Craig's List's "Erotic Services" Similar to Tiffany on eBay

The New York Times reported on November 6, 2008 that Craig's List had agreed with 40 attorneys general to take action to reduce the listing of prostitution and similar services on the site. So, Craig's List is now implementing business processes to discourage illegitimate service providers. This includes asking for phone numbers and charging a fee for which a credit card will have to be provided.

Back in July, CNET reported a New York court ruled that eBay was not responsible for trademark counterfeiting occurring on its website even if after Tiffany had provided eBay with knowledge of it. Like Craig's List, eBay implemented measures to prevent the unwanted activity. eBay used search engine technology to find keywords that would identify instances of blatant infringement. In addition, eBay provided a mechanism to allow trademark owners to report suspected infringement. As a result, eBay won its court case.

The real issue in both of these cases, is: "To what extent should an online conduit (like eBay and Craig's List) be obligated to police postings on its site or else be liable for the consequences? "

Before you jump to any conclusions, consider the fact that eBay's expert acknowledged that 30% or more of "Tiffany" items sold on eBay were probably counterfeit. Clearly companies like Craig's List and eBay are making money by allowing their sites to be used for such illegal activity. Why shouldn't they bear the cost?

On the other hand, sites like Craig's List and eBay serve a useful purpose and since they are merely conduits, why should they be held liable? In both cases, it seems like the legal results are coming down in favor of requiring these companies to use some reasonable processes to police their sites in exchange for immunity from liability. Is this a good thing?