Shabby Chic settled the lawsuit brought by eBay sellers Karen Dudnikov and Michael Meadors, known by the eBay ID Tabberone. Terms of the settlement were not disclosed.

Tabberone filed the suit after Shabby Chic shut down an auction through eBay's VeRO program. (http://www.auctionbytes.com/cab/abn/y03/m12/i02/s02)

VeRO is eBay's "Verified Rights Owner" program for protecting intellectual property. eBay allows any person or company who holds intellectual property rights (such as a copyright, trademark or patent) to become a VeRO program member or IPO (intellectual property owner). eBay has a page explaining the VeRO program at http://pages.ebay.com/help/community/vero-program.html.

Tabberone has settled suits with a number of IPOs including M&M/Mars, Warner Brothers, Major League Baseball Properties, Precious Moments and Disney Enterprises and Michael Meadors says "there are major problems with the VeRO program."

Through VeRO an IPO can claim a violation and shut down an auction with no proof, says Meadors. "They don't have to enter into a dialog with [the seller]," and eBay doesn't have to tell sellers who requested the shutdown or why, making it very difficult, Meadors says, to resolve the dispute.

eBay, however, has claimed that it is a "venue only" and is not responsible for the actions of its users regarding trademark or copyright infringement. Meadors thinks otherwise.

"Once you start making decisions as to what is infringing on someone else's copyright, you're no longer a venue," says Mike Meadors of Tabberone. "eBay has started enforcing people's trademarks without their knowledge" and mentions the case in which eBay shut down one of Tabberone's auctions of Major League Baseball Property's (MLBP) products even though Tabberone has an agreement with MLBP. "Baseball didn't shut down the auction; it was eBay," says Meadors.

Sellers are not the only ones unhappy with eBay's VeRO program. In April of 2001, Watchmaker Rolex sued eBay's German subsidiary, alleging that their trademark was infringed upon by eBay customers selling fake Rolex watches on the German Web site, resulting in unfair competition. The court later ruled in favor of eBay but according to eBay's annual report, Rolex may appeal the ruling to the German Federal Supreme Court.

Last month, Reuters and Wall Street Journal reported that Tiffany filed suit against eBay "alleging that the Internet auction site should be held accountable for the sale of counterfeit Tiffany jewelry through eBay." Tiffany said 73% of items purchased on eBay in a study it conducted were counterfeit.

Some think precedent suggests a tough case for Tiffany, but intellectual property attorney Bill Munck of Davis Munck, P.C. noted that, "if eBay took steps to implement VeRO, and either did not do enough (i.e., a sham) or is not policing/enforcing the policy, they may very well be liable."

eBay spokesperson Hani Durzy noted that, "we take these concerns very seriously, which is why we have worked closely with Tiffany and thousands of other rights owners for many years through our VeRO program to help them address these types of issues."

Meadors doesn't put all of the blame on eBay, however, saying instead that current law "puts eBay at a disadvantage so now they are overreacting." eBay must take action but by law they don't have to investigate the validity of the claim by the IPO, so now, says Meadors, VeRO "is out of control." IPOs, he says, have found a way to intimidate sellers and also "are out of control."

Tabberone is currently taking legal action against Dunkin Donuts, MGA Entertainment and E! Television over auction shutdowns through VeRO.