The eBay Exemption: Restructuring the Trademark Safe Harbor for Online Marketplaces

By Powell, Connie Davis | Santa Clara High Technology Law Journal, November 2011 | Go to article overview

The eBay Exemption: Restructuring the Trademark Safe Harbor for Online Marketplaces


Powell, Connie Davis, Santa Clara High Technology Law Journal


I. INTRODUCTION

The use of the Internet as a global mega-mall/auction house with infringing and counterfeit goods sold routinely raises many concerns with trademark owners and Internet auction sites alike. As a result of the growth of the sale of counterfeit goods online, Internet auction sites, such as eBay, have developed policies which attempt to curtail the sale of infringing merchandise. Despite these efforts, Internet auction sites remain a preferred distribution channel for infringing and counterfeit goods online. Predictably, these sites have been subject to trademark infringement suits for counterfeit articles sold by users of their services. While a few cases cite direct trademark infringement, the primary theory of liability advanced by trademark holders against these Internet auction sites is secondary trademark infringement. However, the rules for determining liability for secondary trademark infringement against these Internet auction sites are ambiguous at best. To date, no Internet auction site has been held liable in the united States under secondary liability theories of trademark infringement. Notwithstanding the analysis by courts reviewing these cases has been inconsistent, providing little guidance on the application of the standards for secondary liability under the Lanham Act.

This Article argues for revisions to the Lanham Act that will establish a principled scheme for liability. First, the Article discusses the development of the counterfeit trademark market online and provides a brief synopsis of the major Internet auction sites' response to the developing counterfeit market. Second, the Article provides an overview of the current legal framework for establishing secondary liability for trademark infringement. Next, the Article discusses secondary liability suits involving eBay, the largest online marketplace and evaluates the courts' rationale in finding eBay not liable for secondary trademark liability. The Article concludes with a discussion of Senate Bill 3804, "The Combating Online Infringement and Counterfeits Act", and its pitfalls; followed by a proposal for additions to the Lanham Act to establish a "notice and take down" system for trademark infringement. If the recommendations of this Article are codified, a more predictable and principled scheme is established for holding Internet auction sites, as well as other Internet intermediaries, liable for trademark infringement without shifting the obligation of the trademark owner to police their trademark to the Internet intermediary.

II. COUNTERFEIT SALES STATISTICS AND INTERNET AUCTION RESPONSES

Trademark infringement and counterfeiting (1) online accounts for roughly $30 billion of lost revenues annually. (2) Roughly ten percent of the total counterfeit market, which is estimated to be around five to seven percent of world trade, occurs online. (3) Based on these statistics, Internet auctions have undoubtedly become the most popular distribution channel for counterfeit goods. (4) Indeed, a report from the National Fraud Information Center indicates that Internet auctions are amongst top reported fraud online in 2007. (5) In 2008, one in four complaints received by the Internet Crimes Complaint Center involved Internet auction fraud. (6)

In recognition of these statistics, major online auctioneers adopted policies that prohibit the sale of counterfeit merchandise on their sites. (7) In addition to these policies, many online marketplaces (8) have implemented monitoring programs, fraud filtering technology, and hired staff to periodically search their sites for suspected listings containing counterfeit goods. (9) Despite the adoption of policies that prohibit the sale of infringing and counterfeit merchandise and the efforts at policing their systems for infringements, Internet auctions are still plagued with trademark infringements and the sale of counterfeit goods by end-users. (10)

The continued use of these websites for the sale of counterfeit goods can be attributed to the anonymity of the buyers and sellers, (11) the vast amount of transactions online (12), the short timeframe (13) in which auctions/sales are conducted, and the ability of the end-users to delete one account and immediately post under a different username and email address. …

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