eBay 2013 Annual Report Download - page 60

and Guerlain Société also filed a lawsuit in the Paris Court of Commerce against eBay Inc. and eBay International AG. The complaint alleged
that we had interfered with the selective distribution network the plaintiffs established in France and the European Union by allowing third
parties to post listings offering genuine perfumes and cosmetics for sale on our websites. In June 2008, the Paris Court of Commerce ruled that
eBay and eBay International AG were liable for failing to prevent the sale of counterfeit items on its websites that traded on plaintiffs' brand
names and for interfering with the plaintiffs' selective distribution network. The court awarded plaintiffs approximately EUR 38.6 million in
damages and issued an injunction (enforceable by daily fines of up to EUR 100,000) prohibiting all sales of perfumes and cosmetics bearing the
Dior, Guerlain, Givenchy and Kenzo brands over all worldwide eBay websites to the extent that they are accessible from France. We appealed
this decision, and in September 2010, the Paris Court of Appeal reduced the damages award to EUR 5.7 million and modified the injunction. We
further appealed this decision to the French Supreme Court, and in May 2012, the French Supreme Court ruled that the appeal court should not
have assumed jurisdiction upon activity that took place on the eBay.com site and that the injunction was too broad insofar as it did not exclude
private sales. The court also noted that the appeal court had not sufficiently dealt with assertions that the plaintiffs' distribution contracts were
not valid. Those matters were remanded to the Paris Court of Appeal. In 2009, plaintiffs filed an action regarding our compliance with the
original injunction, and in November 2009, the court awarded the plaintiffs EUR 1.7 million (the equivalent of EUR 2,500 per day) and
indicated that as a large Internet company we should do a better job of enforcing the injunction. Parfums Christian Dior has filed another motion
relating to our compliance with the injunction. We have taken measures to comply with the injunction and have appealed these rulings, noting,
among other things, the modification of the initial injunction. In light of the French Supreme Court ruling mentioned above, we asked the court
to stay proceedings with respect to enforcement of the injunction pending the retrial of the matters on appeal, and this request has been granted.
However, 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 such results could materially harm our business. Other brand owners have also filed suit against
us or have threatened to do so in numerous different jurisdictions, seeking to hold us liable for, among other things, alleged counterfeit items
listed on our websites by third parties, “tester” and other not for resale consumer products listed on our websites by third parties, alleged misuse
of trademarks in listings, alleged violations of selective distribution channel laws, alleged violations of parallel import laws, alleged non-
compliance with consumer protection laws and in connection with paid search advertisements. We have prevailed in some of these suits, lost in
others, and many are in various stages of appeal. We continue to believe that we have meritorious defenses to these suits and intend to defend
ourselves vigorously.
In May 2009, the U.K. High Court of Justice ruled in the case filed by L'Oréal SA, Lancôme Parfums et Beauté & Cie, Laboratoire
Garnier & Cie and L'Oréal (UK) Ltd against eBay International AG, other eBay companies, and several eBay sellers (No. HC07CO1978) that
eBay was not jointly liable with the seller co-defendants as a joint tortfeasor, and indicated that it would certify to the European Court of Justice
("ECJ") questions of liability for the use of L'Oréal trademarks, hosting liability, and the scope of a possible injunction against intermediaries.
On July 12, 2011 the ECJ ruled on the questions certified by the U.K. High Court of Justice. It held that (a) brand names could be used by
marketplaces as keywords for paid search advertising without violating a trademark owner's rights if it were clear to consumers that the goods
reached via the key word link were not being offered by the trademark owner or its designees but instead by third parties, (b) that marketplaces
could invoke the limitation from liability provided by Article 14 of the ecommerce directive if they did not take such an active role with respect
to the listings in question that the limitation would not be available, but that even where the limitation was available, the marketplace could be
liable if it had awareness (through notice or its own investigation) of the illegality of the listings, (c) that a marketplace would be liable in a
specific jurisdiction only if the offers on the website at issue were targeting that jurisdiction, a question of fact, (d) that injunctions may be issued
to a marketplace in connection with infringing third party content, but that such injunctions must be proportionate and not block legitimate trade
and (e) that trademark rights can only be evoked by a rights owner as a result of a seller's commercial activity as opposed to private activity. The
matter was set to return to the U.K. High Court of Justice for further action in light of the ECJ opinion. However, we have entered into a
Cooperation and Settlement Agreement with L'Oréal and the other parties to the suit, under which all pending litigation is terminated, including
other pending cases in Europe regarding the question of liability for third party content on our websites.
eBay's Korean subsidiary, IAC (which has merged into Gmarket and is now named eBay Korea), 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 149,000 users
sued IAC over this breach in several lawsuits in Korean courts and more may do so in the future (including after final determination of liability).
Trial for a group of representative suits began in August 2009 in the Seoul Central District Court, and trial for other suits began later in the Seoul
Central 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 Central
District Court ruled that IAC had met its obligations with respect to defending the website from intrusion and, accordingly, had no liability for
the breach. This January 2010 ruling was appealed by approximately 34,000 plaintiffs to the Seoul High Court.
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