The NYT reports:
A year ago Jacqui Rogers, a retiree in southern Oregon who dabbles in vintage costume jewelry, went on eBay and bought 10 butterfly brooches made by Weiss, a well-known maker of high-quality costume jewelry in the 1950's and 1960's. At first, Ms. Rogers thought she had snagged a great deal. But when the jewelry arrived from a seller in Rhode Island, her well- trained eye told her that all of the pieces were knockoffs.
Even though Ms. Rogers received a refund after she confronted the seller, eBay refused to remove hundreds of listings for identical "Weiss" pieces. It said it had no responsibility for the fakes because it was nothing more than a marketplace that links buyers and sellers.
That very stance ? the heart of eBay's business model ? is now being challenged by eBay users like Ms. Rogers who notify other unsuspecting buyers of fakes on the site. And it is being tested by a jewelry seller with far greater resources than Ms. Rogers: Tiffany & Company, which has sued eBay for facilitating the trade of counterfeit Tiffany items on the site.
If Tiffany wins its case, not only would other lawsuits follow, but eBay's very business model would be threatened because it would be nearly impossible for the company to police a site that now has 180 million members and 60 million items for sale at any one time. ...
"We never take possession of the goods sold through eBay, and we don't have any expertise," said Hani Durzy, an eBay spokesman. "We're not clothing experts. We're not car experts, and we're not jewelry experts. We're experts at building a marketplace and bringing buyers and sellers together."
My first question is a pure business one. If your business model is based on building a market, don't you have to worry about a variant of Gresham's law? If people can't distinguish between real and fake products in your marketplace, they will assume that all products are fakes. In other words, your market place has become a market for lemons. This will reduce both the volume of transactions and the prices people are willing to pay for those transactions that do occur. Since eBay's fees are based on the volume and price of transactions, it's business model appears to be inherently self-destructive. Accordingly, unless I'm missing something, it would seem to be in eBay's self-interest to police its market. Yet, they don't do so. I find that very puzzling.
My second question is an IP law one. If eBay is facilitating transactions in which copyright, trademark, service mark, or trade dress laws are being violated, wouldn't eBay be subject to the same legal problems that brought down file-sharing networks like Napster?
In sum, I don't get eBay's unwillingness to be proactive on this issue. It would seem to be both a bad business strategy and a bad legal strategy. Thoughts?
