eBay wins counterfeit-sales suit filed by Tiffany

eBay cannot be forced to police its auction listings to identify counterfeit Tiffany & Co. products, a federal judge ruled on Monday in a lawsuit brought by the iconic 171-year-old jewelry company.

In what could become a landmark case for auction Web sites, the court said trademark law cannot be used to force eBay to shoulder the burden of examining individual auction listings for possible counterfeits.

"The court is not unsympathetic to Tiffany and other rights holders who have invested enormous resources in developing their brands, only to see them illicitly and efficiently exploited by others on the Internet," wrote U.S. District Judge Richard Sullivan. "Nevertheless, the law is clear: it is the trademark owner's burden to police its mark."

Tiffany attorney James Swire, a partner at Arnold & Porter, said he would be surprised if his client did not appeal. Swire said "the purpose of trademark law is to prevent consumer confusion and to protect the trademark owner...and I don't believe that purpose was honored by the judge's ruling."

For now, though, the decision relieves eBay--and companies such as Amazon.com, Yahoo, and Google that provide auction listings or product search results--of what would have been a significant financial burden and legal uncertainty. In the last few years, French courts have ordered eBay and Google to pay fines for trademark breach; a decision last month led to a $61 million fine for eBay that went to fashion giant LVMH Moet Hennessy Louis Vuitton.

It's not an insignificant problem: the U.S. Department of Homeland Security says counterfeiting is an "economic pandemic" that costs the U.S. economy more than $200 billion a year. Counterfeit goods may be manufactured domestically or imported through fraudulent shipping documents.

The lawsuit, which was filed in the southern district of New York, is not about whether counterfeit goods will be permitted on eBay (they're not, and trafficking in counterfeit goods is even a criminal offense). Rather, the debate is about whether the product manufacturer or the auction site should bear the cost of policing eBay listings for fakes.

For its part, eBay says it spends $5 million a year in maintaining its fraud search engine, which has 13,000 rules that are designed to identify counterfeit listings based on words such as "replica" or "knock-off." Listings flagged by the search engine are manually reviewed by customer service representatives.

In addition, eBay offers a Verified Rights Owner ("VeRO") program that lets trademark owners report and remove infringing listings. Tiffany is one of more than 14,000 companies and individuals participating in the VeRO program.

Making matters tricky is that it's perfectly legal to resell noncounterfeit Tiffany jewelry, with or without the famous blue boxes. And because eBay doesn't review the actual merchandise, which is exchanged directly between buyer and seller, it may not be able to identify illicit merchandise based only on the information provided in the auction listing.

In 2003, Tiffany's lawyers contacted eBay and said that because their client uses no third-party vendors, "any seller" of "five pieces or more of purported 'Tiffany' jewelry is almost certainly selling counterfeit merchandise" and the listing should be automatically deleted. eBay replied: "What you have asked us to do is to consider listings 'apparently infringing' simply because the seller is offering multiple Tiffany items. That we are not prepared to do at this time." A year later, Tiffany asked eBay to ban the sale of all silver "Tiffany" jewelry; eBay refused.

On Monday, Judge Sullivan put an end to that argument: "As a factual matter, there is little support for Tiffany's allegation that a seller listing five or more pieces of Tiffany jewelry is presumptively trafficking in counterfeit goods." In addition, Sullivan concluded that eBay always removed listings promptly after receiving notification from Tiffany, and noted that eBay delayed listings of Tiffany products by 6 to 12 hours to provide time for a manual review.

"There is no dispute that eBay was generally aware that counterfeit Tiffany jewelry was being listed and sold on eBay even prior to Tiffany's initial demand letter," Sullivan wrote. But he said that because "eBay does not continue to supply its services to those whom it knows, or has reason to know, are infringing Tiffany's trademarks," generalized knowledge is not enough to make the auction site liable.

The debate over whether Web companies should be held liable for what their users post is hardly new: It's been at the heart of some of the most bitter legal battles in the last decade. Those involve recent free-speech cases involving FriendFinder, Craigslist, and Roommates.com. Viacom's pursuit of YouTube through the court system is in a slightly different category because it involves intellectual-property law and the Digital Millennium Copyright Act. The extent to which trademark law restricts auction listings has been, until now, somewhat unclear.

There is one irony in this hard-fought legal battle, which has involved top-tier law firms and has almost certainly cost both sides millions of dollars in fees. Tiffany filed suit four years ago, when the auction site remained primarily focused on small sellers and before its new deal with Buy.com that has angered the eBay faithful.

Because eBay is trying to compete with Amazon.com (with an enviable stock price performance over the last two years, compared to eBay), by working with larger sellers, it may not have taken precisely the same hard line, if those letters from Tiffany had arrived today.

