights in the struggle against infringement by removing the items L’Oreal complained about. The court considered that these measures could not be considered as ineffective.

The Belgian Commercial Court therefore dismissed all of L'Oréal's claims against the online auctioneer, and the cosmetics firm was furthermore ordered to pay 15,000 Euros in court costs.