Use of eBay's VeRO policy may constitute groundless threat

In Quads 4 Kids v Campbell (October 13 2006) the Patents Court has issued an interim order to the effect that the defendant's use of online auction site eBay's VeRO policy, which is used to safeguard the rights of IP owners, to prevent the plaintiff from selling its products on eBay amounted to a groundless threat to bring infringement proceedings.

Quads 4 Kids sells children's dirt bikes on eBay, as well as through more traditional sales methods. Under eBay's VeRO policy, IP rights owners can report alleged infringement by eBay sellers. On receipt of information entered on its online form, eBay removes allegedly offending items from the seller's listings, without ascertaining whether the items are indeed infringing. eBay then informs the seller that its goods have been removed.

An individual named Mr Campbell had applied to register as a Community design right a design for children's dirt bikes, asking for deferment of publication of that application. Campbell claimed that the dirt bikes sold by Quads infringed his Community design right and instigated the VeRO procedure, following which the dirt bikes were removed from Quads' eBay listings. Thereafter, Campbell took no further steps to enforce his purported design rights.

Quads denied the infringement allegations and sued Campbell for bringing a groundless threat of infringement proceedings under the UK's Community Design Regulations 2005. Quads also argued that Campbell's design was invalid on the grounds that it had sold its dirt bikes before Campbell filed his design application. An interim injunction was sought to stop Campbell interfering with its eBay sales pending a hearing of the main action. Accordingly, the court had to decide, as a preliminary issue, whether Campbell's submission of the VeRO online form could be regarded as a threat to bring infringement proceedings.

The court granted the relief Quads sought. His analysis included the following points:

• The test to apply was whether a reasonable person, in the position of the person allegedly threatened, would have understood that he might have been subject to infringement proceedings at some point in the future.
  
  
• In theory, the operation of eBay's VeRO scheme did not mean that a future infringement proceeding was a possibility. However, in this case, the unsatisfactory situation would arise where Campbell could extinguish a means of Quads selling its bikes by just filling in an online form.
  
  
• This being so, the proper test here was whether eBay would have understood that it could be subject to future infringement proceedings if it had not adopted the policy of removing any allegedly infringing items. Since that was how eBay would have viewed things, there was, therefore, a serious issue to be tried.
  
  
• The risk of damage to Quads, and Campbell's inability to meet any future damages award, led to the balance of convenience falling in favour of granting the injunction.

Jeremy Phillips, IP Consultant to Slaughter and May, London