A federal judge has ruled that eBay Inc. has fulfilled its obligation to investigate and control sellers trying to sell counterfeit Tiffany & Co. goods on its Web site (download PDF).
Richard Sullivan, judge of the U.S. District Court for the Southern District of New York, ruled that Tiffany, and not eBay, is responsible for monitoring the eBay Web site for counterfeit Tiffany goods and for bringing those counterfeit goods to the online auctioner's attention.
The ruling is a major victory for eBay in its fight with luxury goods companies over the sale of their merchandise -- counterfeit or otherwise -- on its Web site.
Although the judge said he was sympathetic to Tiffany's claims, he said the law was clear, and the burden was on the trademark owner to police its mark.
"Companies like eBay cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might be occurring on their Web sites," Sullivan said in his ruling. "The court finds that the plaintiff has failed to satisfy its burden on all of its claims."
A Tiffany spokesman said the company is disappointed with the decision.
"We are shocked and deeply disappointed in the district court's erroneous reading of the law," said a Tiffany spokesman. "This ruling allows sellers of counterfeit goods on eBay to victimize consumers. Tiffany filed the case because we believed, and continue to believe, that eBay unfairly and illegally profits at Tiffany's and the public's expense through the sale of counterfeit merchandise and thereby damages the public's confidence in the integrity of the marketplace."
The spokesman said the sale of counterfeit Tiffany merchandise on eBay is not only an issue for Tiffany, but also for members of the public who may believe that that are buy authentic Tiffany goods when there's a chance they are buying counterfeit goods.
"We believe that eBay is legally responsible for the trademark infringement of those selling counterfeit Tiffany jewelry, and that eBay cannot avoid liability by placing the entire burden of enforcement on Tiffany and on the other manufacturers of well-known brand-name products," he said.
The spokesman added he would be surprised if Tiffany did not appeal the decision.
An eBay spokeswoman said the decision affirms that eBay's efforts to stop counterfeit sales are reasonable. "The ruling confirms that eBay acted reasonably and has adequate procedures in place to effectively address counterfeiting," said eBay spokeswoman Nichola Sharpe. "The ruling appropriately establishes that protecting brands and trademarks is the primary burden of rights owners. While today's decision is a victory for consumer choice, it is a shame that so much effort has been wasted when Tiffany could have worked with eBay to more effectively fight counterfeits. EBay will continue to lead the industry with innovative solutions to stop the sale of counterfeits."
In June, the Tribunal de Commerce in Paris fined eBay $61 million for allowing the sale of Louis Vuitton Malletier and Christian Dior Couture counterfeit goods on its Web site. That decision came on the heels of a similar ruling by a separate French court that ordered eBay to pay $31,000 to Hermes International for selling fake Hermes handbags.
In 2004, Tiffany sued eBay in federal court in New York, claiming that the company didn't do enough to keep counterfeit goods off its Web site.
EBay disagreed, saying it take steps to stop the sale of counterfeit goods through its Verified Rights Owners (VeRO) Program, which provides tools to help companies look for fake goods on the site. Under the program, if a company determines that a user is selling counterfeit merchandise, it notifies eBay, which immediately takes down the auction.
"Congratulations to eBay; that's a big win for them," said Eric Goldman, assistant professor and director of the High Tech Law Institute at the Santa Clara University School of Law, in an interview. "That is exactly what eBay was arguing, and it sounds like they got the judge to fully see the world the way that they described it. And the judge appears to have allocated the costs to the plaintiff, which is where a lot of people think the costs ought to reside."
Goldman said he had not predicted the outcome of the case because of the lack of precedence in the U.S. on trademark liability on the Internet.
"For now, this is a major win for eBay specifically, but it's also a win generally for online service providers who have been receiving trademark takedown notices and haven't known what to do about them," Goldman noted in a blog post. "Unfortunately, a nice clean win like this also invites a challenge, and I'd be surprised if this ruling were the end of it. Instead, the battleground might just shift to the Second Circuit or Congress."