“We respectfully ask the Superior Court in San Francisco to enjoin this conduct and order eBay to (1) make full restitution to craigslist, (2) disgorge their related profits (3) restore to craigslist all shares of the company acquired by means of, or for the purpose of unfair competition, and (4) pay punitive damages for their malicious behavior.”

As you may recall, eBay sued Craigslist last month alleging a variety of behaviour on the part of co-founders — and controlling shareholders — Craig Newmark and Jim Buckmaster, including the issuance of shares that diluted eBay’s stake below the 25-per-cent mark, as well as the creation of an even more dilutive “shareholder rights” agreement, otherwise known as a “poison pill” that had the effect of making it impossible for eBay to sell its stake to anyone other than Craig and/or Jim. Craigslist later made the statement public.

They’ve now done the same thing with their countersuit by posting the entire thing online. Among other things, the suit alleges that eBay tried twice to put executives from its Kijiji unit — which now competes head-to-head with Craigslist in the U.S. — on the board of the classified site. The lawsuit also says that eBay “has used Craigslist’s mark and name in commerce to confuse the public and illegally divert Internet traffic from Craigslist to eBay and its Kijiji site,” which appears to involve the buying of Google ads that linked to the eBay site but used Craigslist’s name.

The bulk of the suit seems concerned with what Craigslist says is eBay’s desire to gain access to “proprietary competitive information” to help Kijiji. My friend and fellow mesh organizer Rob Hyndman, a lawyer who specializes in technology startups, says that the lawsuit seems to be an attempt by Craigslist to “accomplish by litigation what it failed to accomplish by business planning and sensible precautions.”

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According to the statement (which obviously has only one side of the story) eBay says that Craig and Jim got mad when Kijiji — the eBay subsidiary that competes with Craigslist — started up operations in the United States, so they took a number of steps to dilute the company’s stake below 25 per cent (including issuing themselves a bunch of shares), and thereby removed a bunch of rights that eBay had as a shareholder. They also, according to eBay, instituted a “poison pill” that threatened to flood the place with cheap stock.

In other words, they did (or are alleged to have done) pretty much what Valleywag and others, including yours truly, thought they did when the lawsuit first emerged. Of course, what eBay is talking about isn’t really a poison pill — pills are typically designed to prevent hostile takeovers, but no one can take over Craigslist because Jim and Craig control it. This pill isn’t so much designed to prevent someone from buying as it is designed to prevent someone (namely eBay) from selling.

Can Craigslist do that? Obviously eBay is arguing that it can’t. And while you might think that the classified site is a private company and so Craig and Jim can do whatever they like, it’s not quite that simple. Ebay does have rights as a minority shareholder — and it argues that even if it did engage in competitive activity, the clause it triggered did not give Craig and Jim the right to prevent eBay from selling its stock to anyone but them. This could get ugly.

My earlier post on it and update follow:

Update:

Craigslist CEO Jim Buckmaster has posted an entry to the new Craigslist blog in which he apologizes for the “ham-handed” C&D letter described below, which the site sent to a blog called Craigslistblog.org. But Buckmaster also provides some more details about why the classified service went after Tim White’s blog; among other things, he says the blog was running misleading text ads with Craigslist’s name in them (the ads were apparently removed from the site before the blog post got a lot of attention).

To me, that changes things substantially. One of the principles behind domain-squatting cases is that in order to avoid such accusations, a domain should have been registered and used in good faith — in other words, not to generate revenue based on the potential misunderstanding generated by a similar domain name. It seems pretty clear that Craigslistblog.org was designed to do that, and so I am backing Craigslist on this one. Jim Buckmaster’s post, incidentally, is a nice example of how to apologize and still make your point.

Original post:

Seems like Craigslist is in some hot water over a blog. But not because its new official blog is really ugly, poorly-designed and difficult to use, which it is — although given the somewhat… er, “distinctive” look and feel of the classified site itself, it’s probably not surprising that the blog looks like my daughter’s fifth-grade class designed it using a version of Microsoft’s FrontPage from 1998 (Craigslist doesn’t have ads? Not to be outdone, the blog doesn’t have comments or an RSS feed).

In any case, it’s not Craigslist’s official blog that’s the issue — it’s a site called Craigslistblog.org, which was started up about a month ago by a guy named Tim White as a way of getting some discussion going about Craigslist, both good and bad. Then he got a rather brusque C&D letter from none other than Craigslist CEO Jim Buckmaster, which Tim has posted on his site. In no uncertain terms, it directs Tim to stop using the domain and the name Craigslist immediately or face legal action.

Tim,

We need you to stop using the infringing domain CRAIGSLISTBLOG.ORG immediately, and arrange for tranfer of it to us asap - using/selling/transfering infringing domains is illegal, and penalties up to $100,000 per domain can be applied.

Tim, however, responds that Jim has “gotten some bad legal counsel” and asks whether the company plans to shut down other sites with craigslist in the name, such as craigslistmap.info. Jim then copies Tim on a letter to Craigslist’s attorneys, in which he not-so-subtly mentions that the law firm does intellectual property work for “Google and a lot of other prominent companies.” As far as I can tell, Tim isn’t planning to back down.

Is Craigslist in the right here? I’m not a lawyer (although I sometimes play one on TV), but from my reading of past cases involving domain disputes, both WIPO rules and U.S. law require complainants to satisfy several conditions in order to win such a case. The first one — whether the domain name is confusingly similar — is a slam dunk for sure. But the other criteria are whether the defendant is making legitimate fair use of the name, and whether it was registered in bad faith (i.e. whether the defendant registered it with intent to profit from the confusion).

Those last two are a lot harder to answer, and I happen to think Tim has a pretty good case. Whether he can withstand a legal onslaught from Craigslist — which has about $60-million or so a year to play around with, as far as I can tell from the recent revenue numbers — is a separate question. It’s also interesting to note the anti-Craigslist comments on Tim’s post. I expect plenty of criticism of the classified site based on the contrast between its touchy-feely ethos and its actions.

As Mike Arrington notes in his post at TechCrunch, this shouldn’t be that surprising really. Craigslist is simply a mirror that reflects human behaviour at its best and possibly at its worst. Why does that have anything to do with the site itself? If someone arranges for a hitman to take out their spouse, and the medium of communication happens to be a newspaper ad, should the newspaper be liable? Hardly. If I call someone and arrange a bank robbery, is the phone company to blame for that?

Craigslist is simply an instrument. Obviously, if it publishes an ad that it knows to be fake or illegal — like the listings on eBay for human kidneys and so on — then it is potentially at fault. But it has no way of knowing whether Robert Salisbury of Jacksonville actually wants to give away all of his possessions, nor should it be expected to.

“We don’t focus on optimizing the revenue we have today. It has always been our philosophy to run the company at around break even as we grow.”

This reminded me of what Jim Buckmaster and Craig Newmark have always said about craigslist.org, which is that they basically spend zero time thinking about how to “monetize” all the eyeballs and pageviews they get (about eight billion a month or so) and spend close to 100 per cent of their time thinking about their users and what they want and need.

That drives Wall Street types and venture capitalists crazy, and people like to use those quotes to make a point about how unrealistic Web 2.0 businesses are, etc. etc. — but from a certain standpoint it makes perfect sense.

Not that you shouldn’t be thinking about a business model, obviously. But that can’t be your number one concern. If it is, you will almost certainly produce a crappy service that eventually fails, because no one goes there.