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The Warsaw Voice » Other » September 3, 2008
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E-Business and the Law
September 3, 2008   
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With the number of online transactions growing by the year, a lot of economists are pointing up the importance of e-commerce to the global economy. Online purchasing offers previously unheard of convenience and choice. You can buy just about anything from anywhere in the world without ever having to leave home and save a lot of time into the bargain.

Lifestyles are changing. Consumers these days are pressed for time. Hence the increasing scale and popularity of e-business. Exchanges invariably raise questions of security as well as the rights and responsibilities of those involved and internet exchanges are no exception. These issues are inextricably bound with the effectiveness of enforcing claims and obligations in online transactions.

Services provided over the internet are governed by law just like any others. But the legal system is clearly not changing anywhere near as rapidly as the internet. The laws currently in force often leave doubt as to the legal status of online services. Court judgments, therefore, can and should step into the breach.

The most important legislative act governing services provided over the internet is EU Directive no. 2000/31/EC of June 8, 2000. This sets out the responsibilities and obligations of entities providing online services in all EU member states. A judgment from a court in one member state should therefore be taken into consideration by all courts everywhere in the EU.

French courts of first instance sitting in Troyes and Paris have set precedents recently by ordering eBay to pay nearly 40 million euros in damages to companies belonging to luxury goods manufacturer LVMH Group and damages to Hermes International for trademark infringement by allowing users to sell counterfeit goods online.

These judgments are worth a closer look as we might just see luxury goods producers suing online auction services in Poland.

eBay, in its defenses to the Hermes International and LVMH Group company lawsuits, argued that the EU directive mentioned earlier specifically excluded it from liability for user-provided content.

eBay argued that, as it was merely providing space for content published by third parties (i.e. it was a host provider), it was not liable for such content unless it knew the content was illegal or failed to remove the content after being informed that it was illegal.

In the first case in Troyes, Hermes International accused eBay of failing to prevent the sale of counterfeit goods bearing the Hermes trademark. Hermes argued that eBay should have taken appropriate steps to stop its users from engaging in illegal activity once it suspected, or at the very least, as soon as it was informed, that they were doing so. The court ruled in favor of Hermes.

The Parisian court hearing the other case where LVMH sued eBay developed the law in this area even further. The court accepted LVMH's position that eBay was more than a host provider and was therefore not excluded from liability under the EU directive. The court held that as an online auction service was not merely somewhere for users to store information; it had an obligation to ensure that its users were not causing damage to third parties. The court ordered eBay to pay almost 40 million euros in damages to LVMH for publishing offers of sale that infringed the trademarks of the group's companies.

These cases of luxury goods manufacturers suing eBay (the company has also been sued by L'Oréal in five European countries), and the discussions they have sparked off, illustrate the urgency of having appropriate regulations covering the provision of services over the internet. These latest judgments are subject to appeal, and eBay has said it will contest the decisions. It's not certain the lower court decisions will be upheld by the higher courts. Anyone providing services over the internet, though, would be well advised to study these judgments carefully. The possibility of lawsuits in other member states, including Poland, claiming damages for user provided content, cannot be ruled out.

Dariusz Tokarczuk, legal advisor and managing partner, Gide Loyrette Nouel
Piotr £upiñski, legal advisor, Gide Loyrette Nouel
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