Ebay's Victory in Fraud Case Offers an Example to Booksellers and Google
The Tiffany warning page, about as easy to find on eBay as a needle in a haystack.
By Michael Stillman
A case pitting online auction giant eBay against luxury jeweler Tiffany's in the Second Circuit U.S. Appeals Court has all kinds of implications for sellers and buyers in the book field. The victory for eBay, which facilitates trade, but also facilitates fraud, is one about which booksellers and collectors may want to be aware. If I were a bookseller, I think I would want to post a copy of this decision in a spot visible to every potential customer who walked through the door.
This decision, though it does not apply directly, might also have implications for the Google Books case, currently being fought in another courtroom. We will get to this later.
Several years ago, Tiffany's, unsatisfied with eBay's efforts to stop the sale of fake Tiffany merchandise on their website, sued the auctioneer for trademark infringement. While exact figures are uncertain, there seems little doubt that a substantial amount of fake "Tiffany" jewelry is promoted and sold on eBay. If this shocks you, you are either incredibly naïve or have been living on another planet. However, the question was not whether eBay was selling fake "Tiffany" jewelry, nor even whether eBay was aware that they were selling fake "Tiffany" jewelry. Quoting the trial court, the Appeals Court stated, "a significant portion of the 'Tiffany' sterling silver jewelry listed on the eBay website...was counterfeit." The question, then, was whether eBay was obligated to do more than it was already to prevent the selling of fraudulent or misrepresented material on its site. The court said it was not.
Ebay argued that it had made all reasonable attempts to stop fraudulent merchandise from being sold. It had both automated programs and live representatives look at "Tiffany" listings for signs of fraud. It encouraged Tiffany to scour its listings and inform them of items it believed were misrepresented. It permitted Tiffany to post an "About Me" page on the eBay website where the jeweler stated, "Most of the purported TIFFANY & CO. silver jewelry and packaging available on eBay is counterfeit." Ebay provided warnings to sellers when they listed merchandise with the "Tiffany" name to be sure it was authentic, that eBay "does not tolerate listing of replica, counterfeit, or otherwise unauthorized items," and violation of this could result in suspension of the seller's account. Ebay does not automatically suspend a seller for listing his first fake "Tiffany" item, but employs something of a "three strikes rule" if the seller appears to be legitimate, most likely unaware that the item was counterfeit. In that case, a warning would be given first, but if it appeared that the seller was simply in the business of selling counterfeits, he would be removed immediately. Ebay suspends "hundred of thousands" of sellers every year, "tens of thousands" for suspected trademark infringement.
Without delving into the intricacies of case law the Court had to consider, the issue essentially came down to whether eBay was required to prevent all listings of counterfeit goods based on a "generalized" knowledge that misrepresentations were being made, rather than knowledge of specific cases. The Court came down on the side of specific requirements only. In other words, eBay is required to act when it has knowledge that a specific item is fraudulent, but not when it has reason to suspect that there are some unidentified fraudulent listings on its site. In order to show contributory trademark infringement, the Court said, "a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods. Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary."
Ebay's Victory in Fraud Case Offers an Example to Booksellers and Google
What, then, are the implications for the book and paper trade? The criticism of eBay and similar sites, long employed by booksellers, is that they are not a safe environment in which to buy. Claimed first editions may not be firsts, condition flaws may not be delineated in a way expected of a reputable dealer, pages might be in facsimile, autographs and inscriptions may be faked (this one is a HUGE risk), book and paper may simply be manufactured frauds. The seller may well be as unaware as the buyer, or perhaps looks the other way for fear of what he may learn. The item may lack clear title, that is, it may be stolen, or a discarded old government document which more recent legislation now declares still to be government property. Ebay prices are usually quite low, but there is risk in buying there. The principle established in this decision is that as long as eBay makes some general attempt to locate and prevent fraud, it has met its obligations. In the case of books and paper, which lack the trademark protection of Tiffany jewelry, that obligation may be limited to taking down such frauds if they are so notified. As Tiffany warns on its eBay "About Me" page, "BUYER BEWARE."
As noted earlier, as a bookseller, I would feel free to point out this drawback to eBay buying. The Court has made it clear that eBay is not responsible for fraud on its site, and their sellers may not provide satisfaction either. There is far greater security in buying from a knowledgeable bookseller, particularly one with an established reputation and a strong refund policy. That said, sellers should not overdo the impact of eBay's successful claim to lack of responsibility. Security is a valuable benefit, but like anything else, overcharging for it will drive customers away. Authentication adds to a buyer's comfort and increases the likelihood he will buy, but it does not make a book more valuable. The bookseller may not have to discount as greatly as the eBay seller to make a sale, but a $500 book is still a $500 book, not a $1,000 one.
As mentioned previously, while this case has no precedential application to the Google Books case, some of the logic used could well fit. The major issue with Google Books has been its displaying material from old books that may, or may not, still be under copyright, and if so, the copyright holders may be practically impossible to locate or determine. Google has chosen to make such books available for viewing, requiring the copyright holder to inform them of a violation (rather than first seeking the copyright holder's permission). To us, this situation seems strikingly similar to the one eBay faced.
Certainly, the cases are not identical. One involves trademarks, the other copyrights. Ebay simply lists others' material, it doesn't post the violating items itself in the way Google Books does. There are plenty of differences a court could rely upon to reach a different verdict. Nonetheless, the similarity is that both rely on the aggrieved party to raise an objection, and when they do, promptly rectify it. Otherwise, Google Books and eBay post or allow to be posted violating material, and each makes a commission when the item is sold. Both have a "generalized" knowledge that there are infringements on their site, but neither has knowledge about specific items. A demand that either absolutely eliminate fraud and infringement would essentially close down their valuable services. If I were either Google or a bookseller, I think I might like to cite this case as an example.