[xraydude]

I had an experience a year or two ago where someone was offering to sell with "buy it now" on new 80 GB ipods for a ridiculously low price. I informed ebay that they were selling a questionable or worse product, but near as I could tell, nothing happened. I thought you had to have a credit card on file to have an account. So keeping tabs on illegal activity should be very straight forward and criminals apprehended.

[humanssssss]

This is a good decision. "Tiffany" is a stolen name and the bag company use it to make a name for itself. When a company decides to base their trademark on common name, it is more of a burden on the company to provide trademark infringement.

[nh_chiker]

No one likes to be ripped off by counterfeits. In the end it's the consumer who loses out by paying more for a fake. It's too bad Tiffany and E-Bay can't work together and find a way to protect their customers.

[humanssssss]

Companies that plan to use word that commonly familiar with people should always be subjected to scrutiny of the market. For example, Apple. If people were to sell Apple or Apple this and that, it is Apple's responsibility to go after the person or company that infringes on the company's trademark because Apple is not unique nor should it ever be defensible. In fact, Apple may lose its trademark if its name gets diluted by market force; meaning Apple may need to change its name to be unique if it wants trademark protection.

Same goes with Windows. Windows is not unique.

These technology companies create names that are not unique and based on previous familiar knowledge by consumers to sell a product and should not have this advantage to leverage marketing prominence. That's why I perfectly agree with the decision.

[make_or_break]

'Tiffany' is NOT a "stolen name", as you so blithely put it. Charles Tiffany was a very REAL person who happen to be the FIRST to trademark his own surname for his jewelry business.

Your argument completely skirts the issue of forgery and counterfeit behavior who seek to take advantage of the prior reputation that some else invested in a trademark for their own grubby scheming. Your argument is completely bogus, because the POINT is that Tiffany & Co.--a jewerly maker among all of its other products--has identified a pattern of illicit transactions by others who are--guess what--selling Tiffany-branded jewelry that they presumably had made to cash in on someone else's reputation. Your wayward spin on the issue totally avoids that point.

The judge's decision was based not on whether Tiffany & Co. had any right to their trademark, because in his decision he more or less said they do. His rendering of his decision was based on the point that it's up to the trademark holder to police the use of its own name, and not the responsibility of a third-party like eBay. That said, I disagree with the judge's determination. Considering that Tiffany only sells their own products out of their own stores, it seems highly unlikely a third-party eBay seller would be able to have bulk quantities of REAL Tiffany product. eBay doesn't step in because in the end, it gets a percentage of all those illegal transactions. eBay talks a good game, but it would be bloody EXPENSIVE to have to police every seller that uses its services.

eBay got a reprieve with this ruling. But it's not over yet, especially in those nations that aren't so flippant about the rights of trademark and intellectual property owners.

[BCCM]

There is lots of fraud going on in the Internet. The fake forgeries and frauds are easy to deal with; after been exposed to greedy, racist, frauds you get a fairly decent education. WHat is more troubling is hacker invasion and Chinese and other Government hacking attempts at ordinary citizen computers. This is a much more serious issue I believe. Oh by the way eBay cesored one of our auctions that inadvertently exposed NASA fraud.

http://www.bccmeteorites.com/misconduct-planetary.html
http://www.bccmeteorites.com/NASAcert.html
SRD-BCCM

[BCCM]

There is lots of fraud going on in the Internet. The fake, forgeries and frauds are easy to deal with; after been exposed to greedy, racist, frauds you get a fairly decent education. WHat is more troubling is hacker invasion and Chinese and other Government hacking attempts at ordinary citizen computers. This is a much more serious issue I believe. Oh by the way eBay cesored one of our auctions that inadvertently exposed NASA fraud.

http://www.bccmeteorites.com/misconduct-planetary.html
http://www.bccmeteorites.com/NASAcert.html
SRD-BCCM

[lavern]

Honestly Ebay wouldn't want to stop counterfiet goods. They have alot of revenue coming on such products. its not in thier best interest. There have been several times when I alerted Ebay to counterfiets. They never did a thing.

[whitesites]

I don't think ebay cares about stopping the sale of fake merchadise. Obviously people don't think a LV purse is worth the $1200 it costs. Maybe LV should start embedding gold and precious stones into their stuff. Its pretty hard to replicate that stuff.

[Gromit801]

I find it difficult to believe eBay is not being held culpable to some degree. They are making money in form of listing fees, off any counterfeit products. They're the middle man taking a cut. In the physical world, that's called a "fence," and it's a felony.

[gsmiller88]

Usually eBay will pull any auction where the item is reported as being fake. I was selling authentic HP recovery discs on eBay once, and apparently HP got a hair up their *** about it and reported it and the auction was pulled. Let it be an actual scam though and nothing gets done about it. eBay only adheres to their own policy when they want.

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