eBay and retailers are about to duke it out over legislation introduced into the US House of Representatives yesterday. House Resolution 6491, the Organized Retail Crime Act of 2008, was introduced on Tuesday and was referred to the House Committee on the Judiciary. It would make organized retail crime a federal offense and would make marketplaces like eBay more accountable for stolen goods listed on their sites.
The National Retail Federation's press release about H.R. 6491 referenced this week's ruling in the Tiffany-eBay counterfeiting case. In that case, US District Judge Richard J. Sullivan said the heart of the dispute was not whether counterfeit Tiffany jewelry should flourish on eBay, but rather, who should bear the burden of policing Tiffany's trademarks in Internet commerce. The Court said:
Policymakers may yet decide that the law as it stands is inadequate to protect rights owners in light of the increasing scope of Internet commerce and the concomitant rise in potential trademark infringement.
Nevertheless, under the law as it currently stands, it does not matter whether eBay or Tiffany could more efficiently bear the burden of policing the eBay website for Tiffany counterfeits - an open question left unresolved by this trial. Instead, the issue is whether eBay continued to provide its website to sellers when eBay knew or had reason to know that those sellers were using the website to traffic in counterfeit Tiffany jewelry. The Court finds that when eBay possessed the requisite knowledge, it took appropriate steps to remove listings and suspend service. Under these circumstances, the Court declines to impose liability for contributory trademark infringement.
While the Tiffany case deals with eBay's liability over counterfeit goods on the site, the proposed legislation deals with eBay's liability over stolen goods listed on the site.
But what is significant for both cases is that Judge Sullivan concluded that eBay is analogous to a flea market, "like those in Hard Rock Café and Fonavisa, and that it is inappropriate to compare eBay to an online classified ad service."
eBay's success in defending itself against lawsuits has been its insistence that it is a "venue only," something that might not stand up in court in the future.
eBay has made a lot of people angry - retailers, manufacturers, law enforcement, to name a few. Its chosen approach to policing its site may very well be catching up with them. Unfortunately, the honest, hard-working small businesses who depend on eBay are the ones caught in the middle.
