Tuesday, November 27, 2007

Counterfeit News of Interest

Customs and Border Protection is responsible for preventing the importation of counterfeit merchandise. This news item from CBP says it recently intercepted a shipment of 20,000 fake "Coach" belts from China in Seattle. Clearly, the holidays will be less bright for the fashion conscious bargain hunter this year. Which, by the way, is as it should be.

A more interesting story is this piece from the New York Times. Famous luxury merchant Tiffany has sued famous online auctioneer eBay to force eBay to get counterfeit merchandise off its web site. This creates some interesting questions concerning eBay's role in the transactions. eBay argues, I'm paraphrasing here, that it just provides a communication channel connecting buyers and sellers. The way eBay sees it, the seller is liable to Tiffany, not eBay. Tiffany, of course, disagrees. Among other things, it points out that eBay profits from the sale of fake merchandise on its site.

Assume that eBay is held liable as a contributory infringer, what exactly is it supposed to do? Tiffany (and Nike, and Coach, and Rolex, etc.) have the expertise to identify fake merchandise. eBay does not. Further, eBay has no way of physically examining the merchandise private parties all over the world offer for sale on its site. Of course, neither does Tiffany.

The problem for eBay is that a difficult business process is not in and of itself a legal defense. Getting customs valuation correct is hard, that doesn't mean importers don't have to do it. I'm not making light of this; both Tiffany and eBay have a serious problem. Perhaps the judge will find that eBay's profits are so remote from the actual sale that it is not liable. That would make more sense if eBay charges a flat fees for posting. I'm not sure how their pricing works, so I am not offering an opinion. This will be interpreting to watch as it might have a fundamental impact on eBay's business model and the liability of Internet service providers large and small for the sale of counterfeit goods over their services.

1 comment:

Rafael said...

You raise an interesting point regarding the eBay pricing structure. eBay charges fees based on the final sale price, so an argument could be made that eBay profits are directly influenced by the presentation of counterfeit goods as the real deal. Tough spot to be in for sure.