« String Theory | Main | Tiffany v. eBay: Today's the Day! »

Euros and Scents: More on LVMH v. eBay

Time is money in eBay's ongoing battle with LVMH, as a French appellate court upheld a fine of 50,000 euros per day for as long as the auction site continues to allow sales of several LVMH perfume brands.

This ongoing fine is on top of the 38.6 million euros already awarded to LVMH, primarily to compensate for the sale of counterfeit luxury products on eBay, but also as a penalty for the unauthorized sale of authentic fragrances, including scents from Dior, Givenchy, Guerlain, and Kenzo.  Like other luxury companies, LVMH carefully controls the distribution of its fragrances under the theory that a rose does not smell as sweet -- nor does it command as high a price -- when it's sold alongside lesser blooms.  In addition, it's easy for counterfeit versions to creep into unmonitored supply chains -- hence the periodic news stories about fake eau de toilette that turns out to contain, well, just that.  Distribution agreements therefore typically attempt to prohibit resale, with varying degrees of success.

While eBay doesn't defend the sale of counterfeits, it is opposed to legal limitations on e-commerce that limit the resale of authentic products, like the fragrances in question.  According to Bloomberg, however, eBay has now announced its intent to comply with the order "as technically and humanly as possible."  Whatever that might mean.

In the U.S., the first sale doctrine (usually referred to elsewhere as "exhaustion of rights") limits the ability of an intellectual property rights owner to control a product once it has been released into the stream of commerce.  In other words, if you want to resell that copyrighted book you've finished reading or that tacky trademarked tchotchke, go right ahead.  However, copyright and trademark holders have had some success in limiting the first sale doctrine via contract (and statutory modifications), which is why you usually don't buy software -- you just license it, with a prohibition on passing it on.  Other jurisdictions enforce somewhat greater restrictions on resale -- so French LVMH and American eBay are involved in a cultural clash as well as a legal one. 

While LVMH has once again experienced the sweet smell of legal success, its dispute with eBay is far from over -- with respect to either counterfeits or unauthorized sales of authentic products.  Stay tuned.

And in the meantime, read more about the issue in Cosmetic News (thanks to Sophie Douez for the quotes!) or listen to my brief chat with June Grasso on Bloomberg Radio at 4:20 this afternoon.