The court also told eBay that it could use other people's trade
marked terms in ads on its site and in ads it places on other
people's websites.
Jeweller Tiffany sued eBay in 2004 over the counterfeit Tiffany
items that flooded the site, arguing that the company was liable
for the trade mark infringement resulting from the sale of the
fakes.
Judge Richard Sullivan in the US District Court in New York
ruled that eBay was not responsible for all trade mark infringement
on its site and said that its anti-counterfeiting policies were
sufficient.
Sullivan said that eBay could not be held responsible for trade
mark infringement "based solely on their generalized knowledge that
trademark infringement might be occurring on their Web sites".
He said that taking down of specific listings brought to eBay's
attention by Tiffany was sufficient protection for trade mark
holders. The ruling confirms that it is up to the owner of a trade
mark to protect it.
"Tiffany must ultimately bear the burden of protecting its
trademark," said the ruling. "Policymakers may yet decide that the
law as it stands is inadequate to protect rights owners in light of
the increasing scope of Internet commerce and the concomitant rise
in potential trademark infringement. Nevertheless, under the law as
it currently stands, it does not matter whether eBay or Tiffany
could more efficiently bear the burden of policing the eBay website
for Tiffany counterfeits – an open question left unresolved by this
trial."
"Instead, the issue is whether eBay continued to provide its
website to sellers when eBay knew or had reason to know that those
sellers were using the website to traffic in counterfeit Tiffany
jewelry. The Court finds that when eBay possessed the requisite
knowledge, it took appropriate steps to remove listings and suspend
service," it said.
Had the court ruled in favour of Tiffany it could have
undermined the entire eBay business. If eBay had to check every
single listing for authenticity then the cost of listing an item
would be likely to become prohibitively expensive, observers
said.
EBay suffered a recent court setback when a French judge said
that its anti-counterfeiting procedures were inadequate. Handbag,
clothing and perfume company Louis Vuitton Moët Hennessy (LVMH)
sued eBay, claiming that the company did not do enough to combat
the sale of counterfeits of its goods.
The French court found "serious faults" in eBay's processes that
led to auctions of counterfeit goods going ahead and ordered it to
pay €39 million to the brand holders. By allowing the sales, it
said, eBay had damaged the reputation of luxury brands such as
Louis Vuitton and Christian Dior, it said.
EBay was told by another French court earlier this year to pay
Hermes €20,000 over the sale of three Hermes bags, two of which
were fakes.
The New York court's ruling will protect its US business, which
is responsible for nearly half of the company's earnings.
"This ruling appropriately established that protecting
trademarks is the primary burden of rights owners – not
marketplaces like eBay," said Rob Chesnut, senior vice president
and legal counsel at eBay. "The court ruled that eBay does in fact
meet its responsibilities regarding counterfeits."
Tiffany spokesman Mark Aaron told the Associated Press news
agency that the company was "shocked and deeply dismayed" at the
decision, and Tiffany lawyer James Swire told AP that the company
may appeal the ruling.
Trade mark law expert Lindsey Wrenn of Pinsent Masons, the law
firm behind OUT-LAW, said that the French cases found eBay to be
complicit in the sale of counterfeit goods through its failure to
act.
"It was held that eBay were more than a passive intermediary as
they are well aware of transactions since they take a percentage
cut," said Wrenn. "The US court ruling takes a different view on
the question of complicity, requiring less of eBay in its actions
to prevent counterfeits so as to amount to contributory
infringement."
"The US court ruling held that in order for eBay's actions to
amount to contributory infringement they would have had to continue
supplying services to those whom it knew or had reason to know were
infringing the Tiffany trade marks," said Wrenn. "
Wrenn also pointed out that the US court referred to the
fact that Tiffany had chosen to sue eBay rather than the individual
sellers, and that it had chosen not to participate in eBay's
programmes that help brand owners prevent fraud.
"This may have tipped the balance in terms of what was expected
of eBay and the US court was not prepared to accept they had been
complicit in the infringements," said Wrenn.
The court also defended eBay's right to use the term Tiffany in
adverts for eBay which are displayed on other people's websites.
The company advertised the availability of Tiffany goods until the
jeweller's lawsuit, and the court now says that it can resume that
practice.
"The Court finds that eBay’s use of Tiffany’s trademarks in its
advertising, on its homepage, and in sponsored links purchased
through Yahoo! and Google, is a protected, nominative fair use of
the marks," said Sullivan.
