From eBay, the Law Should Expect More

Implications: Courts around the world are now begining to ask exactly what, if anything, sites like eBay should be required to do to discourage the sale of counterfeit goods.  The main options being considered are either to require eBay and its peers to freeze sales upon receiving a complaint from some legitimate seller, and/or to require eBay and its peers to pay cash damages for the illegal sales they facilitate.  I would add to that list a third approach: require eBay to slow its transactions down.

Analysis: In courts throughout the world, the question is being raised as to what exactly a site like eBay must do to discourage the sale of counterfeit goods.  Several jurisdictions have responded that eBay's obligation is responsive in nature: upon receiving an adequate complaint about a specific offer to sell, freeze that offer.  But that solution is unsatisfying because it puts enormous costs on legitimate sellers to monitor eBay's business, and interventions of that sort will often be too late to be effective.  Other jurisdications are in various ways requiring eBay to pay cash damages for the harm it causes, which works, but raises difficult questions about how much should be paid, and to whom, and on what showings.

My take would be different.  The best thing eBay can do is make it easier for legitimate sellers to identify and use legal process against the counterfeit sellers.  Making "direct enforcement" easier would then discourage the illegal act; why offer to sell a counterfeit good if you know with high odds that you will be caught and punished?

How, then, can eBay facilitate direct enforcement?  One way would be for eBay to slow down the process of paying its sellers.  Imagine, for instance, if sellers were not paid until seven days after their sale.  That lag would give injured parties time to engage the normal mechanisms of the law, and would in the meantime ensure that the illegal sellers stay put; after all, each seller wants his money, and so he has to keep alive his relationship to the relevant address, bank account, and so on. 

There are obviously some complexities here -- I'll leave the details to another time -- but the high-level intuition here is that the law's strategy in the eBay context probably should not be merely to focus on what eBay can do to itself police its sellers.  The focus should expand to think about how, at low cost and low disruption, a site like eBay could help other parties enforce the law themselves.