eBay 2007 Annual Report Download - page 48

ITEM 1B: UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2: PROPERTIES
We own and lease various properties in the United States and in 23 other countries around the world. We use the
properties for executive and administrative offices, data centers, product development offices and customer service
offices. As of December 31, 2007, our owned and leased properties provided us with aggregate square footage of
approximately 1.7 million and 1.9 million, respectively. Our corporate headquarters of approximately 0.2 million
square feet are located in San Jose, California. As of December 31, 2007, the total square footage generally used by
each of our Marketplaces, Payments and Communications segments was approximately 1.8 million, 1.4 million and
0.2 million, respectively.
From time to time we consider various alternatives related to our long-term facilities needs. While we believe
our existing facilities are adequate to meet our immediate needs, it may become necessary to lease or acquire
additional or alternative space to accommodate any future growth.
ITEM 3: LEGAL PROCEEDINGS
In April 2001, two of our European subsidiaries, eBay GmbH and eBay International AG, were sued by
Montres Rolex S.A. and certain of its affiliates in the regional court of Cologne, Germany. The suit subsequently
was transferred to the regional court in Du
¨sseldorf, Germany. Rolex alleged that our subsidiaries were infringing
Rolex’s trademarks as a result of users selling counterfeit Rolex watches through our German website. The suit also
alleged unfair competition. Rolex sought an order enjoining the sale of Rolex-branded watches on the website as
well as damages. In December 2002, a trial was held in the matter, and the court ruled in favor of eBay on all causes
of action. Rolex appealed the ruling to the Higher Regional Court of Du
¨sseldorf, and the appeal was heard in
October 2003. In February 2004, the court rejected Rolex’s appeal and ruled in our favor. Rolex appealed the ruling
to the German Federal Supreme Court, a hearing took place before that court in December 2006, and a written
decision was issued in June 2007. The court’s decision found that eBay must take reasonable measures to prevent
recurrence once it is informed of clearly identified infringement, and that eBay may in certain circumstances be
liable upon first notice of infringement. The court referred the case back to the Higher Regional Court to determine
whether, in some circumstances, a low starting listing price was sufficient to indicate that a listing was infringing. In
July 2007, the German Federal Supreme Court extended the reach of the Rolex decision in IVD v. eBay. The court
held that (i) in certain circumstances, a duty of care could be found to exist to competitors requiring eBay to take
reasonable measures to prevent illegal items from being listed (even where the competitors were not directly
harmed) and (ii) such duty would extend to listings by the same seller in the same category (not just identical
listings). Prior to these decisions, we had implemented proactive measures to find and remove illegal listings from
our websites; these decisions may require us to undertake further efforts and will subject us to liability if our efforts
are deemed to be insufficient. We expect that this ruling will likely result in increased costs and litigation against us
in Germany although we do not currently believe that it will require a major change in our business practices.
In August 2006, Louis Vuitton Malletier and Christian Dior Couture filed two lawsuits in the Paris Court of
Commerce against eBay Inc. and eBay International AG. The complaint alleges that we violated French tort law by
negligently broadcasting listings posted by third parties offering counterfeit items bearing plaintiffs’ trademarks,
and by purchasing certain advertising keywords. The plaintiffs seek approximately EUR 37 million in damages.
Around September 2006, Parfums Christian Dior, Kenzo Parfums, Parfums Givenchy, and Guerlain Société also
filed a lawsuit in the Paris Court of Commerce against eBay Inc. and eBay International AG. The complaint alleges
that we have interfered with the selective distribution network the plaintiffs established in France and the European
Union by allowing third parties to post listings offering genuine perfumes and cosmetics for sale on our websites.
The plaintiffs in this suit seek approximately EUR 9 million in damages and injunctive relief. We filed our initial
briefs responding to the first complaint in February 2007, and initial briefs in response to the second complaint were
filed in April 2007. We believe that we have meritorious defenses to these suits and intend to defend ourselves
vigorously. Other luxury brand owners have also filed suit against us or have threatened to do so, seeking to hold us
liable for counterfeit items listed on our websites by third parties, for “tester” and other not for resale consumer
38