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EBay, VeRO, and how it damages the consumer

EBay, VeRO, and how it damages the consumer

Did you know that EBay has recently created a way for individuals or companies to suspend the EBay accounts of users who sell products that they deem too similar to products that they sell?

Here is an example to make sure you understand how absurd the actual situation is:

Company A markets a desk with a white top and black legs called “Table Magnificente”. Company B lists an auction on EBay that has a white top and black legs called “Type 32 Table”. Company A can now file a VeRO complaint against Company B if Company A decides that they don’t like such a similar product on the market. (It does not matter if the tables are distinctly different to any observer and the only similarities are a white top and black legs.) If Company B disagrees with Company A and re-lists the auction several weeks later, Company A can issue the same complaint again and EBay will suspend the account of Company B. Company B is unable to communicate with customers, unable to list new auctions, unable to leave or receive feedback, all their auctions are cancelled and listing fees are retained by EBay, and they appear to their customers to have disappeared off the face of the earth. This both removes the ability to generate revenue and shakes the customers perception of company B, damaging their good name and reputation.

What is EBay’s VeRO program?

VeRO stands for Verified Rights Owner. It is a program started by EBay designed to prevent trademark infringing products from being sold on EBay but oversteps its purpose by so far that it damages the economy. Under VeRO, parties registered under the VeRO program can have listings removed and/or accounts suspended by EBay if they claim to think their intellectual property rights have been violated. Here is EBay’s description: http://pages.ebay.com/help/tp/programs-vero-ov.html

So VeRO is supposed to protect trademark rights, but what does it REALLY do?

The problem with VeRO is that it is implemented in such a ridiculous way. Trademark infringement as it applies to names, logos and counterfeits is easy to spot and, if EBay had left it at that, it would be a great and perfectly legitimate program. The problem is that EBay extended the program to also address something called Trade Dress Infringement (TDI). TDI is primarily based in common law and enforced based on legal precedent. Trade dress has been applied historically mainly to products that sell because of the way they look, such as cloths, greeting cards, and knickknacks. Trade dress is defined as the total image or overall design or appearance of a product or its packaging. The Lanham Act which TDI is derived from: http://www.law.cornell.edu/uscode/html/uscode15/usc_sup_01_15_10_22.html And a nice write up on the common law precedents applicable to TDI: http://www.eckertseamans.com/file/pdf/publications/traded1.htm

TDI is valid under common law. The important note is that TDI has dozens of very complex and specific legal ramifications and limitations that only someone with proper legal training can interpret properly. TDI hearings usually involve introducing expert witnesses and samples of the relevant products and consumers, evidence that is required by law to prove that TDI is applicable to the products in question. Under EBay’s VeRO system, any individual or company , after registration for the program, can cry TDI and EBay, with little if any review from clearly unqualified employees, will suspend someones EBay account, causing immediate and demonstrable financial damage. As we mentioned earlier, trade dress has been applied historically mainly to products that sell because of the way they look, such as cloths, greeting cards, and knickknacks, but EBay applies TDI to all products, including products whose design clearly follows their functionality (traits or appearance derived from functionality are not protected under TDI common law), ranging from power tools to consumer electronics to automotive accessories.

EBay is not a valid authority on what constitutes trade dress infringement. Their irresponsible interpretation of this vaguely defined, common law concept by unqualified individuals could result in anything as foolish as Goodyear having Firestone’s EBay account suspended because their tires are round and black. If you saw a picture of two different tires without having the tires in your possession to compare, they would look identical to you even if the tread pattern and the words on the tires were completely different. Pictures are not adequate for making a TDI assessment. The qualifications of the people who work in the VeRO department are never disclosed to the public. In fact, EBay will not allow a VeRO program employee to talk on the phone. This leads us to believe that VeRO employees are neither legally certified nor well-trained. We actually doubt that anyone at EBay reviews VeRO complaints before canceling listings. EBay has introduced very real financial penalties and damages without requiring a certified, qualified legal professional to determine if any violation has occurred.

TDI and burden of proof

All official Trade Dress Infringement (TDI) lawsuits to date have placed the burden of proof on the plaintiff. This means the plaintiff (AKA the person who claims that his intellectual property rights are being violated and files the lawsuit) must prove that the products of the defendant (The person who is being sued) actually infringe upon the plaintiffs products.

Let’s assume that an EBay user has had his or her account suspended and/or listings removed under the VeRO program and that user wishes to get an official court decision on weather or not the claim of infringement, and therefore the suspension, is valid. If it is in fact deemed to not be infringement, than the user would be entitled to a full reinstatement of his or her account, damages from lost profits, refund of seized listing fees, and most likely other damages arising from damaged reputation. That EBay user must now go through the legal expense of filing a lawsuit, and during the lawsuit must prove that the products do not infringe upon the products of the person who filed the complaint under VeRO.

By enacting this policy EBay has essentially shifted the balance of the TDI laws and legal system so that the burden of proof is on the defendant instead of the plaintiff. The party who claimed infringement doesn’t have to prove anything, and the accused must prove innocence.

This is a dire legal ramification of the system that EBay has created and we strongly believe the VeRO program, as it currently exists, is unlawful. It is negligent and malicious to take action that financially damages a party on the basis of TDI without a court decision where the burden of proof is placed on the plaintiff.

I’m a consumer! I just buy stuff, I never sell, so what do I care?

You should care more than anyone. By having such an irresponsible policy on interpreting TDI cases, EBay has essentially crippled the new economy from functioning on EBay. The new economy, as we use it here, refers to a simplification of the value chain that is made possible through ecommerce. Products move directly from the manufacturer to the consumer; there is not a retailer or distributor to drive up the prices. Goods in the new economy are often generic, or unbranded, but still just as functional as brand name products and often manufactured in the same factory. Another advantage of the new economy is that it is accessible to everyone; anyone can now open an online store from their home and compete with walmart.com. This means that many of the products in the new economy will also have brand names of lesser known brands and new companies. Some examples of products that have a strong foothold in the new economy include power tools, consumer electronics, apparel, and automotive accessories. As you have probably figured out by now, the end result of EBay’s implementation of their VeRO program is that it only leaves old fashioned products on the market – IE products with prices that are artificially inflated because of the need to pay a distributor and retailer. This leaves you, the consumer, paying for services that you do not need and have not used.

Throughout EBay, more and more companies are jumping on the bandwagon of this unfair business practice. To be honest, if EBay gave me a button that I could push to make all of my competition disappear from the market, I would probably push it too. Then I would raise my prices 500%. This is another part of how this policy damages the consumer. By allowing companies to remove their perceived threats from the marketplace, EBay is essentially promoting a monopoly for larger companies while discouraging smaller companies from competing in a fair market. Less competition means higher prices for you and more profit for the large corporations that are determined to prevent smaller companies from competing with them through any means necessary.

Conclusion

Ebay’s VeRO program is not only unfair and irresponsible, but also downright un-American, and we hope that a lawsuit will also prove it to be illegal. It damages consumers and prevents small businesses from being competitive in the new economy. We strongly encourage everyone to try new online shopping ideas, such as ubid.com, craigslist.com, amazon.com, and Google Product Search, to help erode EBay’s monopoly. Thank you for reading.

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