Lawsuit Filed against eBay, PayPal for Infringement and RICO Violations

Bel Air, CAA lawsuit has been filed against eBay, PayPal and various eBay sellers for trademark infringement and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) linked to the sale of fake products on eBay.com. The plaintiff, who has registered trademarks for various products including iPhone cases and iPhone watch cases, alleges that as many as 2,000 eBay sellers, including the sellers named as defendants in the lawsuit, are using its trademark to sell fake products. The lawsuit claims eBay and PayPal knowingly and deliberately facilitate and profit from the sale of counterfeit products.

According to Deborah Klar, co-counsel with R. Rex Parris Law Firm on the lawsuit, the plaintiff, Wimo Labs, has sent more than 5,000 notices of claimed infringement to eBay since 2013, requesting the auction site remove the fake products. Notwithstanding, the same or similar fake products continue to be listed on eBay.com. This despite the fake sellers using colors and materials in their products that the plaintiff does not use, and despite the fact that the plaintiff does not sell its products on eBay, nor does it allow its licensed sellers to do so.

“The sale of fake products causes consumer confusion, adversely affects the Lunatik brand and also means our client has lost sales.”

The lawsuit alleges eBay is also engaged in soliciting eBay buyers to purchase fake products and provides specific examples. In addition, according to court documents filed in the lawsuit, eBay has received a copy of The Counterfeit Report, a third-party that provided a report to eBay in November 2014 outlining listings of fake products on eBay; but rather than respond to the report in a responsible way, according to The Counterfeit Report, “eBay retaliated by blocking The Counterfeit Report’s corporate eBay accounts. eBay altered feedback, changed resolved case dispositions and removed counterfeit comments and warnings protecting consumers and legitimate trademark owners such as Plaintiff.”

“On the one hand, eBay says it wants to curtail these [counterfeit] practices but the program it has to do that, called the Vero program, appears to be a sham,” Klar says. “It doesn't accomplish what it’s supposedly intended to do.”

PayPal is named in the lawsuit because sellers are paid via PayPal, which Klar says should give eBay access to enough information about counterfeit sellers to be in a position to shut them down. Furthermore, the lawsuit argues that one of the best ways to shut down counterfeit sellers is to cut off their access to the money transmitters, such as PayPal, who also facilitate the purchase and sale of fake products on eBay.com.

The problem with counterfeit products, Klar says, is widespread on eBay and has implications for many legitimate manufacturers. According to court documents filed in relation to the lawsuit, counterfeiting costs US businesses between $200 and $250 billion every year. In addition to losing sales to counterfeit producers, legitimate producers have their trademark diluted. And, in cases where fake food or drugs are being sold, consumer health and safety are at risk.

Other legitimate manufacturers may be eligible to file a lawsuit against eBay for facilitating the sale of fake goods. Registered trademark holders who have submitted themselves - or through third parties - notices of claimed infringement to eBay or information that products are fake might want to speak with an attorney, to discuss their legal rights.

The lawsuit is Wimo Labs, LLC, v. eBay, Inc, et al., Case number 8:15-cv-01330, in U.S. District Court, Central District of California.