eBay Lawsuit Over Online Counterfeit Sales Moves Closer to Trial

Wimo Labs, which owns the rights to the Lunatik brand of cellular phone cases, recently sued eBay along with various online sellers for trademark infringement. Chief among Wimo’s complaint is the belief that eBay consistently turned a blind eye to the rampant number of counterfeit items being sold via eBay’s online portal, allegedly to reap major profits. Wimo claimed to have sent eBay as many as 5,000 notices identifying approximately 2,000 eBay sellers knowingly infringing upon the Lunatik trademark by selling fake and inferior cellular phone cases. Wimo has even alleged that eBay solicited eBay buyers to purchase the fake products. For example, when eBay received a 2014 third-party report (“The Counterfeit Report”) outing fake listings on eBay’s website, eBay retaliated against the company by blocking The Counterfeit Report’s corporate eBay accounts. Similarly, Wimo claims that eBay has consistently altered comments left by buyers, changed resolved case dispositions, and utilized other methods to purposely avoid curtailing the practice of selling infringing products on their website.

Wimo also sued PayPal under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), citing the huge volume of fake products sold through eBay and PayPal’s role as the main facilitator of monetary transactions on eBay. Wimo claimed that PayPal therefore had unprecedented access to helpful information about suspicious users and was in the best position to block bogus transactions and facilitate in the takedown of these violators. But in January 2016, the Court dismissed PayPal along with Wimo’s RICO claim.

Wimo’s lawsuit has continued, however, and Wimo is hoping to recoup its alleged losses in sales and other damages. Wimo contends that eBay’s lax policies resulted in a significant drop in Wimo’s sales as well as a negative impact on the goodwill of their brand. Its case is now set for trial in August 2017 in southern California.

For its part, eBay is vigorously defending the lawsuit and notes its pledge to combat infringement through its Verified Rights Owner (“VeRO”) program. But the VeRO program, first introduced more than a decade ago, draws criticism even as eBay continues to update and improve its process for addressing counterfeits. Some brand owners and consumers continue to complain that VeRO is ineffective, while some sellers complain that it has become a tool used to squelch competition by barring sellers of legitimate products. So is eBay doing the best it can? Perhaps a California jury will get to weigh in later this year.

For more information on this topic, please visit our Anti-Counterfeiting Enforcement and Trademark Piracy service page, which is part of our Trademark Practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the trademark law firm and its trademark attorneys may be found at www.klemchuk.com.

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.

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