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eBay escapes pirates liability

Online auction giant eBay has been trumpeting a recent victory in the courts which means it is not liable for offering pirated videos for sale on its site.

Please note the Law may have changed since the publication of article.

Film-maker Robert Hendrickson sued eBay after it refused to stop selling copies of a documentary he made in 1972 about notorious serial-killer Charles Manson. eBay argued that it does not vouch for or give warranties about the items being sold on-line and for this reason was unlike a real-world auctioneer which verifies the source of goods and gives provenances. eBay also argued that copyright infringement actually occurred offline, not on its site.

The judge in this case agreed and said that eBay did not have the requisite ability to control the activity of buying and selling on its site which is required to permit prosecution under the US Digital Millennium Copyright Act. The judge likened sale of the pirate copies from the site to sale of goods from a market stall or flea market. Jay Monahan, of eBay said “The court clearly says a company like eBay is not required to proactively monitor its site looking for infringing content.”

In this case, Hendrickson had notified eBay that pirate copies of a film he owned copyright in were being sold from its website. This notification might have led to eBay taking down the items for sale, but asked Hendrickson refused to complete a “rights owners form” on the basis that his rights were obvious. The outcome might have been different if Hendrickson had complied with this request and eBay’s notify and take-down procedure had been followed through. In England, the outcome might also have been different, as under the Copyright Designs and Patents Act it is an offence to distribute infringing copies of copyright material and eBay’s activities may have been caught by this.

What does this decision actually mean for copyright owners and consumers? For rights owners, it appears giant e-tailers like eBay can avoid liability for selling pirated goods by simply refusing to monitor sales on their sites. Will they use the same arguments for pornographic material or racially offensive material? Presumably they could. By arguing that they do not know what is being sold and bought, such e-tailers avoid the obligation of verifying source, quality and in this case ownership. These e-tailers would surely argue that it is impractical for e-tailers to monitor all goods sold via their sites and the cost of insurance against being sued would have to be passed onto consumers.

From a consumer’s perspective, if the e-tailer has no verification obligations, then it cannot be expected to give any warranties or guarantees to the consumer. The consumer will not know when buying whether the goods are of acceptable quality, whether they will work satisfactorily and whether they will be able to get their money back. If the e-tailer is not prepared to give any such guarantees, swap and auction sites will not flourish as price savings don’t appear so attractive when the goods don’t work and apparently can’t be returned (although under English law consumers will probably be able to seek redress under the Sale of Goods Act.

The cynic might ask whether the outcome would have been different if this had been a sale of pirated music and EMI were suing?

© This article is copyright Simon Halberstam LLP 2008 and should not be construed as legal advice or opinion in any specific facts or circumstances. the contents are intended for generic information purposes only. You are urged to contact a suitably qualified lawyer for specific advice.