eBayeBay

Rob RochesterRob Rochester

eBayeBay

Pioneered the popularity of the online Pioneered the popularity of the online auction.auction.• Selling everything from antiques to Selling everything from antiques to

automobilesautomobiles One of the most important strategic One of the most important strategic

assists eBay had was the information it assists eBay had was the information it gained by conducting auctions.gained by conducting auctions.• Invaluable information for Invaluable information for

the design of auctionsthe design of auctions identifying service enhancementsidentifying service enhancements Other business opportunitiesOther business opportunities

• Including partnering with other services providers.Including partnering with other services providers.

eBayeBay

Pierre OmidyarPierre Omidyar• In 1995 Founded AuctionWeb with the In 1995 Founded AuctionWeb with the

idea ofidea of Providing an Internet site where person-to-Providing an Internet site where person-to-

person trading could take placeperson trading could take place• Buyers and sellers rushed to the site, and by 1997 Buyers and sellers rushed to the site, and by 1997

AuctionWeb became eBay.AuctionWeb became eBay.

Meg WhitmanMeg Whitman• Brought on to serve as president and Brought on to serve as president and

CEOCEO

Impressive growthImpressive growth

By mid-2000By mid-2000• eBay hadeBay had

15.8 million registered users who traded items in more 15.8 million registered users who traded items in more thenthen

4,320 categories4,320 categories• On an average dayOn an average day

4.3 million active auctions4.3 million active auctions 500,000 new items listed500,000 new items listed 1.8 million visits with an average of 20 minutes1.8 million visits with an average of 20 minutes

Estimated toEstimated to• Host 90% of online auctionsHost 90% of online auctions• Control 85% of the marketControl 85% of the market

An online auctionAn online auction

Involved listing an item for sale with a Involved listing an item for sale with a closing date and time.closing date and time.• The sellerThe seller

Provided a description of the itemProvided a description of the item• Most provided picturesMost provided pictures

Could specify Could specify • a minimum opening bida minimum opening bid• A bid incrementA bid increment• A reserve priceA reserve price

Not disclosed to the biddersNot disclosed to the bidders

The transaction between seller and high The transaction between seller and high bidderbidder• Executed with out eBay’s involvementExecuted with out eBay’s involvement

eBayeBay

eBay’s principle asset was its ability to eBay’s principle asset was its ability to aggregate buyers and sellers on its website.aggregate buyers and sellers on its website.• Charged a small fee for listing and sales.Charged a small fee for listing and sales.

Used high levels of customer service.Used high levels of customer service.• Its reputation helped maintain its leadership Its reputation helped maintain its leadership

among online auction sites.among online auction sites. ““The key to eBay’s success is trust. Trust The key to eBay’s success is trust. Trust

between the buyers and sellers who make between the buyers and sellers who make up the eBay community. And trust between up the eBay community. And trust between users and eBay, the company”users and eBay, the company”

Policing eBayPolicing eBay

eBay relied on its community to help eBay relied on its community to help police its sitepolice its site• ““the community is also self-policing, and users the community is also self-policing, and users

frequently form ‘neighborhood watch’ groups frequently form ‘neighborhood watch’ groups to help guard against misuse or violations of to help guard against misuse or violations of the sites etiquette.”the sites etiquette.”

eBay Sought to ensure the privacy of its eBay Sought to ensure the privacy of its users.users.• eBay’s privacy policy was TRUSTe approved.eBay’s privacy policy was TRUSTe approved.• eBay was a founding member of the Online eBay was a founding member of the Online

Privacy Association.Privacy Association.

eBay’s revenueeBay’s revenue

19991999• Revenue of 224.7 millionRevenue of 224.7 million• Net income of 11 millionNet income of 11 million

The first half of 2000The first half of 2000• Doubling of revenue from the previous yearDoubling of revenue from the previous year• Net income increased to 17.9 millionNet income increased to 17.9 million• Market capitalization reached 30 billionMarket capitalization reached 30 billion

Reflecting its leading position in the online auction market Reflecting its leading position in the online auction market and its seemingly unlimited potential.and its seemingly unlimited potential.

The end of 2000The end of 2000• Market capitalization fell to 16 billionMarket capitalization fell to 16 billion

Due to Market decline in high tech stocksDue to Market decline in high tech stocks

U.S. Supreme courtU.S. Supreme court 19911991

• U.S. supreme court decision U.S. supreme court decision ((Feist Publications, Inc. v. Rural Feist Publications, Inc. v. Rural Telephone Service CoTelephone Service Co., 499 U.S.,340)., 499 U.S.,340) held that “facts”, even if held that “facts”, even if collected through “sweat and effort”, remained in the public collected through “sweat and effort”, remained in the public domain.domain.

