Furniture Retailer Enjoined from Sending eBay VeRO Notices–Design Furnishings v. Zen Path

By Eric Goldman

Design Furnishings, Inc. v. Zen Path LLC, 2010 WL 4321568 (E.D. Cal. Oct. 21, 2010). The initial complaint filed by Design Furnishings.

I’m a little late to this party (see, e.g., Evan Brown’s coverage), but it’s a case worth mentioning even now.

Both litigants are retailers of wicker patio furniture made by a third party Chinese manufacturer. Design Furnishings does most of its business via eBay. (Is this its About Me page?) Zen Path has applied for copyright registrations in the furniture as “sculpture/3-D artwork, Ornamental Design.” After it filed its applications for copyright registration, Zen Path then started submitting lots of VeRO notices of claimed infringement (NOCIs) to eBay to take down Design Furnishings’ listings. Not only did eBay comply, but the repeated takedowns drove down eBay’s statistical measure of Design Furnishings’ reputation, putting Design Furnishings in jeopardy of having its entire account suspended and effectively shutting down its business. To fight back, Design Furnishings sued Zen Path and got a TRO against further VeRO notices from a state court. Zen Path removed the case to federal court, and this ruling addresses whether the federal judge will extend the TRO.

Zen Path is clearly taking an aggressive copyright position. First, the ruling doesn’t clarify how Zen Path, as a retailer of furniture made by a third party, has ownership interests in the third party’s works sufficient to register its rights. Second, furniture normally does not qualify for copyright protection due to the “useful articles” doctrine. Based on the little information we get in this opinion, Zen Path looks like it’s on thin ice.

Nevertheless, Design Furnishings’ legal position is not rock solid either. It has a potential cause of action against Zen Path for violation of 17 USC 512(f), but this raises a number of Qs, including (1) is an eBay VeRO notice a 512(c)(3) takedown notice for purposes of 512(f), and (2) if so, does 512(f) support equitable remedies? On the first Q, see Dudnikov v. MGA Entertainment (VeRO notice is govered by 512(f)) and the partially related 10th Circuit ruling in Dudnikov v. Chalk & Vermillion Fine Arts, Inc. On the second Q, 512(f) only references damages as a remedy, but see the uncited but highly relevant Biosafe-One, Inc. v. Hawks case from 2007, where the court granted an injunction against sending 512(c)(3) notices during the lawsuit pendency.

The court extends the TRO against Zen Path submitting additional VeRO NOCIs. This is good news for Design Furnishings, but the good news in this situation is limited overall. In effect, Design Furnishings had to seek protection from the courts because (a) Zen Path has taken a very aggressive copyright position, (b) eBay refused to mediate Zen Path’s NOCIs, and (c) eBay’s refusal to mediate meant that Design Furnishings could be kicked off the eBay network, even for listings that had nothing to do with this dispute. I don’t expect eBay to adjudicate Zen Path’s copyright claim, but Zen Path has taken eBay’s VeRO program to its logical extreme where it can threaten a target’s entire revenue stream through heavy submission of NOCIs. The court did acknowledge the problem created by eBay’s moral hazard, saying:

the public interest is in fact benefitted by granting a TRO, because absent eBay’s policies, designed to avoid eBay’s liability for intellectual property infringement, it would be the claimed copyright holder who would bear the burden of proving the copyright infringement….That burden is essentially shifted under eBay’s policy. To withhold a TRO would allow anyone to effectively shut down a competitor’s business on eBay simply by filing the notice that the seller’s product allegedly infringes on the complaining party’s copyright.

If in fact Zen Path has overread copyright law, 512(f) is supposed to make Zen Path share the financial pain it caused. See, e.g., the Lenz v. Universal litigation. However, under the 9th Circuit’s Rossi opinion, it’s unlikely Design Furnishings will get damages from Zen Path because Zen Path will argue that it had a good faith belief in its copyright posture. If so, it’s unfortunate that Design Furnishings had to go through this hassle and incur substantial expense simply to restore the status quo.

UPDATE: In December, in a much clearer opinion, the court grants Design Furnishing’s request for a preliminary injunction. It appears Zen Path is the furniture designer, but it may not have any protectable rights in the design. The designer may be infected by the natural rights bug when she said “You are further intending to make copies of furniture that I personally designed inch by inch without my permission. My personally designed furniture belongs to us and we will pursue our rights to the fullest extent of the law.”

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