In applying the Inwood “reason to know” standard Judge Sullivan acknowledged that “eBay had generalized notice that some portion of the Tiffany goods sold on its website might be counterfeit.” He reasoned that “[g]iven the presence of authentic goods on eBay, it therefore cannot be said that generalized knowledge of counterfeiting is sufficient to impute knowledge to eBay of any specific acts of actual infringement.”
This rationale is quite troubling. In essence Judge Sullivan is saying that all a service like eBay needs to do is offer one or two legitimate products -- thereby establishing “the presence of authentic goods” -- and they can avoid liability for what is otherwise rampant counterfeiting on the site. The Judge never attempts to draw a line to determine at what point there exists so many infringements on the site that the site operator’s generalized knowledge should amount to “reason to know.” In fact, the Judge does quite the opposite by seeming to say that no matter how egregious the infringements and how many infringements take place on the site so long as there exists a “presence of authentic goods” on the site, the site operator cannot be liable if it has a mere generalized notice of these infringements. If Judge Sullivan’s interpretation of Inwood proves correct, then he may have just created an enormous loophole for infringers and online sites.
In analyzing whether eBay was liable by virtue of engaging in “willful blindness” Judge Sullivan also seemed to miss an opportunity to draw a line to determine when a certain level of generalized knowledge is so high as to meet the “reason to know” standard. Clearly, eBay “knew of a high probability of illegal conduct” – the standard for determining willful blindness. After all, why would it spend millions of dollars to remove infringing listings if it didn’t think or wasn’t aware of the problem. It is thus appropriate to ask whether eBay investigated the problem further and if not, why not. But these questions were not asked or answered.
If eBay receives a NOCI from a rights owner, even if that NOCI is only evidence of suspected infringement (and not actual infringement), the NOCI at the very least provides eBay with knowledge that there is a “a high probability of illegal conduct” taking place on the site. However, instead of conducting an investigation to learn more about what is taking place, as most responsible businesses would do, eBay simply removes the listing. To be clear, I am not suggesting that eBay not remove the listing. I am suggesting, however, that eBay should have conducted a follow-up investigation to learn more. Doesn’t eBay’s failure to conduct a follow-up investigation of the auction listings it removes satisfy both prongs of the willful blindness test? At the very least, shouldn’t Judge Sullivan have considered these facts in his willful blindness analysis?
In short, the Judge failed to recognize that there is a middle ground between specific knowledge and no knowledge that results in eBay having a “reason to know” of the infringements on its site.
Monday: What Implications Does This Decision Have For Copyright Owners?