Earlier court decision had held that databases were protected by Earlier court decision had held that databases were protected by copyright under the “sweat of the brow” doctrine.copyright under the “sweat of the brow” doctrine.

• In FeistIn Feist The court affirmed the originality and creativity requirements and The court affirmed the originality and creativity requirements and

stated thatstated that• ““all facts – scientific, historic, biographical, and news of the day… are all facts – scientific, historic, biographical, and news of the day… are

part of the public domain available to every person”part of the public domain available to every person”• An example:An example:

The telephone WhitePages can not be copyrighted because they The telephone WhitePages can not be copyrighted because they are simply an alphabetical list of names and numbers, whereas are simply an alphabetical list of names and numbers, whereas the YellowPages can be copyrighted because the information is the YellowPages can be copyrighted because the information is arranged by category, which has a degree of originality. arranged by category, which has a degree of originality.

• This ruling gave auction aggregators a legal basis for This ruling gave auction aggregators a legal basis for extracting “facts” from eBay and other online auction sites.extracting “facts” from eBay and other online auction sites.

Auction aggregatorsAuction aggregators

Auction aggregators wouldAuction aggregators would• Search internet auction sitesSearch internet auction sites

Extract dataExtract data• Provided the data to its usersProvided the data to its users

Created value by allowing customers to Created value by allowing customers to comparison shop.comparison shop.

Bidder’s EdgeBidder’s Edge• The first Auction Aggregators appeared in The first Auction Aggregators appeared in

spring of 1999spring of 1999• In September eBay declared that the listings In September eBay declared that the listings

on its Internet site were its “property”on its Internet site were its “property” Prohibited auction aggregators from searching its Prohibited auction aggregators from searching its

site.site.• Bidder’s EdgeBidder’s Edge

Stopped its searchesStopped its searches• Took out a full page ad in the New York Times Took out a full page ad in the New York Times

protesting eBay's move.protesting eBay's move.

• Other Auction AggregatorsOther Auction Aggregators Resumed listing eBay's items on their sitesResumed listing eBay's items on their sites

• Seeing its self at a competitive disadvantage Bidder’s Seeing its self at a competitive disadvantage Bidder’s Edge started again.Edge started again.

eBay attempted to work with auction aggregatorseBay attempted to work with auction aggregators• Offered a small fee and a bounty for each user directed Offered a small fee and a bounty for each user directed

to eBay’s siteto eBay’s site 5 auction aggregators took licenses5 auction aggregators took licenses

• Allowing them to query eBay’s system how a user would.Allowing them to query eBay’s system how a user would. Prohibited copying of data.Prohibited copying of data.

• ““this is a clear cut example of one business trying to get a free this is a clear cut example of one business trying to get a free ride off eBay’s success. What we've been trying to do is reach ride off eBay’s success. What we've been trying to do is reach out to these third parties and establish some appropriate out to these third parties and establish some appropriate business guidelines.”business guidelines.”

Auction RoverAuction Rover• Agreed to eBay’s conditionsAgreed to eBay’s conditions

Had a separate eBay tab on its website.Had a separate eBay tab on its website.• ““we've taken a more pro-eBay approach. Our competitors we've taken a more pro-eBay approach. Our competitors

have taken a more, if you pardon the vernacular, ‘screw eBay!’ have taken a more, if you pardon the vernacular, ‘screw eBay!’ approach.” – Scot Wingo CEO of AuctionRoverapproach.” – Scot Wingo CEO of AuctionRover

Bidder’s EdgeBidder’s Edge

Obtained data from nearly 100 online person-to-Obtained data from nearly 100 online person-to-person and merchant auction sites.person and merchant auction sites.• Providing users with Providing users with

an overview of available itemsan overview of available items Comparison informationComparison information Tracking services of itemsTracking services of items

Bidder’s EdgeBidder’s Edge• Items on eBay accounted for 69% of the Bidders Edge Items on eBay accounted for 69% of the Bidders Edge

database.database. Used a robotic program that daily copied approximately 80,000 Used a robotic program that daily copied approximately 80,000

pagespages• Stored on Bidders Edge’s computers and updated reclusivelyStored on Bidders Edge’s computers and updated reclusively

A query by a visitor to Bidder’s Edge’s website was then A query by a visitor to Bidder’s Edge’s website was then answered by searching its rather then searching eBay’s answered by searching its rather then searching eBay’s database.database.

