eBay 2010 Annual Report Download - page 57

Court’s decision to the Federal Circuit Court of Appeals, but then voluntarily dismissed its appeal and requested
that the Court of Appeals vacate the District Court’s ruling that the patent was invalid. The Court of Appeals
dismissed PartsRiver’s appeal, but remanded to the District Court consideration of PartsRiver’s request to vacate
its earlier decision. In parallel with defense of the litigation, we also challenged the validity of the patent in
reexamination proceedings before the U.S. Patent and Trademark Office (“PTO”). Before the Court of Appeals
issued its decision in the litigation, the PTO issued a reexamination certificate for the patent, which was issued
with several new claims, although the original claims on which eBay was sued were held invalid. PartsRiver then
conveyed some interest in these newly issued claims to another entity named Kelora. We then filed a declaratory
judgment action against PartsRiver and Kelora with the District Court concerning these newly issued claims. The
District Court has set a hearing for March 2011 to discuss PartsRiver’s request to vacate its earlier decision and
eBay’s declaratory judgment action.
eBay’s Korean subsidiary, IAC, has notified its approximately 20 million users of a January 2008 data breach
involving personally identifiable information including name, address, resident registration number and some
transaction and refund data (but not including credit card information or real time banking information).
Approximately 147,000 users have sued IAC over this breach in several lawsuits in Korean courts and more may do
so in the future. Trial for a group of four representative suits began in August 2009 in the Seoul District Court, and
trial for a group of 23 other suits began in September 2009 in the Seoul District Court. There is some precedent in
Korea for a court to grant “consolation money” for data breaches without a specific finding of harm from the
breach. Such precedents have involved payments of up to approximately $200 per user. In January 2010, the Seoul
District Court ruled that IAC had met its obligations with respect to defending the site from intrusion and,
accordingly, had no liability for the breach. This ruling has been appealed by approximately 34,000 plaintiffs to the
Seoul High Court, where it is currently being heard de novo. A decision is expected in 2011.
Other third parties have from time to time claimed, and others may claim in the future, that we have
infringed their intellectual property rights. We are subject to additional 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 and Payments businesses. We have in the past been forced to litigate such claims. We may also
become more vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act, the Lanham
Act and the Communications Decency Act are interpreted by the courts, and as we become subject to laws in
jurisdictions where the underlying laws with respect to the potential liability of online intermediaries like
ourselves are either unclear or less favorable. We believe that additional lawsuits alleging that we have violated
patent, copyright or trademark laws will be filed against us. Intellectual property claims, whether meritorious or
not, are time consuming and costly to resolve, could require expensive changes in our methods of doing business,
or could require us to enter into costly royalty or licensing agreements.
From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course
of business including suits by our users (individually or as class actions) alleging, among other things, improper
disclosure of our prices, rules or policies, that such prices, rules or policies violate applicable law, or that we
have not acted in conformity with such prices, rules or policies. The number and significance of these disputes
and inquiries are increasing. Any claims or regulatory actions against us, whether meritorious or not, could be
time consuming, result in costly litigation, damage awards, injunctive relief or increased costs of doing business
through adverse judgment or settlement, require us to change our business practices in expensive ways, require
significant amounts of management time, result in the diversion of significant operational resources or otherwise
harm our business.
ITEM 4: [REMOVED AND RESERVED]
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