eBay 2011 Annual Report Download - page 23

Our Bill Me Later service is similarly subject to a variety of laws and regulations. Although we do not originate loans under the Bill Me
Later service, we do purchase receivables related to the consumer loans extended by the bank which originates them. One or more jurisdictions
may conclude that the eBay company which purchases those receivables is a lender or money transmitter or loan broker, which could subject us to
liability or regulation in such jurisdictions. As described under the caption “Bill Me Later's operations depend on lending services provided by an
unaffiliated lender” above, a lawsuit was filed against Bill Me Later in the U.S. District Court for the Northern District of California alleging that
in its relationship with the former issuer of the Bill Me Later credit products, Bill Me Later was acting as the true lender to customers in violation
of various California laws, including the state's usury law. Additionally, federal regulators could mandate changes to the relationship between us
and the issuing bank of the Bill Me Later credit products. Any termination or interruption of the issuing bank's lending services to consumers
could result in an interruption of Bill Me Later services, as described under the caption “Bill Me Later's operations depend on lending services
provided by an unaffiliated lender” above.
Given that our Payments business is subject to regulations in the manner described above, any determination that we have not properly
complied with laws and regulations or any instances in which we are criminally indicted or found to have violated a criminal statute or regulation
could adversely impact our regulatory status in one or more jurisdictions, which would harm our business.
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. See “Item 3: Legal
Proceedings” below. 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 actively asserted their purported rights against online companies, including eBay. Allegations of
infringement of intellectual property rights have resulted in threatened and actual litigation against us from time to time by rights owners,
including litigation brought by luxury brand owners such as Tiffany & Co. in the U.S.; Rolex S.A. and Coty Prestige Lancaster Group GmbH in
Germany; Louis Vuitton Malletier and Christian Dior Couture in France; and L'Oréal SA, Lancôme Parfums et Beauté & Cie and Laboratoire
Garnier & Cie in several European countries. The plaintiffs in these cases seek to hold eBay liable for alleged counterfeit items listed on our sites
by third parties; for “tester” and other consumer products labeled in a manner to prevent resale and for unboxed and other allegedly
nonconforming products listed on our sites by third parties; for the alleged misuse of trademarks or copyrights in listings or otherwise on our sites
and in connection with paid search advertisements; for alleged violations of selective distribution channel laws or parallel import laws for listings
of authentic items; and for alleged non-compliance with consumer protection laws. Such plaintiffs seek, among other remedies, injunctive relief
and damages. In the aggregate, these suits could result in significant damage awards and injunctions that could, individually or in the aggregate,
adversely affect our business. There are approximately 30,000 rights owners in our verified rights owner (VeRO) program, and each rights owner
has anywhere from one to several hundred brands. Statutory damages for copyright or trademark violations could range up to $30,000 per
copyright violation and $100,000 per trademark violation in the U.S., and may be even higher in other jurisdictions. These and similar suits may
force us to modify our business practices, which could lower our revenue, increase our costs or make our websites less convenient to our
customers, any of which could materially harm our business. In addition, rights owners have aggressively sought to reduce the applicability of
limitations to intellectual property rights such as copyright exhaustion and the first sales doctrine in cases such as Vernor v. Autodesk Inc. (Ninth
Circuit Court of Appeals), Wiley v. Kirtsaeng (Second Circuit Court of Appeals) and Costco Wholesale Corp. v. Omega S.A. (Sup. Ct.). To the
extent such doctrines are limited, the supply of goods available for resale on our sites may be adversely affected.
In addition to litigation from rights owners, we may be subject to regulatory, civil or criminal proceedings and penalties if governmental
authorities believe 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. 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 under the Electronic Commerce Directive
because of the alleged 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 supposedly have not adequately removed listings that are counterfeit or are authentic but allegedly violate trademark or
copyright law or effectively suspended users who have created such listings. While we do not believe the European Court of Justice decision in
the L'Oréal case (see “Item 3: Legal Proceedings” below) changes the standard for hosting immunity under the Electronic Commerce directive,
rights owners in European jurisdictions have asserted that our degree of participation in the transaction should cause us to be unable to take
advantage of the hosting immunity exception. Final resolution of this issue has been left to the national courts of countries in the European Union.
We are continuously seeking to improve and modify our efforts to eliminate counterfeit and pirated items through ongoing business initiatives
designed to reduce bad buyer experiences
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