Judge Rules for eBay, against Tiffany, in Trademark Suit

A Federal District Court judge in New York has ruled that an online retailer (eBay in this case) does not have a legal responsibility to prevent its users from selling counterfeit items on its site.

In ruling for eBay and against Tiffany & Co. (New York) in a four-year-old trademark lawsuit, Judge Richard Sullivan reaffirmed that Internet companies do not have to actively filter their sites for trademarked material. Rather, they can rely on intellectual property holders to monitor their sites, as long as they promptly remove material when rights holders complain.

“The court ruled that eBay does in fact meet its responsibilities regarding counterfeits,” said Rob Chesnut, eBay’s senior vp and legal counsel. “We aggressively fight counterfeits not only to meet our limited responsibilities, but also because counterfeits hurt the eBay community.”

Tiffany counsel James Swire said he was “shocked and disappointed” in the ruling. “The principal purpose of trademark law is first to protect consumers and then to protect brand owners,” he added. “You don’t get a real sense of that in this decision.” Swire said that Tiffany was likely to appeal the decision to the United States Court of Appeals for the Second Circuit.

Just last week, a French judge ordered eBay to pay $63.2 million to the French luxury goods maker LVMH Moët Hennessy Louis Vuitton SA (Paris) over counterfeiting charges. In April, a German appeals court ruled that eBay must take preventive measures against the sale of counterfeit Rolex watches.

Tiffany originally filed the trademark lawsuit against eBay in 2004, after conducting a study that found a majority of items bought on eBay under the Tiffany’s brand were fakes. Lawyers for Tiffany argued that eBay directly profited from infringement of its trademark, while eBay’s lawyers countered that it was required only to faithfully take down material when rights holders complained.

“Tiffany has failed to demonstrate that eBay knowingly encouraged others to dilute Tiffany’s trademarks,” Judge Sullivan wrote in a 66-page decision. “Rather, to the extent that eBay may have possessed general knowledge of infringement and dilution by sellers on its web site, eBay did not possess knowledge or a reason to know of specific instances of trademark infringement or dilution as required under the law.”