Embroidery Piracy and EBay/PayPal Privacy

The situation I described in yesterday’s story (see “Embroidering on a Copyright Shakedown Theme”) raises many troubling questions – questions I must admit I don’t have definitive answers for yet. But in looking for answers, I found myself asking yet one more question: what duty of privacy does eBay and its PayPal subsidiary owe customers purchasing goods via their services?

As near as I can tell, the ESPC letters had their origins a little over a year ago when the group settled a lawsuit it had filed against eBay. The ESPC, which then as now seemed to consist mostly of embroidery design house Great Notions and its business partners, had accused eBay of being complicit in illegal sales of copyrighted designs. Terms of the settlement were not announced, but an ESPC legal spokesman at the time made it clear he thought it would enable them to go after the buyers as well as sellers.

By the way, I have no doubt that the embroidery design piracy problem is a serious one. And not all buyers who purchased a suspect CD on eBay did so in complete innocence. Some of the letter recipients that I’ve heard from – particularly those who got their first letter many months ago – acknowledge they paid a couple dollars for a disk claiming to have thousands of designs and so knew all along it was probably a bootleg copy. But there are also many well-respected independent “digitizers” – people who make embroidery machine designs of their own – who sell CD collections on the Internet at prices similar to the ones we discussed yesterday.

In all likelihood, the ESPC letters would not have received any attention outside sewing circles if it hadn’t for lawsuits Great Notions brought against two Missouri women accused of selling, not buying, products that infringe Great Notions copyrights. Originally filed in Texas last year, the lawsuits were re-filed in Missouri this year. And for good measure, the ESPC filed a defamation suit against the two women over a Yahoo group it said they were running. In conjunction with those lawsuits, Greats Notions and ESPC’s attorney issued subpoenas to eBay and PayPal for their records on the defendants’ sales and to Yahoo for all information on anyone who’d posted in the Yahoo group.

That might have been a tactical error. Yahoo began notifying participants in the group that their information was being subpoenaed, which led to something of a stir. Not only did the Missouri defendants’ attorney file motions to quash all the subpoenas, the Electronic Frontier Foundation filed in support of quashing the Yahoo subpoena, posting documents in the process that provide us with the best window into this whole affair. But as fascinating as the defamation suit is, it’s a tangent to what we’re talking about here. And whether the Missouri women are guilty of infringing Great Notions copyrights will presumably be decided in court, so we don’t have to worry about that either.

On the other hand, the eBay and PayPal subpoenas are very relevant. Although the Missouri court has put a hold on all those subpoenas, there is an apparent coincidence here. The two buyers whose experience we discussed yesterday purchased their allegedly infringing CDs from one of the Missouri women. And, you will recall, they didn’t receive their first letters from ESPC until late July. So how did the ESPC get their name, postal address, and transaction information it needed to send those letters? Did eBay or PayPal give them up?

Well, like all the questions here, we’re not going to be able answer that one definitively, but eBay acknowledges it’s a distinct possibility. For one thing, PayPal somehow failed to get the message about the motion to quash the subpoenas, so it provided information to the ESPC pursuant to the July 10th subpoena. For another thing, responding to ESPC subpoenas for seller and buyer information has become something of a routine activity for eBay/PayPal.

“You will have to check with the Embroidery Software Protection Alliance to confirm what their sources of information on buyers have been,” an eBay spokesperson told me. “I can tell you that through the course of our conversations with them, they have actually filed multiple subpoenas, so it is entirely possible the folks you’re talking to were subjects of an earlier subpoena.” The eBay spokesperson also said that, contrary to what eBay buyers have been told when they asked eBay how the ESPC had gotten their purchase information, buyer information was not provided to the ESPC through eBay’s VERO (Verified Rights Owner) program.

For the record, I did manage to get through briefly to the attorney for the ESPC and Great Notions a few weeks ago. She told me they generally get the information about eBay buyers from the sellers as part of their settlement with the ESPC. When I asked how they got the information about those who bought from the Missouri women –who appear not to have settled, after all — the conversation to a somewhat abrupt end. She has not returned my subsequent calls. I also called the ESPC Executive Director over whose signature the initial letter to buyers goes out, but she said she cannot speak about the letter and referred me back to the ESPC attorney.

Of course, the eBay and PayPal privacy polices say they will provide your information to respond to subpoenas and other legal requests. (Actually, the eBay and PayPal privacy policies practically give them the right to sell your financial information on street corners, but let’s not get into that now.) But that still leave yet one more question: Shouldn’t eBay notify customers when information about their transactions is being subpoenaed? There is no legal requirement that eBay do so, their spokesperson told me, and eBay prefers not to insert itself in the middle of a legal process where it would not have all the answers to the questions customers would ask when given such notification.

That doesn’t strike me as much of an answer, either. Sure, eBay has no desire to get involved in intellectual property disputes, and they obviously know from experience that ESPC is a litigious outfit. But these are eBay and PayPal customers who are receiving these legal threats instead, some of whom have done absolutely nothing wrong. Yahoo thought it at least owed its users some notification that information about them was being subpoenaed. Instead of just rolling over time and time again, doesn’t eBay at the very least owe its customers the same?

Read and post comments about this story here.