eBay 2007 Annual Report Download - page 25

dollar, and the Canadian dollar, cross-border trade related to purchases of dollar-denominated goods by
non-U.S. purchasers may decrease, and that decrease may not be offset by a corresponding increase in cross-
border trade involving purchases by U.S. buyers of goods denominated in other currencies.
In addition, we face exposure to fluctuations in interest rates. For example, reductions in U.S. interest rates
may reduce our investment income, which in turn would lower our net interest income.
The listing or sale by our users of pirated or counterfeit items may harm our business.
We have received in the past, and we anticipate receiving in the future, communications alleging that certain
items listed or sold through our service by our users infringe third-party copyrights, trademarks and trade names, or
other intellectual property rights. Although we have sought to work actively with the owners of intellectual property
rights to eliminate listings offering infringing items on our websites, some rights owners have expressed the view
that our efforts are insufficient. Content owners and other intellectual property rights owners have been active in
asserting their rights against online companies, including eBay. Allegations of infringement of intellectual property
rights have resulted in threats of litigation and actual litigation against us from time to time, including litigation
brought by Tiffany & Co. in the U.S., Rolex S.A. in Germany, Louis Vuitton Malletier and Christian Dior Couture in
France, L’Oréal SA, Lancôme Parfums et Beauté & Cie, and Laboratoire Garnier & Cie in several European
countries, and a number of other owners of intellectual property rights. The plaintiffs in these cases seek to hold
eBay liable for counterfeit items listed on our sites by third parties, for “tester” and other not for resale consumer
products listed on our sites by third parties, for the misuse of trademarks in listings or in connection with paid search
advertisements, or for alleged violations of selective distribution channel laws. Such plaintiffs seek, among other
things, injunctive relief and damages. In the aggregate, these suits could result in significant damage awards and
could adversely affect our business. Other luxury brand owners have also filed suit against us or have threatened to
do so. In addition to litigation from rights owners, we may be subject to criminal penalties if the authorities feel we
have aided in the sale of counterfeit goods. While we have had some early success in defending against such
litigation, more recent cases have been based, at least in part, on different legal theories than those of earlier cases,
and there is no guarantee that we will continue to be successful in defending against such litigation. For example, the
German Federal Supreme Court has ruled against us in the Rolex and IVD cases. Plaintiffs in recent cases have
argued that we are not entitled to safe harbors under the Digital Millennium Copyright Act in the U.S. or as a hosting
provider in the European Union because of the active nature of our involvement with our sellers, and that, whether
or not such safe harbors are available, we should be found liable because we have not adequately removed
counterfeit listings or effectively suspended users who have created such listings.
Content owners and other intellectual property rights owners may also seek to bring legal action against
entities that are peripherally involved in the sale of infringing items, such as payment companies. To the extent that
intellectual property rights owners bring legal action against PayPal based upon the use of PayPal’s payment
services in a transaction involving the sale of infringing items, including on our websites, our business could be
harmed.
Litigation and negative publicity has increased as our websites gain prominence in markets outside of the U.S.,
where the laws may be unsettled or less favorable to us. Such litigation is costly for us, could result in damage
awards, injunctive relief, or increased costs of doing business through adverse judgment or settlement, could require
us to change our business practices in expensive ways, or could otherwise harm our business. Litigation against
other online companies could result in interpretations of the law that could also require us to change our business
practices or otherwise increase our costs. In addition, a public perception that counterfeit or pirated items are
commonplace on our site could damage our reputation and our business.
We are subject to patent litigation.
We have repeatedly been sued for allegedly infringing other parties’ patents. Some of these ongoing suits are
described under the heading “Item 3: Legal Proceedings,” below. We are a defendant in other patent suits and we
have been notified of several other potential patent disputes, and expect that we will increasingly be subject to patent
infringement claims as our services expand in scope and complexity. In particular, we expect that we may face
additional patent infringement claims involving various aspects of our Marketplaces, Payments and
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