Tiffany appeals ruling in eBay counterfeit listings case

Updated at 2:10 PM PDT with analysis from attorney Heather McDonald.

Tiffany & Co. announced on Monday that it is appealing a recent federal court decision that said eBay is not responsible for policing counterfeit listings on its auction site.

In July, U.S. District Judge Richard Sullivan ruled that eBay could not be forced by trademark law to examine individual auction listings. "The law is clear," he wrote. "It is the trademark owner's burden to police its mark."

"We believe that legal errors were made in this decision, and we have every reason to believe that the circuit court will look at them afresh and hopefully agree with us," Tiffany attorney James Swire, a partner at the law firm Arnold & Porter, said in an interview.

"If one were a flea market operator and you become aware that counterfeiting is going on with the individual sellers at the flea market, you have a duty to investigate it," Swire said. "Why is eBay any different from that analogy?"

Tiffany filed suit against eBay in 2004 after it notified the auction site that 73 percent of a random sample of supposed Tiffany listings were, in fact, counterfeit. Tiffany primarily asked eBay to ban sellers who listed five or more objects of Tiffany jewelry under the logic that so many pieces were likely to be counterfeit. When that request was rebuffed, along with another request to ban all silver Tiffany jewelry listed on the site, Tiffany then filed suit.

"The effect of this is that eBay can continue to profit at the expense of consumers and trademark holders," Patrick Dorsey, general counsel to Tiffany, said in a press release. "Once eBay has reason to know that a specific brand like Tiffany & Co. is being widely counterfeited and sold, eBay should be compelled to investigate and take action to protect its customers and stop the illegal conduct."

eBay spokesperson Catherine England said on Monday: "Tiffany's decision to carry this litigation on after the District Court's decision doesn't do anything to combat counterfeiting. The best way to stop counterfeiting is ongoing collaboration between companies, government agencies and law enforcement."

The appeal comes on the heels of word that the Software and Information Industry Association may sue eBay over software counterfeits.

The auction site was also recently ordered by a French court to pay nearly $61 million in damages to LVMH Moet Hennessy Louis Vuitton to compensate for fraudulent listings. The German Federal Supreme Court also recently handed down a ruling against eBay in an appeal from Montres Rolex SA, requiring the auction site to take preventative measures against the sale of counterfeits.

The foreign cases may affect eBay's operations as much as the Tiffany case, according to Heather McDonald, an attorney with Baker Hostetler who specializes in intellectual property enforcement.

"In the event that the foreign courts uphold those rulings, eBay's going to have to change the way it does business," McDonald said. Given that eBay operates on one technological platform globally, she said, it should be a natural step for eBay to extend greater oversight both abroad and in the U.S.

"If they have the ability to prevent counterfeiting in France and Germany, then clearly they have the ability to prevent it in the United States," McDonald said. "The question is, why won't they?"

Furthermore, other auctions sites may have to take note of all of the litigation facing eBay. "There are other online sites that have to realize that they've got to up their game and do at least what eBay is doing if they want to insulate themselves from liability," McDonald said.

eBay has measures in place already to help curb counterfeit listings, such as a search engine that seeks out words in listings such as "replica" or "knock-off." It also has a program to enable trademark owners to report and remove infringing listings.

"There's no question that eBay has taken a lot steps to take its marketplace clean of counterfeiting, but there are literally thousands of counterfeited items for sale every day" on the site, McDonald said. "If those auctions actually conclude, eBay reaps a financial profit from that sale of a counterfeit item. If you're gong to profit from it, don't you already have some responsibility there?"

[Lerianis]

The fact is that EBay is not required to police the content on their site. If someone knows that someone on there is selling counterfeit software or counterfeit anything, they should e-mail eBay and they will take it down immediately or force the person in question to relist their items, from what I have heard from people who have done that.
Unless something is OBVIOUSLY illegal (such as child pornography), then eBay has absolutely no obligation to police the content.

[sanenazok]

That eBay has no responsibility for the content is what eBays whats you to believe. Whatever counterfeiting procedures they have right now obviously they're not that good or Tiffany would not be wasting tens of thousands of dollars on the lawsuit.

[sanenazok]

I have next to zero sympathy for fleaBay. They make money from the thousands of counterfeit items and close their eyes to complaints, apparently even from big wigs like Tiffany. Like what the spokesthing said: throw it back to someone else other than eBay. Especially the "law enforcement agencies." Yeah right, eBay will collect listing and other auction fees while cops all over America will do eBay's policing work. Nice for eBay that's for sure!

[tanis143]

sanenazok, go get a clue as its obvious you do not have one. If the merchant went out and selected the items to list on their site, yes they should be responsible for the items that they sell. Ebay is different in the fact that they are not selling anything. They provide a site that allows person A to sell/auction items to person B. That would be like trying to sue the landlord of a person who sold you a fake fur coat at a garage sale. Now, if they were doing something illegal, like selling drugs, then yes the landlord has an obligation to do something.

Ebay is just way too big for them to look at every single auction to make sure the items are legit. If Tiffany & Co. find items that are fake, they should just notify ebay about that particular seller and then let ebay deal with them.

[sanenazok]

The problem with analogies is they come back at you. Looking at your analogy, well what if the landlord of the garage sale got a "cut" from every sale and ignored complaints that the items were fake? That's what eBay did in this case.

