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eBay Seller Sues Monitoring Firm over Counterfeit Claims

An eBay seller has sued a company that scours the Web for counterfeits on behalf of manufacturers and brands. Lytle Racing Group (LRG) filed a lawsuit in the District of Arizona against Dutch company SNB-React (React) for actions it took against it through the eBay VeRO program.

eBay’s VeRO program lets brand owners proactively identify counterfeit or infringing listings and report them for removal. In reporting a listing to eBay, brand owners or their agents submit a Notice of Claimed Infringement form under a good faith belief.

Paul Ticen of McFadden Ticen & Beam told EcommerceBytes that React has sent four different notices to eBay claiming that approximately two dozen of his client’s listings are counterfeit. “These aren’t counterfeit, but rather are sold pursuant to a distributor agreement with the manufacturer (Factory Effex),” he said.

Ticen was sympathetic to eBay – they don’t want to get sued on the basis of secondary infringement, he said, but its program puts the client at a competitive disadvantage.

His client’s ultimate objective is described in the first claim of the lawsuit, Ticen said, which is in part to have a judge issue a Declaratory Judgment that LRG’s listings are not counterfeit and do not constitute trademark infringement, which would give eBay the confidence to restore his client’s listings.

On its website, React says it assists members in the fight against counterfeit trading to defend their legitimate market share and save them considerable costs at the same time. It cites the following statistics: “In 2013 we undertook 34,144 cases seizing 13,726,987 goods closing 588,057 online auctions taking down 8,524 websites.”

React does some good things, Ticen said. The problem from his perception is that they are not making much effort to make a distinction between what is counterfeit and what is not when it does its monitoring. He explained that after his client provided an affidavit from the licensed manufacturer of branded goods stating his client LRG was authorized to sell its products bearing licensed intellectual property on ecommerce platforms such as eBay, React did not respond and “kept doing the same thing.” His client has a restriction on his eBay account as a result, he said.

Suing a company in the Netherlands could be challenging for an Arizona business – Ticen said jurisdiction could be an issue that is litigated. Asked what would happen if the Dutch company failed to respond to the action, Ticen said a default judgment is a possibility.

LRG, which sells on its own website, on Amazon, as well as through its eBay Store, has 130,000 different listings on eBay and lists between 200 – 500 each day. The company has been selling on eBay since 2002, and, according to the complaint, “The majority of LRG’s sales occurs through its eBay store-front compared to its website and its Amazon store front.”

LRG is also seeking compensatory and punitive damages; a permanent injunction; and reasonable attorneys’ fees, according to the lawsuit, which was filed on Monday (December 29, 2014).

“There may be some interesting legal issues that develop from this for the ecommerce world,” Ticen told EcommerceBytes.

See the lawsuit in PDF format.

Comment on the EcommerceBytes Blog.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.