In a lawsuit filed in a Paris court last September, LVMH Moet Hennessy Louis Vuitton SA has launched a legal attack on the world's biggest online auction site, claiming that eBay Inc. has not done enough to stop the sales of counterfeit goods through its Internet marketplace. LVMH's suit is part of a worldwide effort to crack down on counterfeiting. But France makes an especially appealing venue for the suit, not just because LVMH is a French company, but because of France's tough anti-counterfeiting laws.

As reported in Le Monde on September 21, the suit accuses the San Jose, Calif.-based company of failing to police the goods for sale in the auctions hosted by the site. Christian Dior Couture and Louis Vuitton, two high-profile brands owned by Paris-based LVMH and its parent Christian Dior SA, are suing both eBay's U.S. parent, eBay Inc., and a Swiss unit of the company, eBay AG, in the Tribunal de Commerce de Paris, the French commercial court, seeking damages of about $40 million. Central to the case, say both U.S. and French lawyers, is the question of who is ultimately responsible for ensuring that counterfeit goods do not come up for sale.

"In filing the suit, LVMH is trying to convince eBay that its business model must change, and to convince it to police the auctions that take place on its site," says Helen Minsker, a partner with the Chicago-based intellectual property firm Banner & Witcoff who is familiar with, but not involved in, this suit. "A ruling in LVMH's favor will make it difficult for eBay to operate in France, and could force a change." LVMH declined to comment for this article.

eBay insists that the level of protection it offers is sufficient. "We invest millions of dollars to address these [counterfeiting] issues and work collaboratively with brand owners," says eBay spokesperson Catherine England in an e-mail statement. "Much of our activity in this area not only meets but exceeds the requirements of the law." Currently, if a trademark owner alerts eBay that a counterfeit item is for sale on the site and provides evidence in support of the claim, the item will be taken down, though not necessarily before the auction is complete.

Tiffany & Co. filed a similar suit against eBay in federal district court in Manhattan in July 2004; the case is expected to go to trial in 2007. But suing eBay in France offers some key advantages.

Among them is LVMH's recent victory in French courts in a case against Google Inc. At issue in that suit were ads appearing in the search engine that promoted Web sites selling counterfeit LVMH goods. Paris's court of first instance found for LVMH in February 2005, a decision upheld by an appeals court last spring; LVMH was awarded $400,000 in damages. "The principle that these different access providers are just site owners offering access and they don't take active part in counterfeiting activities didn't hold up," says Rebecca Delorey, a partner at the Paris-based intellectual property firm Gilbey de Haas, whose clients include other makers of luxury goods. "What the court said in Google is, 'You are making money out of this, it's commercial, you make a commission, so you better find a way to make sure people are not counterfeiting.'"

In general, French laws are ahead of those of other countries in fighting counterfeiting, says Faisal Daudpota, external relations coordinator for anti-counterfeiting with the International Trademark Association in New York. France began setting stricter criminal penalties for counterfeiting in the years after World War II. "As home to a number of the world's leading luxury brands, France has developed a body of law that is specific and somewhat favorable to luxury goods manufacturers," says Paris-based intellectual property partner Kathie Claret of Dechert. A 1994 French law has united government and private sector anti-counterfeiting efforts through coordinated lobbying, legislative, and advertising campaigns. France also has a proceeding known as saisie contrefacon, which allows a court bailiff to enter private premises and gather evidence in investigating charges of counterfeit trade.

The 1994 legislation also gives customs authorities the power to seize counterfeit goods, and lawyers and trademark experts say that France has pursued this strategy with vigor. For example, a tourist arriving in France with a counterfeit product -- say, a fake Louis Vuitton bag -- could have the item confiscated by customs agents and might have to pay a fine. In 2002, according to French customs reports, 2 million items were seized.

LVMH has aggressively attacked the counterfeiting problem in recent years, filing lawsuits from China to the United States. But suing eBay in France is something new and could inspire other trademark owners to take a similar tack, says Gilbey & De Haas's Delorey: "We have been testing various systems with our clients, but if this case actually goes somewhere and gets a good result, we'll see more and more brand owners taking the hard line."

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