[ckought]

I also have no sympathy for eBay -- when eBay does something wrong. In this case, eBay is legally in the right. If you look at it from Tiffany's own statistics, then 23% of the sales were legitimate. Also, since Tiffany has shown that it is capable of doing its own monitoring and sampling of items on eBay, then they've proven by their own testimony that they have the ability to "police their own copyrights" as required by law -- and they have the ability to remove any eBay listings that they find infringe on their copyrights and pursue legal recourse from those sellers that infringe on their copyrights. eBay does a lot of messed up @#$& -- but in this case, they are in the right.

[sanenazok]

The problem in the lawsuit was the eBay wasn't responding to Tiffany's complaints. eBay would not pull sellers that had sold multiple fake items hiding behind the "we're a neutral marketplace" shenanigan.

[benjaminstraight]

Of course they appeal because they lost.

[sanenazok]

Hey I'm not saying eBay has to look at every item. Tiffany would not sue eBay if eBay's fraud responses were adequate. Per the lawsuit, eBay was slow to take down multiple offenders and essentially required Tiffany to buy the counterfeit products....in other words in order to take items off the market Tiffany would have to buy them. Sure eBay doesn't have to police every item, but they have acceptable responses from right holders, otherwise it becomes a free for all even more than it already is.

[Kainchild]

Ebay never does anything about their counterfeit item sellers. They know the majority of their customer base are in fact these piraters. What amazes me is how come the big media companies that were holding companies like Napster and Kazaa responsible for their users content but for some weird reason Ebay goes unchecked. Don't these companies realize all of the illegal copied material that belongs to is being copied and sold without them making a single dollar from it. I think Hollywood should start cracking down it's huge legal muscle on this site and close it down till they can do something about all these bootleggers.

[ckought]

I've read in other stories (dealing with the SIIA threatening to sue eBay for similar claims) that eBay provides copyright holders with a mechanism to directly disable auctions that the copyright holder thinks may be infringing on their copyright. So, Tiffany doesn't have to buy items that it thinks are counterfeit -- they can block the auction themselves if they think the item is counterfeit. These companies (Tiffany & SIIA) are just trying to bully eBay into doing their work for them. eBay provides them with a way to police their own copyrights, which is above and beyond what the law requires, so I don't know how this is eBay's problem.

[RockHunter05]

eBay has lost control, or maybe never had it. I don't know why people still purchase luxury items on eBay when this case proved that a majority of the items are fake. The measures that eBay is taking are clearly not going to decrease the number of imitations, if anything they are going to make it so that it is harder to distinguish the fakes from the real. Why aren't more people going to Portero ( http://portero.com ). It is an authenticated luxury auction site. Unlike eBay's "Buyer Beware", Portero guarantees every item the sell.

[brilliant08]

in my opinion ebay knows exactly what is happening i don't know how many times i have reported fake tiffany items (please return to tiffany & co is not a genuine tiffany item) and they have gotten back to 48 hours later saying they will look into it but nothing ever happens the item stays listed and sells for around $400-500 dollars and lets not forget that paypal and ebay are owned by the same company so they make added profit as most people would pay by paypal for buyer protection. Please do not insult people intelligence ebay. But whats even worse have a look at oztion.com.au the fake christian louboutin lv, gucci, bvlgari, chanel, tiffany, ed hardy, software, pirated dvds the list is endless and when you report it they say they cannot do anything till they are notified by the verified rights owner. Like ebay they don;t care because they are making heaps of money from all the sales.

[hmetzenberg]

Let me offer another perspective here, that of the Verified Rights Owner. I participate in EBay's VeRO program, where I have taken down hundreds of EBay auctions, and identified hundreds of sellers who I believe are mostly selling either stolen or counterfeit merchandise.

While EBay claims that its VeRO program provides a safe harbor, protecting it from the law-breaking activities of its sellers, EBay is in fact adversarial and uncooperative towards the VeRO rights owners who, in good faith and under possible penalty for perjury, report violations of copyright and trademark laws to EBAY.

If you are not as big and as profitable as Tiffany, EBay will simply ignore your claims of trademark violations, responding with endless form letters and "requests for more information" when you send them obvious evidence of trademark or copyright infringement.

I am often forced to send several increasingly threatening letters to get a copyright infringer taken down. EBay punishes its sellers when they copy from each other, but looks the other way when they copy from legitimate vendors with registered copyrights. It is difficult to get them to act promptly. They present endless stumbling blocks to safeguard their sellers. They never seem to sanction a seller for copyright violations, even after many repeated takedown notices.

[TrademarkViolation]

There is a user on Ebay (a bidder, who seems not to be a seller) that exactly matches our registered trademark. A couple months ago we informed Ebay to stop using our registered trademark and ask their customer to change their name to something else. That request was supposed to be responded to within 24-48 hours, but was completely ignored by Ebay. No response received from Ebay. Our trademark and company is very small. We have noticed that Ebay users such as "ebay" "yahoo" "honda" etc. are "No longer registered user". Ebay rules prohibit registering usernames that match or are similar to registered trademarks. We are sending another notice to Ebay and we consider taking action against Ebay if Ebay ignores us again.