EBay’s VeRO procedure is as old as eBay itself. VeRO is short for ‘Verified Rights Owner’ and is a mechanism by which intellectual property rights owners can report eBay listings to eBay which allegedly infringe their rights. eBay then removes the item from sale.
From the rights owners’ point of view this can be a satisfactory way to handle vendors selling allegedly infringing items; eBay makes no further enquiries and simply removes the items from sale. The procedure is cheaper, quicker and easier than any form of litigation or dispute resolution and the vendor is prevented from listing the item for sale through eBay.
From eBay’s point of view it is also satisfactory. Although the liability of eBay for infringing listings has not yet been tested in the UK, there is always a risk that an offended party will join eBay to proceedings, incurring the time, cost and loss of reputation that comes with defending such proceedings. Media reports abound alleging breaches of IP rights in eBay sales – for example, it has been reported that 73% of Tiffany items for sale on eBay are counterfeit. So eBay need a method by which they can remove such items quickly, and the VeRO procedure allows them to place the obligation on rights owners to police their own rights.
The Facts
The recent case of Quads 4 Kids v Campbell has highlighted difficulties with the procedure. The defendant contacted eBay to report the claimant’s sale of children’s dirt bikes and alleged that they infringed one of 16 community registered designs that he had applied for in February 2006. eBay promptly removed the items from sale and notified the claimant of their removal, which is eBay’s normal procedure.
The claimant issued proceedings against Dr Campbell, alleging that his statements to eBay constituted unjustified threats under Reg 2 of the Community Designs Regulations 2005 (the provisions of which are mirrored in UK legislation in the Copyright, Designs and Patents Act 1988 and the Registered Designs Act 1949). They applied to the court for an interim injunction to stop Dr Campbell making further threats.
The Law
Briefly, the ‘unjustified threats’ rules are designed to prevent unscrupulous traders from preventing competitors trading by making unjustified threats against them that they are infringing intellectual property rights. They seek to ensure that trade is not stifled without recourse being made to a court of competent jurisdiction. Similar provisions exist in relation to allegations that items infringe trademarks and patents.
His Honour Judge Pumfrey allowed the application, ruling that Dr Campbell’s statements constituted unjustified threats under the Regulations. An actionable threat for these purposes is one which a reasonable man in the claimant’s position would understand was a statement that might be the subject of infringement proceedings in the future. Dr Campbell had made it clear that he did not intend to take further action; his reasons are not listed in the judgment but it is common for rights owners to take no further action as the operation of the VeRO procedure provides most rights owners with the solution they want – eg the items are removed from sale. The court therefore had to extend the meaning of ‘actionable threat’ but it observed that the allegations to eBay constituted an abuse of registered rights, which was exactly what the unjustified threats rules were designed to prevent.
In the circumstances, therefore, and taking into account the rules set out in the landmark case which sets out the criteria for assessing whether an interim injunction should be granted (American Cyanamid v Ethicon Limited [1975] AC 396), the court granted an interim injunction. However, it was observed by His Honour Judge Pumfrey that an urgent decision was needed if the claimant was to be able to take advantage of the lucrative Christmas market, and he had perhaps not dealt with all of the issues as fully as he would have liked (though he had dealt with all of them).
Implications
The implications of this case are not yet clear. Potentially, vendors whose items have been removed from sale could have a claim against the rights owner who applies to eBay for the items to be removed for unjustified threats. However, the circumstances of this case were to some extent novel. Dr Campbell had deferred publication of his designs, which is allowed pursuant to the Regulations. This meant that he was reliant on unregistered design rights, for which he would have to prove infringement along the lines of copyright infringement (eg copying, offering for sale, importing, exporting etc) as opposed to registered design rights which create a monopoly right for which no proof of copying is required to prove infringement.
His Honour Judge Pumfrey acknowledged in his judgment that the designs of the items were highly similar and that the main question to be decided at any trial was, therefore, likely to be whether the designs were novel and therefore valid (the claimant alleged that sales of their bikes pre-dated Dr Campbell’s applications and therefore the applications were invalid for lack of novelty).
It is likely that in most cases of infringement reported under the VeRO procedure the infringement is so blatant (amounting to a direct copy of an item or usage of a trademark) that the threats would not be unjustified. It is also the case that there are no unjustified threats rules relating to allegations of breach of copyright or unregistered trademarks (passing off) and such a claim could still therefore be made without risk of triggering the risk of it being deemed to be an unjustified threat.
However, this case may cast doubt on the implications of using the VeRO procedure. According to eBay, thousands of rights owners regularly use the procedure and, unlike threatening litigation against an infringer, there has been little perceived danger of a counter action for unjustified threats. If such an action has become a real risk, however, rights owners may be deterred from reporting such infringements.
In addition, if rights owners cease to use eBay’s system, eBay may struggle to put in place a replacement system that will reassure rights owners. eBay is not in a position to review or make a judgement on the validity or otherwise of a claim that a particular item infringes intellectual property rights, and could open itself up to substantial litigation if it chose to do so. It should also be remembered that eBay, although perhaps universally recognised and viewed by many to be somewhat of a public service, is still a service which is paid for and which is governed by terms and conditions and a contract. Ultimately, if eBay wishes to remove any listing, it is entitled to do so just as any business may refuse to deal with a particular customer for any reason – it merely risks the ire of its users.
Reminder
This was, of course, an interim application and from an academic point of view it would be preferable if the facts were the subject of a final judicial decision; whether that will happen remains to be seen. In the meantime, counterfeit items listed via eBay continues to be a hot topic for both rights owners and eBay itself.
Shelley Hill is an associate solicitor at Hill Dickinson LLP where she specialises in all aspects of IT law: Shelley.Hill@hilldickinson.com
