Monday, July 14, 2008

Tiffany & Co. loses its contributory trademark infringement lawsuit against eBay

The trademark news story du jour was the long awaited (and lengthy) decision in the Tiffany v. eBay trademark infringement lawsuit. See Tiffany (NJ) Inc. and Tiffany and Company v. eBay, Inc., Case, No. 04-cv-04607 (July 14, 2008). See news stories here and here.

Judge Richard J. Sullivan of the U.S. district Court for the Southern District of New York decided that eBay was not liable for contributory trademark infringement for the actions of sellers of counterfeit Tiffany & Co. items over eBay’s auction website.

Tiffany had tried to argue that the law required eBay to monitor its website and preemptively remove listings of Tiffany jewelry. However, the court held that the law does not impose liability for contributory trademark infringement for eBay refusing to take such steps based on a “reasonable anticipation” that counterfeit goods might be sold on its site, but instead requires that action be taken only after eBay has specific knowledge regarding infringing items and the sellers listing such items.

Stated another way, the standard for contributory trademark infringement is “not whether eBay could reasonably anticipate possible infringement, but rather whether eBay continued to supply its services to sellers when it knew or had reason to know of infringement by those sellers. See Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982).” In this case, the court found that eBay took the appropriate steps to remove listings once it was given specific knowledge about counterfeit items, and thus was not liable for contributory trademark infringement

The court summarized as follows:

[T]he law is clear: it is the trademark owner's burden to police its mark, and companies like eBay cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might be occurring on their website.

The court also rejected Tiffany’s claims of false advertising and trademark dilution on the basis that eBay’s use of Tiffany’s trademarks – in its advertising, on its home page, and in sponsored links purchased through Yahoo! and Google – constitutes protected, nominative fair use of such marks. Specifically, eBay established that Tiffany’s product is “one not readily identifiable without use of the trademark,” demonstrated that it “used only so much of the marks as was reasonably necessary to identify the product,” and proved that “it did not do anything that would suggest sponsorship or endorsement” by Tiffany.

What is interesting about this court’s decision is that it stands in stark contrast to the adverse decision eBay has obtained in Europe. Recently, a French court ordered eBay to pay over $60 million to Louis Vuitton for similar claims of counterfeiting (New York Times story here). eBay lost a similar challenge brought by the maker of Hermes scarves (Businessweek story here).

Expect an appeal to the Second Circuit Court of Appeals from Tiffany.

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