Monday, March 06, 2006

EBay Makes Your Eyes Water

According to the Beeb, a prosecution brought against by the General Optical Council, for aiding and abetting in the illegal sale of contact lenses by persons other than registered opticians, under the Opticians Act 1989, has been dropped, after advice that EBay was protected by European law. One can only assume this refers to Art 14 of the EC Electronic Commerce Directive as implemented in the UK by the 2002 Regulations of the same name. Under this law, reg 19 states that:

"Where an information society service is provided which consists of the storage of information provided by a recipient of the service, the service provider (if he otherwise would) shall not be liable for damages or for any other pecuniary remedy or for any criminal sanction as a result of that storage where -

(a) the service provider -
(i) does not have actual knowledge of unlawful activity or information and, where a claim for damages is made, is not aware of facts or circumstances from which it would have been apparent to the service provider that the activity or information was unlawful; or
(ii) upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information
, and

(b) the recipient of the service was not acting under the authority or the control of the service provider.

EBay's involvement came from some 200 individuals selling contact lenses via its site listings, not from any direct commercial activities of its own. What the GOC seem to have accepted then is that, as EBay themselves put it, "as an "information society service provider", [EBay's] duty is simply to remove illegal sale notices from its site when it is made aware of them, rather than to comb through it for them". This interpretation is reinforced by Art 15 of the Electronic Commerce Directive which provides that EC states shall not impose positive obligations of monitoring on information society service providers.

As the Beeb report points out, this leaves the GOC, as a public regulator, in a highly unsatisfactory position. The GOC spokesman said: "We feel that it is an unreasonable burden for a regulator, with limited resources, to have to monitor the millions of listings on auction websites. In effect, we would have to notify the website of each individual instance of an illegal sale in order for it to be de-listed."

But did the GOC cave too soon? First, Art 15 was never transposed into UK law. Arguably this makes no difference as remedies can be obtained in respect of Directives even where not transposed into domestic law, but it is still rather odd.

Secondly, and rather controversially, could it be argued that the EBay sellers of contact lenses were acting "under the authority or the control of" EBay? EBay do contractually allow sellers to sell on its site, and take a cut of the profits for doing so. Is this not "authority"? As I have noted before, they are hardly in the same position as a traditional ISP handling myriads of communications in a hands off way. EBay furthermore do at least present something that looks rather like "control" in that they have various Acceptable Use policies relating to what can and cannot be sold on EBay. Contact lenses are specifically mentioned under the "prohibited" list. EBay do their best to make these warnings look advisory - "eBay is here to help, but you are ultimately responsible for making sure that buying an item or selling your item(s) is allowed on eBay and is not prohibited in the eyes of the law. Follow these steps to find out whether or not your item can be listed on eBay."
- but such words cannot detract from the fact that it seems a reasonable interpretation that eBay's various "prohibited" policies for buyers and sellers are incorporated by reference as part of the terms of the contract with eBay .

If eBay can be characterised as having either "authority or control" then the immunity provided by reg 19 in respect of criminal liability will fail to protect them.

Thirdly, nothing in the ECD or the UK regs stops a litigant seeking an injunction or interdict in relation to hosting liability. Reg 20 states: "Nothing in regulations 17, 18 and 19 shall ...(b) affect the rights of any party to apply to a court for relief to prevent or stop infringement of any rights." This language speaks of civil law rights, but could it be read also as allowing the GOC to take an injunction preventing eBay from selling contact lenses without a trained optician on staff? If so, the regulator's need for swift and single-targeted action can be met. Such an approach would not be out of step with the rest of the EU - in Germany, in two cases, the Supreme Court has allowed injunctions against on line auction sites in respect of illegal content they were hosting.

This case is significant for more than just the illegal sale of contact lenses. It is the first UK case, and one of the first EU cases, to decide in any shape or form whether eBay's habitual claim of immunity as a "neutral intermediary" will be unquestioningly accepted. As reported on this blog earlier, an action is also pending from Tiffany the diamond sellers in relation to rampant trademark infringement on eBay. If the GOC case is accepted in practice as any kind of precedent (it is not in strict law, being simply the abandonment of the case), it will be hard for any case on civil or criminal hosting liability to stand up against eBay.

Yet in a civil case such as a trademark infringement action, eBay can be held liable not just if it has actual notice, but also if it has constructive knowledge of the infringement. So in the upcoming TM case, I expect to see evidence that eBay must reasonably have known that its listings were full of counterfeit Tiffany goods, even if it was not compelled to actually monitor its site to see just how many counterfeit listings it had - simply from the NTD requests it received on an ongoing basis. The very advice eBay gives about prohibited listings could be seen as evidence that eBay knew quite well these sort of goods were habitually sold on its site. If that were to be proven - and it would not be hard, one feels - a defense of take down only on actual notice would be irrelevant.

Anyone know what lawyers advised the GOC?

1 comment:

feneuk said...

I think that Lilian is right. EBay cannot keep using the ISP defence while cashing in the monumental amount of conterfeit goods sold through them. The bricks and mortar analogy would be that of an ISP been a "telecentre" where you enter and pay to use a phone and clearly the owner cannot be responsible for what you say, and eBay would be like the owner of a market that allow you to put your stand there and when you are caught selling drugs in front of his eyes he claims that he only gives you the place...Furthermore, I think that the Grokster could give a headache to more people that it originally seemed. Where the justices wrote "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties", you can easyly transpolate "that one who lend his space with the object of promoting its use to infringe trademark, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by the third party". If you are thinking what will be the "clear expression or other affirmative steps", when you sell a counterfeit good eBay asks you if you have another to sell, it also gives you discounts if you sell more and so on, and I think that we already past the stage where anyone can claim that eBay does not know that it is used to sell goods that infringe somebody's trademark (without going into the copied software, CDs and DVDs).