A Paris tribunal found Ebay Inc guilty of misleading consumers by using misspelt versions of luxury brand Louis Vuitton as search engine key words to redirect users to Ebay website links.

The tribunal on Thursday ordered Ebay to pay 200,000 euros ($275,800) in damages and 30,000 euros in legal costs incurred by Louis Vuitton, a leather bags maker owned by LVMH, the world's biggest luxury goods group.

It also demanded Ebay pay 1,000 euros in penalties every time it used search engine key words that harmed the reputation of the Louis Vuitton brand.

Ebay recognized the facts of the case but said they reflected the workings of a search system it uses.

When a certain number of badly spelt words similar to Louis Vuitton often came up in search engines, the system allowed it to automatically pay search engines such as Yahoo and Google to have them used as key words directing users to Ebay.

We are extremely disappointed by this decision, Yohan Ruso, head of Ebay France told Reuters. We recognize the facts but we think the sanction is disproportionate.

Louis Vuitton said the tribunal had found Ebay liable for harming the trademark and domain name of Louis Vuitton.

For its part, Ebay said the words were commercial links used in search engines to redirect consumers to Ebay to buy genuine Louis Vuitton goods.

This issue is being used by certain rights owners as an excuse to retain total control of what people can buy, where they can buy it from and how much they have to pay, Ebay said in a statement.

Ebay said it had not decided yet whether it would appeal against the decision.

Louis Vuitton, which began proceedings against Ebay in December 2006, said it had asked for 600,000 euros in damages.

The Tribunal said that with these key words, Ebay was doing advertising for its website by using the brand name Louis Vuitton and by doing so, was misleading Internet users, Patrice de Cande, Louis Vuitton lawyer, told Reuters.

This is a decision to protect the consumer.

LVMH shares closed barely changed at 77.58 euros, valuing the group at 38.16 billion euros.

(Editing by Hans Peters and David Holmes)

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