First posted April 27, 2011.ebay-logo-02

News item:

eBay just reported first quarter earnings today posting revenue of $2.5 billion, an increase of 16% from the same period of 2010. eBay’s net income on a GAAP basis of $475.9 million, or $0.36 per diluted share, and non-GAAP net income of $619.0 million, or $0.47 per diluted share, representing a 12% increase compared to the same period of 2010. The retail giant narrowly beat analyst expectations, which were 46 cents per share on revenues of $2.48 billion. eBay says that the first quarter increase in earnings was due primarily to sales growth and a lower effective tax rate.


Nice!  I wish I had one of those.

But it does bring to mind the following bunch of words I do have, and which I wrote on this very place in space, on the topic of eBay’s essentially unconditional non-liability for contributory trademark infringement in connection with the sale on eBay of counterfeit goods:

Willful blindness, evidently, is a good standard to spank flea market zhlubs who “should have known” vendors who rent tables from them are selling counterfeit goods.   It doesn’t apply, however, to billion-dollar companies that are â€œtoo big to be liable” as contributory infringers or even  accountable after the fact on some level (disgorgement?)  for the millions they rack up in commissions on counterfeit sales.

Ah, yes, but doesn’t the Circuit say, as quoted above?:

But we are also disposed to think, and the record suggests, that private market forces give eBay and those operating similar businesses a strong incentive to minimize the counterfeit goods sold on their websites. eBay received many complaints from users claiming to have been duped into buying counterfeit Tiffany products sold on eBay.  The risk of alienating these users gives eBay a reason to identify and remove counterfeit listings. Indeed, it has spent millions of dollars in that effort.


I’m disposed to think exactly the opposite–because:

  1. the law will not punish them for failing to do so;
  2. notwithstanding “many complaints” (it’s that Lanham Act “rigor” at work once again!),  most buyers of counterfeits want to buy counterfeits.  It’s not a matter of quality control:   These days, everyone except Archie Bunker who spends $45 for a “Romex” knows exactly what he’s buying.  But unless and until “private market forces” eliminate trademark law, notwithstanding that the sale of a fake Rolex or Tiffany item is entirely between “consenting adults,” it’s still an unlawful transaction;
  3. the “millions of dollars” spent by eBay was spent precisely to obtain an opinion like this by a court that doesn’t really “get it”; and
  4. eBay makes money selling counterfeits!  Even the Circuit had to acknowledge this fact, which it does in a little-bitty footnote and then completely ignores.

Yes, they make a lot of money, they do, at eBay.  Why the company is exempt from any responsibility to compensate victims of trademark infringement via a system it has established — notwithstanding their notice-and-takedown system — merely because it has spent “millions” on trying, a number that is both vague and which the court made no attempt to relate to the profits or the damages involved, remains beyond my understanding.


By Ron Coleman

I write this blog.