Bidders EdgeBidders Edge

The problem with Bidders EdgeThe problem with Bidders Edge• Bidder’s Edge searched reclusivelyBidder’s Edge searched reclusively

The information it provided was:The information it provided was:• StaleStale• inaccurateinaccurate

• Bidder’s Edge accounted for about 1.4% of the Bidder’s Edge accounted for about 1.4% of the quarries received by eBayquarries received by eBay

A heavy load on eBay’s computersA heavy load on eBay’s computers eBay believed that those using Bidder’s eBay believed that those using Bidder’s

Edge and other auction aggregators were Edge and other auction aggregators were not receiving the full experience of its web not receiving the full experience of its web site and the eBay community.site and the eBay community.

Fighting RobotsFighting Robots

eBay used a robotic exclusion standard and eBay used a robotic exclusion standard and a robots.xtx filea robots.xtx file• Notified those searching its site that robotic Notified those searching its site that robotic

searches were prohibitedsearches were prohibited Compliance was voluntaryCompliance was voluntary

• Search sites like Google and Yahoo respected the standardSearch sites like Google and Yahoo respected the standard

• Had a security unit that detected any unusual Had a security unit that detected any unusual number of quarries form an IP number and number of quarries form an IP number and blocked those suspected of violating its policies.blocked those suspected of violating its policies.

Bidder’s Edge used proxy servers to avoid eBay's IP Bidder’s Edge used proxy servers to avoid eBay's IP blocks.blocks.

Intellectual propertyIntellectual property

Intellectual property law provided Intellectual property law provided protection for information though: protection for information though: • patentspatents• trademarks trademarks • copyrighting copyrighting

know-howknow-how Trade secretsTrade secrets

CADPCADP The Coalition Against Database PiracyThe Coalition Against Database Piracy

• Argued that the existing intellectual property laws provided little Argued that the existing intellectual property laws provided little protection for databases.protection for databases.

““Copyright law only protects a database to the extent that it is Copyright law only protects a database to the extent that it is creative in the selection, arrangements, or coordination of the facts it creative in the selection, arrangements, or coordination of the facts it contains. Copyright law does not shield the databases factual content contains. Copyright law does not shield the databases factual content from thievery. Very few databases meet this ‘creative’ requirement from thievery. Very few databases meet this ‘creative’ requirement because all the things that make a database valuable and user-because all the things that make a database valuable and user-friendly – its comprehensiveness and its logical order – are deemed to friendly – its comprehensiveness and its logical order – are deemed to involve no ‘creative’ selection, arrangement or coordination.”involve no ‘creative’ selection, arrangement or coordination.”

• Also argued that the U.S. Anti Hacking Statute as well as state Also argued that the U.S. Anti Hacking Statute as well as state contract and misappropriation laws provided inadequate contract and misappropriation laws provided inadequate protection.protection.

The Antihacking statue has “never been held to apply to a published The Antihacking statue has “never been held to apply to a published database at all – no matter what its format. Nor would the statute database at all – no matter what its format. Nor would the statute apply in a situation where a database producer - like eBay – makes apply in a situation where a database producer - like eBay – makes information available over the Internet without a password or firewall information available over the Internet without a password or firewall protecting it.”protecting it.”

State contract law applied only to signed agreementsState contract law applied only to signed agreements ““Misappropriation is an ill-defined state law doctrine and it does not Misappropriation is an ill-defined state law doctrine and it does not

provide database creators with uniform, nationwide protection.provide database creators with uniform, nationwide protection.

eBay’s alternativeseBay’s alternatives Ebay could attempt to establish through the courts Ebay could attempt to establish through the courts

intellectual property rights to the data it generated from its intellectual property rights to the data it generated from its auctions.auctions.• Allowing eBay to block the Auction aggregators.Allowing eBay to block the Auction aggregators.

