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BUSTED….or NOT. Copyright and Trademark Infringement Claims against Online Auction Sellers

Online auction giant eBay has recently faced a number of copyright and trademark infringement claims both internationally and domestically. Well-known brands such as LOUIS VUITTON and CARTIER have charged that eBay is liable for secondary copyright or trademark infringement due to eBay’s users selling infringing goods on their website. However, despite the expanding number of cases and the similarity in evidence presented, these cases have yet to demonstrate a strong trend in policy towards the liability of online auction sites in their users’ infringement activities. Whether or not online auction sites are found liable appears to hinge on if the site can prove that it has taken sufficient measures to prevent and discourage infringing activities on its website. The ambiguous definition of “sufficient” leaves the central question to the judge’s discretion: Who is ultimately responsible for actively policing copyright and trademark infringement—the brand or the auction site?

Recent eBay cases in Europe and the United States demonstrate the difficulties presented in these claims.

eBay vs. Moet Hennessy Louis Vuitton (MHLV)

The case between online auction site eBay and the French luxury brand MOET HENNESSY LOUIS VUITTON has been a headliner in the French courts for the past five years. MHLV originally sued eBay over counterfeit MHLV goods being sold on the auction site, alleging that eBay was partially liable for its users’ infringement. The French judge sided with MHLV and required eBay to pay damages to the company. In January 2007, after being sued for a second time by the luxury brand, eBay upped its infringement prevention practices. From this point on, sellers in select categories, such as luxury goods and clothing, were limited to the number of items they could sell and were no longer allowed to use the one-day auction option popular with counterfeiters. The site also introduced restrictions based on the sellers’ locations, banning sellers in Hong Kong and mainland China (locations hosting the greatest number of infringers on the eBay site) from selling such items at all. In addition, some listings were delayed from being posted on the eBay site to give eBay employees time to review the items. As a result of these measures, eBay claims that 95% of infringing goods are now removed from the site before the auction ends.

In 2008, however, eBay got sued once again by the French brand, and was ordered to pay $60.8 million dollars to the French brand. Citing its increased prevention and policing measures, eBay appealed the French court decision. Yet again, the French court sided with the MHLV. Though the amount was decreased, MHLV has continued to fight, slapping eBay with several more lawsuits in the past two years, most of which end up requiring eBay to pay. It seems that on France’s end at least, eBay is considered liable for its users’ infringing actions despite the measures it takes to prevent infringement.

eBay vs. Tiffany & Co.

TIFFANY & CO. also got in on the action in a Manhattan court, charging eBay with secondary trademark infringement and alleging that 75% of the 325 advertised TIFFANY items that the company bought on eBay since 2004 as part of an infringement prevention program were counterfeit. TIFFANY claimed that eBay’s failure to stop the sale of counterfeit goods on its website made it liable for trademark dilution, false advertising, and unfair competition.

This time, however, the judge was on eBay’s side. Judge Richard Sullivan asserted that the responsibility for policing its goods fell to TIFANNY & CO., not to eBay, and that the luxury brand had failed to prove that eBay was liable for the infringement.

Unlike the French judges, the Manhattan court found that the online auction site could not be held responsible for the infringement activities of its users.

eBay Sellers Charged with Infringement

In addition to the company itself facing charges of infringement, the law has cracked down on individual sellers that sell illegal goods online. In 2004, CARTIER INTERNATIONAL and MONTBLANC-SIMPLO filed complaints about two eBay vendors—Marina’s Boutique Store and Verona Eyewear—in a California court. The two companies sought damages for trademark infringement, trademark dilution, and false advertising.

Another individual seller from Portland, Oregon was sentenced to four years in federal prison after he ran a counterfeit software operation through eBay. He pleaded guilty to copyright infringement, mail fraud, and identity threat after he used hundreds of stolen identities to conceal his own. He will also serve three years probation and community service after he is released, and forfeit the $220,000 in income he made selling the infringing software.

Whereas eBay’s liability in these cases remains unclear, the law has set a firm precedent in terms of individual infringers, doling out significant jail terms and financial penalties.

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Comments

One Comment on BUSTED….or NOT. Copyright and Trademark Infringement Claims against Online Auction Sellers

  1. Ulf Wolf on Mon, 29th Mar 2010 6:13 pm
  2. Great post.

    Trademark issues aside, pPerhaps I can just add to this that the best way to guard against being ripped off by online sales or auctions of any kind, eBay inlcuded, is to use a bona fide online escrow company. Although it does add some cost, that will take uncertainty out of the transaction.

    For my money, the best bona fide online escrow (and there seems to be ten fraudulent escrow sites for every bona fide one) is probably Escrow.com (http://escrow.com). In fact, it’s the only one that eBay recommends.

    Take care,

    Ulf Wolf