In 2006, Tiffany & Company ("Tiffany") brought suit against eBay Inc. ("eBay"), alleging trademark infringement, trademark dilution, and false advertising. Tiffany claimed that eBay facilitated and advertised the sale of counterfeit Tiffany goods on its online auction website, however the district court held in 2008 that eBay was not liable under any of the alleged claims.
Tiffany appealed the decision, and in April 2010, the Second Circuit affirmed all counts but one, holding that eBay was not liable for contributory or direct trademark infringement or trademark dilution. The Second Circuit did, however, remand the false-advertising claim. The Court agreed that eBay's "Tiffany" advertisements were not per se false, as genuine Tiffany goods were available on the site, but was not convinced that the district court considered whether the ads were misleading. Advertising "Tiffany" jewelry may have implied that all Tiffany goods were indeed confirmed genuine, when the available merchandise was a mix of genuine and counterfeit product.
All other issues, though, were affirmed in favor of eBay. On the issue of contributory infringement, Tiffany alleged that eBay continued to make its marketplace services available to infringing sellers despite knowledge that counterfeit goods were being sold throughout its website. The Second Circuit disagreed, however, noting,
For contributory infringement liability to lie, a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods. Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.
To arrive at its conclusion, the Second Circuit applied the test for contributory infringement defined in the Supreme Court decision, Inwood Labs v. Ives Labs (1982), noting that eBay must have identified specific sellers engaging in infringing activity and then opted not to act for liability to stick. In this case, both Tiffany and the Court acknowledged eBay's prompt removal of counterfeit Tiffany listings within 24 hours of specific infringement notifications. Thus, Inwood supported eBay's position that, when notified of specific instances, it acts appropriately.
The Second Circuit also affirmed that eBay was not liable for trademark dilution of the TIFFANY mark, because eBay did not use the Tiffany trademark to refer to its own products or services. Likewise, the Court agreed that eBay did not directly infringe the TIFFANY trademark as eBay used the mark to "describe accurately that genuine goods [were] offered on its website."
When faced with Tiffany's complaint that brand owners should not be forced to police eBay's website every waking second of every day, the Court declined to bite, stating that its responsibility was to the law and facts at hand, not to designate trademark policemen.
Even though the Second Circuit seemed reluctant to assign trademark policing responsibility, it appears brand owners are still ultimately responsible for policing counterfeiting activity under this decision, even when that activity emanates from a single, very public source, in high volume. However, some responsibility may still befall the online merchants. As the district court revisits the false-advertising issue, online retailers may ultimately be forced to redefine advertising procedures for legitimately-branded goods when a possibility exists that some goods may be counterfeit.
Vol. 53, June 2010