Legal Commentary

Though eBay (EBAY) is still basking in its recent victory in Manhattan federal court — where a district judge Monday rejected Tiffany’s (TIF) attempts to hold it responsible for counterfeit sales of “Tiffany” silver jewelry — I need to crash the party with a ticklish question. It stems from eBay’s recent losses to Rolex, Hermès International, and LVMH Moët Hennessy Louis Vuitton (LVMUY) regarding the same issues in German and French courts.

There’s a live French court injunction against eBay at the moment forbidding it from allowing any sales of four specific LVMH perfumes — Givenchy, Guerlain, Kenzo, and Christian Dior — on any of its sites accessible from France. But, from all I can tell, eBay doesn’t seem to be in compliance with it. (The injunction is not limited to counterfeit sales, but extends even to sales of genuine perfumes. That’s because LVMH sells these perfumes only through licensed exclusive distributors, who are not authorized to sell them over eBay, and the French court is honoring and enforcing LVMH’s exclusive distributing contracts. U.S. courts will not ordinarily do that, since selling genuine articles through unauthorized channels — “gray-marketeering” –  is generally considered legal here and beneficial to the consumer.)

Here’s what I mean. Go to http://www.ebay.fr/ and do a search for “Kenzo parfum” — or any of the other forbidden brands — and see if you still don’t get dozens of responses.

Of course, I’m in New York, so it’s conceivable that eBay’s using some sort of geographic filtering technique that isn’t blocking me from seeing those offerings, but which does block viewers who are logging on in France, in which case everything would be fine.

So I asked an LVMH spokesperson what they’re seeing in France when they do those searches.

She wrote back yesterday (July 15), “As of this morning, if one visited those sites — ebay.com and ebay.fr — in France, a significant number of the perfumes appear for sale. That is not in compliance with the injunction.”

So then I asked eBay: Am I misunderstanding the injunction, or is eBay still not yet in compliance?

“You are not misunderstanding the injunction,” a spokeswoman from eBay Europe politely wrote back. “We are actively working towards finding an effective solution. We will comply as technically and humanly possible. I will keep you . . .  posted when we have some news to share in this direction.”

But today is July 16 and the injunction — which had been foreseeable for months — was issued on June 30, and eBay lost its attempt to stay its immediate impact last Friday (July 11). Courts don’t respond well when defendants don’t carry out their orders. As Microsoft found out a few years ago, telling judges that, in effect, they “just don’t get the technology” doesn’t play well.

(Here, by the way, is an interesting blog item from Joe Nocera at The New York Times, entitled “EBay’s Pyrrhic Victory,” on the Tiffany ruling.)

Some Technical Stuff:

For those who have been trying to understand exactly what the French ruling does and doesn’t do, reporters — including me — have not been making things crystal clear for you.

What I and others have been calling “the LVMH ruling” is really a trio of rulings in three related cases. All were decided on June 30 by the Commercial Court of Paris, and the cumulative damage award imposed upon eBay from all three totaled more than $60 million. The cases include:

1. Louis Vuitton Malletier v. eBay: This is a case for damages for counterfeit sales of handbags, fashion accessories, and ready-to-wear items sold on eBay’s sites from about 2001 to 2006. LVM did not seek an injunction in this case. Here is the English language version of the ruling. (Here’s the French language version.)

2. Christian Dior Couture v. eBay: This is also a case for damages for past counterfeit sales of handbags, fashion accessories, and ready-to-wear items. Here is the English language version of the Dior Couture ruling. (The French ruling can be found here.)

3. Parfums Christian Dior v. eBay: This is the case relating to the four LVMH perfumes: Givenchy, Guerlain, Kenzo, and Christian Dior. This suit seeks both damages and injunctive relief and it concerns both counterfeiting and sales of genuine products through unauthorized channels. I don’t have an English language version of this one yet. (The French language ruling is here. The French language Court of Appeals ruling denying the stay of the injunction is here.)

eBay has said it plans to appeal the rulings in all three cases, but it is focusing initially on the third one, because that’s the only one that includes an injunction. The injunction is enforceable by fines of 50,000 euros a day (about $80,000).

Update: I  had earlier  asked my Fortune colleague, Peter Gumbel, who is stationed in Paris, if he would perform some searches from there on eBay sites and to let me know what he got. Here’s his report, as of 12:57 ET on July 16, 2008.

“On eBay.com, the US site, nothing seems to be blocked, since when I entered Christian Dior perfume; Kenzo perfume or Givenchy perfume in the search box, dozens of auctions came up.

“On the French eBay site, ebay.fr, the same searches (using both ‘perfume’ and ‘parfum’) produces 0 results for each of the brands - so some blocking must be happening. However, at the bottom of those same search results pages, there’s a box with links  to eBay boutiques outside France (US, UK and Canada, mainly, but I also saw Spain) that offer perfumes by the three [sic] producers for auction.”

In response to Peter’s observations, an eBay spokeswoman says: “At this stage our comment still remains the same as earlier, which is we are actively working towards finding an effective solution.”