The Feist decision placed heavy burden on eBay to demonstrate The Feist decision placed heavy burden on eBay to demonstrate creativity.creativity.

eBay could also seek a preliminary injunction and ultimately a eBay could also seek a preliminary injunction and ultimately a permanent injunction against Bidders Edge and other auction permanent injunction against Bidders Edge and other auction aggregators.aggregators.• eBay recognized that pursuing a court resolution would be both eBay recognized that pursuing a court resolution would be both

costly and time consumingcostly and time consuming Decisions could be appealed.Decisions could be appealed. Internet law guidelines were not set in stone. Internet law guidelines were not set in stone.

eBay could also use technology to stop the auction eBay could also use technology to stop the auction aggregators attempts to extract info form its database.aggregators attempts to extract info form its database.• The problemThe problem

A tech fix in the form of a firewall could make the site less convenient A tech fix in the form of a firewall could make the site less convenient for users.for users.

It could also lead to a costly technology race.It could also lead to a costly technology race.

NetCoalition.comNetCoalition.com

July 1999July 1999• eBay and eight other Internet Service Providers eBay and eight other Internet Service Providers

formed NetCoalition.comformed NetCoalition.com With the mission to beWith the mission to be

• ““the collective public policy voice of the world’s leading the collective public policy voice of the world’s leading Internet companies, NetCoalition.com is committed to Internet companies, NetCoalition.com is committed to building user confidence in the internet through building user confidence in the internet through responsible market-driven policies; preserving the open responsible market-driven policies; preserving the open and competitive environment that has allowed the and competitive environment that has allowed the internet to flourish; and ensuring the continued vitality internet to flourish; and ensuring the continued vitality of the Internet through active dialogue with of the Internet through active dialogue with policymakers.” Meg Whitman explained, “We want to be policymakers.” Meg Whitman explained, “We want to be active participants in the dialogue that is addressing the active participants in the dialogue that is addressing the critical issues facing the burgeoning Internet industry. As critical issues facing the burgeoning Internet industry. As a group we can be a valuable resource and a powerful a group we can be a valuable resource and a powerful educational tool for policymakers and the public.”educational tool for policymakers and the public.”

H.R. 354H.R. 354 Reintroduced the “Collections of Information Antipiracy Reintroduced the “Collections of Information Antipiracy

Act”Act”• The bill has been redrafted to address concerns with the earlier The bill has been redrafted to address concerns with the earlier

versionsversions• The judiciary committee reportedThe judiciary committee reported

The bill would provide substantial protection to those who collected The bill would provide substantial protection to those who collected information, including those who did so on the Internet. Facts were information, including those who did so on the Internet. Facts were not protected and remained in the public domain.not protected and remained in the public domain.

• Effect of the bill was to overturn feistEffect of the bill was to overturn feist.. Support came fromSupport came from

• eBayeBay• Reed ElsevierReed Elsevier• ThomsonThomson• The American Medical AssociationThe American Medical Association• The New York Stock ExchangeThe New York Stock Exchange• National Association of RealtorsNational Association of Realtors

H.R. 354 supportersH.R. 354 supporters Online auction companies, Internet service providers, Online auction companies, Internet service providers,

and publishers were not the only ones concerned and publishers were not the only ones concerned about their databases.about their databases.• One of the largest most valuable databases was the multiple One of the largest most valuable databases was the multiple

listings service of real estate properties.listings service of real estate properties.• Companies providing print databases also sought protection.Companies providing print databases also sought protection.

The Coalition Against Database PiracyThe Coalition Against Database Piracy• Formed to support H.R. 354 and against H.R. 1858Formed to support H.R. 354 and against H.R. 1858

The CADP argued thatThe CADP argued that• H.R. 354 was pro-internet and pro-consumerH.R. 354 was pro-internet and pro-consumer..

Created Created www.gooddata.orgwww.gooddata.org to provide information on the issue. to provide information on the issue.• ““H.R. 1858 only bars thefts that results in duplicate databases. This H.R. 1858 only bars thefts that results in duplicate databases. This

allowed ‘free riders’ to avoid liability by the simply contrivance of allowed ‘free riders’ to avoid liability by the simply contrivance of cutting and pasting the stolen data so that the ‘new database’ is cutting and pasting the stolen data so that the ‘new database’ is not a ’duplicate’ of the original – a simple task today for anyone not a ’duplicate’ of the original – a simple task today for anyone with a computer.with a computer.

