eBay 2001 Annual Report Download - page 47

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through their services. Several private lawsuits seeking to impose liability upon us under a number of these
theories have been brought against us. In addition, federal, state and foreign legislation has been proposed
that imposes liability for or prohibits the transmission over the Internet of certain types of information.
Our service features a Feedback Forum, which includes information from users regarding other users.
Although all such feedback is generated by users and not by us, it is possible that a claim of defamation or
other injury could be made against us for content posted in the Feedback Forum. Claims like these are
more likely and have a higher probability of success in jurisdictions outside the U.S. If we become liable
for information provided by our users and carried on our service in any jurisdiction in which we operate,
we could be directly harmed and we may be forced to implement new measures to reduce our exposure to
this liability. This may require us to expend substantial resources and/or to discontinue certain service
oÅerings, which would negatively aÅect our Ñnancial results. In addition, the increased attention focused
upon liability issues as a result of these lawsuits and legislative proposals could harm our reputation or
otherwise impact the growth of our business. Any costs incurred as a result of this liability or asserted
liability could harm our business.
We are subject to intellectual property and other litigation.
On April 25, 2000, we were served with a lawsuit, Gentry et.al. v. eBay, Inc. et.al, Ñled in Superior
Court in San Diego, California. The lawsuit was Ñled on behalf of a purported class of eBay users who
purchased allegedly forged autographed sports memorabilia on eBay. The lawsuit claims we were negligent
in permitting certain named (and other unnamed) defendants to sell allegedly forged autographed sports
memorabilia on eBay. In addition, the lawsuit claims we violated California unfair competition law and a
section of the California Civil Code, which prohibits ""dealers'' from selling sports memorabilia without a
""CertiÑcate of Authenticity.'' The lawsuit seeks class action certiÑcation, compensatory damages, a civil
penalty of ten times actual damages, interest, costs and fees and injunctive relief. On January 26, 2001, the
court issued a ruling dismissing all claims against us in the lawsuit. The court ruled that our business falls
within the safe harbor provisions of 47 USC 230, which grants Internet service providers such as eBay
immunity from state claims based on the conduct of third parties. The court also noted that we were not a
""dealer'' under California law and thus not required to provide certiÑcates of authenticity with autographs
sold over our site by third parties. The plaintiÅs have appealed this ruling. We believe we have meritorious
defenses and intend to defend ourselves vigorously.
On April 25, 2001, our European subsidiaries, eBay GmbH and eBay International AG, were sued by
Montres Rolex S.A. and certain Rolex aÇliates (""Rolex'') in the regional court of Cologne, Germany.
The suit has been moved to the regional court in Dusseldorf, Germany. Rolex alleged that our subsidiaries
were infringing Rolex's trademarks as result of users selling counterfeit Rolex watches through our German
website. The suit also alleges unfair competition. Rolex is seeking an order forbidding the sale of Rolex
watches on the website as well as damages. We believe that we have meritorious defenses against this
claim and intend to defend ourselves vigorously.
On September 26, 2001, a complaint was Ñled by MercExchange LLC against us, our Half.com
subsidiary and ReturnBuy, Inc. in the Eastern District of Virginia (No. 2:01-CV-736) alleging
infringement of three patents (relating to online auction technology, multiple database searching and
electronic consignment systems) and seeking a permanent injunction and damages (including treble
damages for willful infringement). We have answered this complaint, denying the allegations, and we
believe we have meritorious defenses and will defend ourselves vigorously. However, even if successful, our
defense against this action will be costly and could divert our management's time. If the plaintiÅ were to
prevail on any of its claims, we might be forced to pay signiÑcant damages and licensing fees, modify our
business practices or even be enjoined from practicing a signiÑcant part of our U.S. business. Any such
results could materially harm our business.
Other third parties have from time to time claimed, and others may claim in the future that we have
infringed their past, current or future intellectual property rights. We have in the past been forced to
litigate such claims. We may become more vulnerable to such claims as laws such as the Digital
Millennium Copyright Act are interpreted by the courts and as we expand into jurisdictions where the
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