eBay 2001 Annual Report Download - page 20

""CertiÑcate of Authenticity.'' The lawsuit seeks class action certiÑcation, compensatory damages, a civil
penalty of ten times actual damages, interest, costs and fees and injunctive relief. On January 26, 2001, the
court issued a ruling dismissing all claims against us in the lawsuit. The court ruled that our business falls
within the safe harbor provisions of 47 USC 230, which grants Internet service providers such as eBay
immunity from state claims based on the conduct of third parties. The court also noted that we were not a
""dealer'' under California law and thus not required to provide certiÑcates of authenticity with autographs
sold over our site by third parties. The plaintiÅs have appealed this ruling. We believe we have meritorious
defenses and intend to defend ourselves vigorously.
On April 25, 2001, our European subsidiaries, eBay GmbH and eBay International AG, were sued by
Montres Rolex S.A. and certain Rolex aÇliates (""Rolex'') in the regional court of Cologne, Germany.
The suit has been moved to the regional court in Dusseldorf, Germany. Rolex alleged that our subsidiaries
were infringing Rolex's trademarks as result of users selling counterfeit Rolex watches through our German
website. The suit also alleges unfair competition. Rolex is seeking an order forbidding the sale of Rolex
watches on the website as well as damages. We believe that we have meritorious defenses against this
claim and intend to defend ourselves vigorously.
On September 26, 2001, a complaint was Ñled by MercExchange LLC against us, our Half.com
subsidiary and ReturnBuy, Inc. in the Eastern District of Virginia (No. 2:01-CV-736) alleging
infringement of three patents (relating to online auction technology, multiple database searching, and
electronic consignment systems) and seeking a permanent injunction and damages (including treble
damages for willful infringement). We have answered this complaint, denying the allegations, and we
believe we have meritorious defenses and will defend ourselves vigorously. However, even if successful, our
defense against this action will be costly and could divert our management's time. If the plaintiÅ were to
prevail on any of its claims, we might be forced to pay signiÑcant damages and licensing fees, modify our
business practices or even be enjoined from practicing a signiÑcant part of our U.S. business. Any such
results could materially harm our business.
Other third parties have from time to time claimed, and others may claim in the future that we have
infringed their past, current or future intellectual property rights. We have in the past been forced to
litigate such claims. We may become more vulnerable to such claims as laws such as the Digital
Millennium Copyright Act are interpreted by the courts and as we expand into international jurisdictions
where the underlying laws with respect to the potential liability of online intermediaries like ourselves is
less favorable. We expect that we will increasingly be subject to copyright and trademark infringement
claims as the geographical reach of our services expands. We also expect that we will increasingly be
subject to patent infringement claims as our services expand. These claims, whether meritorious or not,
could be time-consuming, result in costly litigation, cause service upgrade delays, require expensive
changes in our methods of doing business or could require us to enter into costly royalty or licensing
agreements, if available. As a result, these claims could harm our business.
From time to time, we are involved in other disputes that arise in the ordinary course of business. We
believe that the ultimate resolution of these other disputes will not have a material adverse impact on our
Ñnancial position, results of operations, or cash Öows.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no submissions of matters to a vote of security holders during the fourth quarter ended
December 31, 2001.
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