eBay 2012 Annual Report Download - page 23

owners bring legal action against PayPal based upon the use of PayPal's payment services in a transaction involving the sale of infringing items,
including on our websites or mobile platforms, our business could be harmed. Several jurisdictions have adopted new laws in these areas, and
others are considering imposing additional restrictions.
In addition, new laws have been proposed regulating Internet companies with respect to intellectual property issues. For example, ACTA
and TPP are trade agreements that include international standards for enforcing intellectual property rights, including provisions regarding
counterfeit goods and online piracy. The European Commission is considering revising the Intellectual Property Enforcement Directive, which
could potentially increase our exposure to enforcement actions from rights owners. Implementation of these or similar laws could require us to
change our business practices, increase our compliance costs and harm our business. Rights owners have also increasingly gone into U.S. courts
and obtained injunctions requiring PayPal to cease handling transactions for named websites and third parties (in most cases located outside the
U.S.) and to hold the funds of such parties pending judicial resolution of such rights owners' claims against such parties, which disrupts the
relationship between PayPal and such parties and, if such parties sell on our Marketplaces platforms, could also adversely affect our
Marketplaces business.
We are subject to patent litigation.
We have repeatedly been sued for allegedly infringing other parties' patents. We are a defendant in a number of patent suits and have been
notified of several other potential patent disputes. We expect that we will increasingly be subject to patent infringement claims involving various
aspects of our Marketplaces, Payments and GSI segments as our products and services continue to expand in scope and complexity (e.g., our
mobile, local, social and digital initiatives); as we expand into new businesses, including through acquisitions; and as the universe of patent
owners who may claim that we, companies that we have acquired, or our customers (including GSI clients) infringe their patents and the
aggregate number of patents controlled by such patent owners correspondingly increases. Such claims may be brought directly against our
companies and/or against our customers, including GSI clients, whom we may indemnify either because we are contractually obligated to do so
or as a business matter. We and other technology companies have seen more of these claims from an increasing number of third parties whose
sole or primary business is to assert such claims. In addition, we have seen significant patent disputes between operating companies in some
technology industries (e.g., mobile telephony). Patent claims, whether meritorious or not, are time consuming and costly to defend and resolve,
and could require us to make expensive changes in our methods of doing business, enter into costly royalty or licensing agreements, or cease
conducting certain operations, which would harm our business.
Use of our services for illegal purposes could harm our business.
We may be unable to prevent our users from selling unlawful or stolen goods or unlawful services, or selling goods or services in an
unlawful manner, and we (including our employees and directors of our various entities) may be subject to allegations of civil or criminal
liability for unlawful activities carried out by users through our services. We have been subject to several lawsuits based upon such allegations.
In Turkey, local prosecutors and courts are investigating our liability for allegedly illegal actions by users of our Turkish Marketplaces business
(GittiGidiyor.com). In accordance with local law and custom they are considering indicting, and have in some cases already indicted, one or
more members of the board of directors of our local Turkish subsidiary. We believe that the relevant Turkish ecommerce and criminal laws
protect our local directors from being held personally liable for the activities of GittiGidiyor’s users, and intend to defend vigorously against any
such actions. In August 2012, we were informed that U.S. listings of footwear with religious imagery were visible on our local Indian site and
we immediately removed these listings. In September 2012, a criminal case was registered against us in India in regard to these listings, and we
are challenging the prosecution of this case. Also, the German Federal Supreme Court has ruled that we may have a duty to take reasonable
measures to prevent prohibited DVDs from being sold on our site to minors and that competitors may be able to enforce this duty. In a number
of circumstances, third parties, including government regulators and law enforcement officials, have alleged that our services aid and abet certain
violations of certain laws, including anti-scalping laws with respect to the resale of tickets, laws regarding the sale of counterfeit items, the
fencing of stolen goods, selective distribution channel laws, customs laws, distance selling laws and the sale of items outside of the U.S. that are
regulated by U.S. export controls. As we seek to reduce bad buying experiences and improve the customer experience on our sites, our level of
interaction with buyers and sellers may increase over time, which could in turn increase our potential exposure to allegations of civil or criminal
liability for unlawful activities carried out by users through our services.
Although we have prohibited the listing of illegal and stolen goods and certain high-
risk items and implemented other protective measures,
we may be required to spend substantial resources to take additional protective measures or discontinue certain service offerings, which could
harm our business. Any costs incurred as a result of potential liability relating to the alleged or actual sale of unlawful goods or the unlawful sale
of goods could harm our business. Certain manufacturers and large retailers have sought new U.S. federal and state legislation regarding stolen
goods that could limit our ability to allow sellers to
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