eBay gum

What has a trade mark dispute between eBay and beauty products manufacturer L’Oréal to do with inventors? And why ‘eBay gum’? Give me a minute and I’ll get there.

First, some background. The dispute started in 2009 and is summarised with exemplary brevity in this extract from the excellent Ipkat blog.

The facts in brief: Paris-based L’Oréal, which had brought similar proceedings in several European countries, objected that online auction site eBay did not do enough to prevent the sale of counterfeit goods such as perfumes and cosmetics. Broadly speaking L’Oréal’s position was that eBay should be liable for counterfeit and parallel imported goods sold via its website, and that eBay should do more to prevent the sale of such trade mark infringing goods.

The court’s judgment, written in sentences designed to make your head explode, comes down on the side of L’Oréal. An open and shut case, you might think. Any physical outlet selling fake branded goods would very quickly be persuaded to mend its ways. Even scrapyards are required to establish the legitimacy of their supplies. Why should an online market-place be any different?

It’s different because, like Google and other internet giants, eBay is so rich and powerful it thinks it can stick two fingers up to any critic and do whatever it wants. An appeal in this judgment appears likely, so eBay could still prevail and carry on merrily making money from other people’s trade in fake or unauthorised goods.

That L’Oréal had to take eBay to court at all – that eBay can’t play fair with other businesses and still make tons of money for itself – says a lot about the debased moral state we’re in, courtesy of the internet. It’s an example of the culture of disregard I ramble on about in Patenting Your Invention: the Ugly Truth.

This is one of the internet’s darker achievements – putting the shoplifters in charge. The prevailing sentiment seems to be: if the technology and the platform enable me to cheat or steal, that’s exactly what I’ll do. L’Oréal v eBay shows that it’s happening at both the supplier and consumer ends of the rainbow. And if the enabler in the middle – eBay in this case – couldn’t care less, it’s very difficult to get anything done about it except by protracted legal action.

And it isn’t just a problem for well-known brands. Smaller companies are taking a hit too. Where’s the motivation to invent and innovate when the chances are high that you’ll be ripped off by unscrupulous manufacturers (let’s say it: mainly in China) helped by trading platforms that turn a blind eye to it all?

Rupert Murdoch is currently under the cosh thanks to the phone hacking scandal, so worms can turn. The judgment in L’Oréal v eBay may be more evidence of it. There’s no doubt that the playing field needs some serious levelling to stop product innovation becoming a fool’s game, and that impacts on all of us.

A postscript – and an explanation of the headline to this post. A good friend of mine, also based in Yorkshire, registered the domain name ‘ebaygum’. Not for any particular reason; he just fancied owning it. Within days he got a snotty email from eBay’s legal department, making it clear that they’d come down on him like a ton of bricks if he didn’t immediately relinquish ownership.

Which suggests that while eBay appears happy to let L’Oréal and others suffer from counterfeiting and passing off, it doesn’t brook any of that nonsense when eBay itself is the potential loser.


One Comment

  • 18 Jul 2011 | Permalink |

    As a small business owner I am hugely in favour of a low cost and efficient system for the protection of trademarks, however I think this is a complex issue.

    As eBay cannot practically be expected to investigate each of the millions of auctions it hosts, this case would have to effectively result in a ban on all L’Oreal products on eBay. This is exactly what L’Oreal want as they want to completely control the channel, and I believe they want to do so in a way that is anti-competitive.

    There are many scenarios that might legitimately see someone trying to sell L’Oreal goods on eBay
    – Arbitrage – I buy goods where they cost less, import them, and sell at a discount in the UK
    – Unwanted gifts – where I sell on something I have acquired legitimately but do not want
    – Bankrupt stock – where I sell goods acquired from a retailer who has closed down

    In practice, it will be difficult or impossible for eBay to distinguish these legitimate practices (practices that promote competition) from fraudulent ones. I believe this harms consumer choice, and encourages anti-competitive practice.

    Google have already been badly bitten by such rulings. Imagine I want to sell an iPod accessory. Google AdWords is no use to me, because “iPod” is a protected trademark so I can’t use it in my search terms – even though doing so would be allowed by consumer law in the UK so long as I acknowledged the trademark owner in my own advertising material. This is a HUGE problem for small companies, and it looks like soon they won’t be able to sell iPod accessories on eBay either if eBay automatically search for brand names and squash them. This is not good news for small business or for the consumer.

    While I agree that protection of brands and inventions is extremely important, I feel that many of our laws are being re-written for the internet era not by legislators but by the courts.

    In individual cases the actions of the court seem reasonable (L’Oreal are victims of massive organised counterfeiters) but they force a reaction on the part of internet companies that suppresses competition and free trade and protects anti-competitive behaviour.

    The big brands plead “all we are asking is that xxx check for legitimacy” but the business models of these internet giants don’t permit human inspection, let alone investigation of each and every advert or listing.

    The internet companies are just as bad, using the “we can’t investigate everything” excuse to shut down swathes of activity to make a point and cause an outcry, when compromise solutions could be explored.

    To some extent they also have a right to feel victimised because giant brand owners did little to pursue counterfeiters supplying small shops and market stalls because it was too hard to find anyone worthy of pursuit.

    I don’t believe rulings like this (assuming it stands) are helpful. I believe we need to fundamentally rethink the issues for the internet age, so the internet can benefit all parties rather than forming a legal battleground that is hugle expensive for all and hurts the interests of consumers and small brand owners.