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By Simon Levine, 22 July 2008 16:39

COMMENT

A landmark ruling against eBay amounts to more than the multimillion-euro fine imposed by the court. It signals a new intent to tighten online policing, says lawyer Simon Levine.

It's not just social networks that are facing pressure to improve the policing of content on their sites. Late last month, eBay was ordered to pay €38m to LVMH for allowing the auction of fake goods purporting to be luxury items from Louis Vuitton, Christian Dior and Givenchy.

Counterfeit goods
Key issues

1. Market value The online market for counterfeit goods is worth an estimated £800m with some traders making as much as £20,000-£30,000 per month.

2. E-fencing E-fencing and grey market trading are common ploys used by fraudsters.

3. Liability vs responsibility Auctions sites and brand owners will have to work together increasingly in monitoring infringement.

The French court's ruling is a landmark that could see more online auction sites punished for counterfeit trading. Far from being the exception, the LVMH case in fact only represents the tip of the iceberg. E-fencing has reached new levels in the UK.

But the key question is what impact does counterfeit trading really have on brands or consumers and whose responsibility is it to monitor it.

Recent research we conducted with online intellectual property specialist Commercial Security International estimates the value of counterfeit goods passing through online shopping sites in the UK to be as much as £800m.

The growth in online shopping and in particular auction sites means that counterfeiters now have more direct and discreet channels to reach consumers than ever before.

Indeed some fraudulent sellers can earn between £20,000 and £30,000 per month on the sale of bootlegged or counterfeit goods.

In addition to fake brands and trademark infringements, another area of concern for brands is grey market trading, where goods are imported and resold for highly inflated prices.

Taken as a whole, it is thought that as much as £5 in every £100 spent online goes on bogus items.

Clearly, counterfeit sales dilute the value of brands but they also undermine the integrity of auction sites and ultimately cost the economy millions of pounds in lost income.

Buyers, too, need to beware. Not only could their bargain turn out to be faulty or dangerous, they may also be funding organised crime in the process.

Despite the savings, consumers still want to know they're getting a bona fide product. Each time that process is hijacked by a fraudster a little bit of the brand value is chipped away. And it's not just posh handbags or luxury clothes.

While in pure money terms luxury brands may have the most to lose, it's interesting to note that pushchair manufacturers MacLaren and Bugaboo are also reviewing their internet sales policy restricting third-party sales of their items in the wake of this news, and others may soon follow suit.

So where do we go from here? Certainly, it is in consumers' own interests to have a healthy scepticism about spurious online bargains and to report any suspicious sellers. Equally, online auction sites themselves need to have appropriate, and swift, take-down policies in place.

But this is not just a problem for the auction sites to address or solve alone. What the eBay case should teach us is that sites and copyright owners cannot be complacent about e-fencing.

Brand owners and sites need to work together to police against infringement if they are to stand any chance of overcoming it.

DLA Piper is the world's largest global legal services organisation with more than 3,700 lawyers across 64 offices and 25 countries. Its award-winning technology, media and commercial practice employs 70 partners specialising in IT, telecoms, media, sport and IP law. Experts in convergence between the technology, communications and media sectors, it advises some of the world's leading multinational entertainment, media, sport and technology companies.