If you've ever bought (or sold) a fake on the online auction site eBay this week's survey question is for you. Today a French court ruled that eBay will be have to pay luxury label Louis Vuitton $63.1 million in damages for fake LV goods that have been sold via their site. While eBay acts primarily as an intermediary between sellers and buyers (who sees part of the action), the court's decision indicates that they expect the company to take a more proactive approach to weeding out counterfeiters.
But what do you think? Should eBay be held financially accountable for fakes sold on the site? They obviously make money off the auctions they host, but does that make them complicit? And are they responsible for taking down the slew of current auctions shilling knock-off designer duds and goods?
Beyond that, does anyone have any ideas as to how eBay could even accomplish such a feat? The site is currently crawling with fakes, and while some of the time it's obvious which items are counterfeit (who sells real Fendi bags for $20?), other times it's not so easily evident. Hiring a department dedicated to sniffing out phonies would be a first step.
While I'm certain there are books of case law dedicated to this topic, I'm curious to hear your opinion as an entrepreneur or small business owner. Let us hear it in the comments section below.
Fake Burberry trench—or real?
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Ah, Learned Hand. Why did you have to bring him into this? Absolutely correct though. A reporting system is definitely the way to go as I said as well.
—mcyr
2:39, July 1st, 2008
The fashion industry has employed wide-spread copying from the very beginning, not only with low end brands copying high end brands, but vice-versa as well. Fashion has never been focused on creating the most novel concepts, but rather on creating the most adoptable concepts. Many of the high end brands would not be the household name they are today without being widely available in knock-off form. In fact, the knock-offs may actually enable the real deal brand to charge more for their product based on the clout and social status associated with the genuine product.
However, as far as Ebay goes, a company should be held liable for aiding and abetting illegal copying or infringement of a valid trademark, copyright, or patent. The question is whether Ebay indeed has the ability and the resources to stop the illegal conduct. The answer is a resounding yes, and a simple reporting system as noted in the other post is the perfect solution. This is precisely what youtube is currently doing to police its own content. Ebay can't hide it's head in the sand forever while it is being simultaneously enriched from the damage to the good-will of other businesses.
A simple law and economics calculus developed by Judge Learned Hand can resolve this issue. The Hand Test requires that financial liability should be imposed for a negligent tort only if the burden of preventing the injury does not exceed the magnitude of the injury multiplied by its likelihood of occurring; it finds negligence when the actor's burden (B) is less than the probability (p) of harm, multiplied by the degree of loss (L), which can be expressed as the formula B < p × L.
—mjandri
17:57, June 30th, 2008
Maybe they should sue New York... Time Square has a ton of Vouis Luitton. Is NY providing the medium for people who sell the stuff... like Ebay?
Also, I don't think knock-offs in this case hurt a brand. It's the very very small pragmatic minority who would buy a fake if they could afford the real deal anyway.
—bryanh
15:52, June 30th, 2008
I agree with Mateo. When a website like eBay that sees a significant amount of the internet traffic in the world coming through its site daily, they would be hard-pressed to be able to seek out and eliminate every counterfeiter on a proactive basis. The best way is to use a reporting system.
Also, the differences between the French legal system and the US legal system are significant (although I know you want to hear the business side, I will give a bit about the legal side). The French legal system is what is known as a civil code legal system (In fact, I'm in the second week of a one month stay in France right now as part of my law school program.) This means that every law is actually contained in a book - the US system is a predominantly common law system in which stare decisis and precedent rein supreme. If this case had come up in the US, the court would very likely have come to an almost completely opposite result. The US courts have addressed similar cases before (which I can't remember specific names of right now) that have dealt with analogous issues - the US courts, using precedent, would be likely to find it impracticable and highly unreasonable to force eBay to police their website in such a way. They would require complicit reporting of offenders and subsequent removal of those users, but the courts in the US would not likely find as the French court did. (But, at the same time, the courts could choose to set a new precedent).
That's my .02 cents.
—mcyr
15:22, June 30th, 2008
Maybe LV should sue China next? I hear they do the same thing. It's a buyer controlled marketplace. If someone found that they were selling fakes, they should be reported and banned... what more can eBay do to police this? They can't search through every seller's merchandise. That's like asking a team of 5 guys to find all the fake LV's in Los Angeles.
—Matteo
15:04, June 30th, 2008
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