• ““This data confirms what we have known all This data confirms what we have known all along – the American people share the view along – the American people share the view that database piracy is a serious problem and that database piracy is a serious problem and that there is an urgent need to enact anti-that there is an urgent need to enact anti-piracy legislation in congress…consumer piracy legislation in congress…consumer access to accurate information is being access to accurate information is being compromised when anyone can copy and steal compromised when anyone can copy and steal a privately owned database with no fear of a privately owned database with no fear of penalty. Without protection, databases are in penalty. Without protection, databases are in jeopardy and consumers will lose access to jeopardy and consumers will lose access to trusted information.” – Gail Littlejohn and Reed trusted information.” – Gail Littlejohn and Reed ElsevierElsevier

H.R. 1858H.R. 1858

““consumer and investor access to consumer and investor access to information act of 1999”information act of 1999”• Focused on the value of information to Focused on the value of information to

consumers and the benefits to Internet users consumers and the benefits to Internet users from being able to obtain comparisons of from being able to obtain comparisons of information from different databases.information from different databases.

The bill would proscribe “the sale or distribution to The bill would proscribe “the sale or distribution to the public of any database that (1) is a duplicated of the public of any database that (1) is a duplicated of another database collected and organized by another another database collected and organized by another person or entity; and (2) is sold or distributed in person or entity; and (2) is sold or distributed in commerce in competition with the other database.”commerce in competition with the other database.”

• Enforcement responsibility would be assigned Enforcement responsibility would be assigned to the Federal Trade Commissionto the Federal Trade Commission

H.R. 1858 supportersH.R. 1858 supporters Argued that H.R. 354 would give too much protection to Argued that H.R. 354 would give too much protection to

databases, effectively creating data monopolies.databases, effectively creating data monopolies.• ““the bill would mean they would have absolute ownership right the bill would mean they would have absolute ownership right

over something as basic as stock quotes.” a spokes person for over something as basic as stock quotes.” a spokes person for the Chamber of Commerce said, “factual data is the nuts and the Chamber of Commerce said, “factual data is the nuts and bolts of the information age. If you try to control its use, your bolts of the information age. If you try to control its use, your going to stifle commerce.”going to stifle commerce.”

Companies backing H.R. 1858Companies backing H.R. 1858• Yahoo!Yahoo!• AOLAOL• Research librariansResearch librarians• Telecommunications companiesTelecommunications companies• The U.S. Chamber of CommerceThe U.S. Chamber of Commerce• Consumers UnionConsumers Union• Charles SchwabCharles Schwab• BloombergBloomberg

NetCoalition.comNetCoalition.com

NetCoalition.com believedNetCoalition.com believed ““as congress considers the database issue, it must balance the as congress considers the database issue, it must balance the

objective of preventing database piracy with the equally objective of preventing database piracy with the equally important objective of preserving legitimate access to important objective of preserving legitimate access to information, that does not conflict with the principles in feist. information, that does not conflict with the principles in feist. Accordingly, additional database protection should be narrowly Accordingly, additional database protection should be narrowly crafted to address specific, defined problems. NetCoalition.com crafted to address specific, defined problems. NetCoalition.com believes that H.R. 1858 meets this test and, against the believes that H.R. 1858 meets this test and, against the background of the many existing forms of protection, achieves background of the many existing forms of protection, achieves the necessary balance between protection and access.”the necessary balance between protection and access.”

““The Internet is in fact a network of databases, and information The Internet is in fact a network of databases, and information is made accessible through tables of routers and a is made accessible through tables of routers and a standardized system of IP addressing that enables the Internet standardized system of IP addressing that enables the Internet to work. If the original compilers of those ‘databases’ exerted to work. If the original compilers of those ‘databases’ exerted monopoly control over, or prohibited, downstream users of the monopoly control over, or prohibited, downstream users of the information complied in those databases, the future operation information complied in those databases, the future operation of the Internet would be threatened.” – Frank Politano of AT&Tof the Internet would be threatened.” – Frank Politano of AT&T

ChallengesChallenges eBayeBay

• Its database and the community it had developed Its database and the community it had developed were important strategic assets for eBay.were important strategic assets for eBay.

Its biggest challenge ahead would be to protect those Its biggest challenge ahead would be to protect those assets while allowing information to flow freely on the assets while allowing information to flow freely on the internet.internet.

Bidder’s Edge and other Auction Aggregators.Bidder’s Edge and other Auction Aggregators.• Needed legalisations to fall on their side to allow for Needed legalisations to fall on their side to allow for

their businesses to continue.their businesses to continue. ““we’re no different from any other search engine. Yahoo! we’re no different from any other search engine. Yahoo!

And Lycos gather lots of information every day from sites And Lycos gather lots of information every day from sites without exclusive permission. If eBay is right and the without exclusive permission. If eBay is right and the courts agree, that would rip the guts out of the Web itself.”courts agree, that would rip the guts out of the Web itself.”