Craigslist countersues eBay, escalating legal fight

Craigslist's countersuit claims that eBay is using its stake in the company to misappropriate confidential information and engage in false advertising

Classified-advertising site Craigslist is countersuing eBay, accusing the online auction company of using its stake in Craigslist to misappropriate proprietary information and engage in false advertising, trademark infringement, and a host of other wrongdoings.

The suit, filed in a San Francisco court, is a response to eBay's suit filed April 22 against Craigslist, which charged that Craigslist's board of directors secretly plotted to dilute eBay's 28.4 percent investment in the site after eBay launched a competing online classified-advertising service called Kijiji. eBay launched Kijiji overseas in 2005 and in the U.S. last year.

Craigslist's countersuit, filed Tuesday with the Superior Court of the State of California, reveals a sea of bad blood between the companies and escalates the legal battle between them. It also sheds light on tensions between the two that began even before eBay purchased its stake in Craigslist in August 2004.

In its suit, Craigslist accuses eBay of calling Kijiji a "Craigslist killer" inside the company and using the Craigslist moniker to confuse the public and "illegally divert" Internet traffic from Craigslist to eBay and the Kijiji site. Craigslist also accuses eBay of treating it as a subsidiary and making repeated unreasonable demands for confidential information.

Craigslist is asking the court to order eBay to return to it all shares acquired "by means of, or for the purpose of, unfair competition." It is also asking that eBay pay damages and return the profits it made from its misuse of Craigslist's information and trademark.

Craigslist has posted a link to the lawsuit on its Web site in a blog posting by CEO Jim Buckmaster. In the posting, he briefly outlines the charges his company is making against eBay and the relief Craigslist is requesting from the court.

According to eBay's suit against Craigslist, filed on April 22 in Delaware's Court of Chancery, Buckmaster and Craigslist founder Craig Newmark breached "fiduciary duties" to the company. eBay has accused the pair of diluting its stake to 24.85 percent of Craigslist's outstanding shares so eBay would not have the 25 percent investment it needed to elect a director to Craiglist's board.

Copyright © 2008 IDG Communications, Inc.

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