Two California gallery owners were arrested on Oct 2, 2013 for allegedly selling fraudulent Damien Hirst pieces online through eBay and various auction houses. (Damien Hirst is a world-famous English artist associated with the Young British Artists movement and is known for his controversial paintings, sculptures and large-scale installations). The two men, Vincent Lopreto and Ronald Bell, own and worked at JazzArtz, a gallery in Laguna Beach.
Undercover officials coordinated with the Manhattan District Attorney to purchase several of the forged pieces online. Detectives in Laguna Beach conducted surveillance of the two individuals and witnessed the mailing of the phony pieces. Search of the gallery yielded additional counterfeit Hirst works of art, fake certificates of authenticity and tools used to make reproductions. The investigation also revealed possible victims across the globe from South Korea, Spain, Italy, the Netherlands and Japan.
Lopreto and Bell were held on New York arrest warrants for fraud, attempts to defraud and identity theft in the first degree. Incidentally, Lopreto was arrested in 2008 for the fraudulent sale of various Damien Hirst paintings through eBay and was sentenced to prison for five years.
While fraudulent sales through eBay are nothing new, such schemes do raise questions about eBay’s potential liability in this case. Situations like the present one often involve IP rights owners attempting to hold eBay liable on a theory of contributory negligence for allowing the infringing materials to be sold through its channels. However the current state of the law appears to protect eBay from such suits.
For example, Sec. 512(c) of the Digital Millennium Copyright Act (DMCA) provides a safe harbor for online businesses such as eBay. This provision states that if an internet service provider does not have actual knowledge of the existence of infringing material or activities on its site then it can not be held vicariously liable for violations of third parties. However if the rights owner provides notice of the infringing activity to the internet service provider then the service provider must act promptly to take down the offensive material or subject itself to liability.
The 9th Circuit’s decision in Fonovisa demonstrates that in order for a service provider such as eBay to be held liable on a theory of contributory copyright infringement, it must be found to (1) have “knowledge of the infringing activity” and (2) “induce, cause, or materially contribute to the infringing conduct of another”. Clearly eBay satisfies the second prong of the 9th Circuit’s test in this situation. eBay “materially contributes” to a third party’s infringing conduct by providing the channel through which counterfeit works of art are sold. The problem is the first prong. While eBay has general knowledge that infringing activity occurs on its website (evidenced by the various take down policies it implements), it is difficult to show that eBay has specific knowledge that a particular seller is engaging in conduct that infringes on the rights of the copyrights owner.
While it is clear that Lopreto and Bell will be subject to criminal penalties, it is unlikely that Damien Hirst (assuming he owns the rights to these works) has a viable claim against eBay unless he can show that eBay knew of the infringing conduct and did not promptly act to remedy the infringing activity. It seems that at present, Damien Hirst is otherwise occupied with commissions from Doha’s Museum Authority as evidenced by the series of sculptures unveiled at the Sidra Medical and Research Center and the decoration of the exterior of the Al Riwaq exhibition space.
 See Damien Hirst Biogrpahy, http://www.damienhirst.com/biography/read-more-about-the-artist (last visited Oct. 14, 2013).
 KABC-TV Los Angeles, CA, Laguna Beach Art Gallery Owner Arrested for Allegedly Selling Fakes (Oct. 4, 2013), http://abclocal.go.com/kabc/story?section=news/local/orange_county&id=9274417; JazzArtz, http://www.jazzartz.com.
 Rich Kane, Arrest: Two Laguna Beach Men Accused of Selling Fake Damien Hirst Art, Laguna Beach Patch (Oct. 3, 2013), http://lagunabeach.patch.com/groups/police-and-fire/p/arrest-two-laguna-beach-men-accused-of-selling-fake-damien-hirst-art; see also NY PL 190.80(1), NY PL 190.65(1)(b).
 See 17 U.S.C. § 512(c).
 Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996) (quoting Gershwin Publ’ Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)).
 See How eBay Protects Intellectual Property (VeRO), http://pages.ebay.com/help/policies/programs-vero-ov.html (last visited Oct. 12, 2013).
 See also Tiffany (NJ) Inc. v. e Bay Inc., 600 F.3d 93 (2d Cir. 2010) (holding that eBay was not liable for contributory trademark infringement for the sale of numerous fake Tiffany pieces simply because eBay had generalized knowledge of infringing activity occurring on its site).
 See Carol Vogel, Art, From Conception to Birth in Qatar, N.Y. Times (Oct. 7, 2013) http://www.nytimes.com/2013/10/08/arts/design/damien-hirsts-anatomical-sculptures-have-their-debut.html?pagewanted=1; see also Carol Vogel, The Gang’s All there, Talking Art in Qatar, N.Y. Times (Oct. 13, 2013) http://www.nytimes.com/2013/10/14/arts/design/eyes-in-doha-are-on-damien-hirsts-and-warhols.html?_r=0.