January 31, 2006

eBay and Third-Party Liability

Posted in Uncategorized at 11:09 am by thelawthoughts

The NY Times has an article here called ‘Seeing Fakes, Angry Traders Confront eBay’ (rego required).

It examines the liability of eBay for fakes sold on its website. Tiffany, that fabled brand, found by buying up pieces of its own product on eBay that 3 of 4 were fakes. It is suing eBay for ‘facilitating the trade of counterfeit Tiffany items on the site’. In Australia, I think they would probably sue under passing off, or trade mark infringement. However, the case isn’t brought against eBay because it is SELLING fakes, but because it ALLOWS OTHERS to sell fakes.

In Australia, s120 of the Trade Marks Act provides as follows:

“A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered. ”

Essentially, an action in trade mark can only be brought under the Act, where a person uses the mark or sign as a trade mark. In this case, the usual analysis would not wash. Tiffany would need to act against the infringer, rather than the marketplace provider. It would be like suing the owners of the Queen Victoria market for infringement of TMs just because somebody sells infringing products in the market. I just don’t think this is eBay’s fault, especially given that it makes huge efforts to monitor its listings.

Further, I don’t think an action in tort, say for negligence, would work either. eBay simply does not owe a duty of care to those shopping on its site.

This case is essential for the entire future of online commerce, because if firms such as eBay find themselves liable for random people in Romania selling fake tshirts or CDs, they open themselves up to not only civil liability, but criminal liability also. eBay in my experience has a good feedback system and they provide escrow accounts if you are not sure of the providence of your items.

When somebody gets tricked, that sucks. However, no market owner can ever prevent every single case of fraud or good faith mistakes. A loss for eBay in a case like this would, quite simply, be a disaster.

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