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eBay Not Liable for Sale of Counterfeit Tiffany Jewelry on its Auction Site: NY District Court
Tiffany (NJ) Inc., et al. eBay, Inc.
No 04 Civ. 4607 (RJS), U.S. District Court for the Southern District of New York, 07/14/2008
Companies Mentioned: eBay, Inc., Tiffany & Co., Tiffany (NJ) Inc.
Holding
In a ruling that runs counter to those issued by European courts, the U.S. District Court for the Southern District of New York dismissed trademark infringement claims filed by world-renowned jeweler Tiffany against online auction site eBay, Inc., stating that Tiffany should bear the burden of policing its valuable trademarks in internet commerce. In dismissing Tiffany's charge of direct trademark infringement, the district court found that the use of Tiffany trademarks by eBay in its advertising, on its home page and in sponsored links purchased through Yahoo! and Google, is a protected, nominative fair use of the marks. With regard to the claim of contributory trademark infringement, the district court held that the standard was not whether eBay could reasonably anticipate infringement by people selling Tiffany knock-offs on its site. But rather, the standard to be applied was whether eBay kept offering its services to sellers it knew or had reason to know were infringing on Tiffany's marks. The result of the application of this standard is that Tiffany must ultimately bear the burden of protecting its trademark. Policymakers may yet decide that the law as it stands is inadequate to protect rights of owners in light of the increasing scope of Internet commerce and the concomitant rise in potential trademark infringement. Hence, the district court similarly dismissed Tiffany's charge of contributory trademark infringement.
Detailed Summary
Plaintiff Tiffany (NJ) Inc. and Tiffany & Co. ("Tiffany") are engaged in the business of design and sale of high quality and luxury goods under the TIFFANY Marks, including jewelry, watches, and home items such as china, crystal, and clocks. The protection of the quality and integrity of the brand and the trademarks is critical to Tiffany’s success as a retailer of luxury goods. Opinion, p. 4, citing Kowalski Decl. paragraph 4. Tiffany does not sell or authorize the sale of Tiffany merchandise on eBay or other online marketplaces. More generally, Tiffany does not use liquidators, sell overstock merchandise, or put its goods on sale at discounted prices. Id., p. 6, citing Zalewska Decl. paragraphs 8, 10.
Tiffany brought this action against eBay, the prominent online marketplace, for the sale of counterfeit Tiffany silver jewelry on its website. Specifically, Tiffany alleged that hundreds of thousands of counterfeit silver jewelry items were offered for sale on eBay’s website from 2003 to 2006. Tiffany sought to hold eBay liable for direct and contributory trademark infringement, unfair competition, false advertising, and direct and contributory trademark dilution, on the grounds that eBay facilitated and allowed these counterfeit items to be sold on its website. Id., p. 1.
Tiffany admitted that individual sellers, rather than eBay, are responsible for listing and selling counterfeit Tiffany items. Nevertheless, Tiffany argued that eBay was on notice that a problem existed and accordingly, that eBay had the obligation to investigate and control the illegal activities of these sellers — specifically, by preemptively refusing to post any listing offering five or more Tiffany items and by immediately suspending sellers upon learning of Tiffany’s belief that the seller had engaged in potentially infringing activity. Id., pp. 1-2.
According to the district court, the heart of this dispute was not whether counterfeit Tiffany jewelry should flourish on eBay, but rather, who should bear the burden of policing Tiffany’s valuable trademarks in Internet commerce. The district court resolved this issue in favor of eBay, dismissing direct and contributory trademark infringement claims.
With regard to the charge of direct trademark infringement, the district court found 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. Id., p. 32. The district court cited three reasons for this holding. First, eBay demonstrated that the product in question - here, Tiffany silver jewelry - was not readily identifiable without the use of the Tiffany trademark. Id., citing Playboy Enters. v. Welles, 279 F.3d 796, 802 (9th Cir. 2002).
The second reason for dismissing Tiffany’s direct trademark infringement claim was that eBay has demonstrated that it used only so much of the mark or marks as was reasonably necessary to identify the product or service. Id., p. 33, citing New Kids on the Block v. News Am. Publ’g, Inc., 971 F.2d 302, 308 (9th Cir. 1992). eBay’s use of the TIFFANY Marks on its website and in its communications to eBay buyers and sellers is similarly limited to the Tiffany name. Id., citing Pl.’s Exs. 1158, 1159, 1160, 1161, 1164.
The third reason for dismissing Tiffany’s direct trademark infringement claim was that eBay has shown that it did not do anything that would suggest sponsorship or endorsement by the trademark holder. Id., citing New Kids on the Block, 971 F.2d at 308. At most, the use of the TIFFANY Marks suggested that individual eBay sellers were selling authentic Tiffany merchandise on eBay. There was scant evidence to suggest that eBay’s use of the TIFFANY Marks on its website has confused customers as to whether Tiffany itself was selling its own merchandise through eBay.
With regard to Tiffany’s charge of contributory trademark infringement claim, the district court similarly found in favor of e Bay. According to the district court, in determining whether eBay was liable, the standard 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. Id., p.2, citing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982).
Here, when Tiffany put eBay on notice of specific items that Tiffany believed to be infringing, eBay immediately removed those listings. eBay refused, however, to monitor its website and preemptively remove listings of Tiffany jewelry before the listings became public. The law does not impose liability for contributory trademark infringement on eBay for its refusal to take such preemptive steps in light of eBay’s “reasonable anticipation” or generalized knowledge that counterfeit goods might be sold on its website. Quite simply, the law demands more specific knowledge as to which items are infringing and which seller is listing those items before requiring eBay to take action. The result of the application of this legal standard is that Tiffany must ultimately bear the burden of protecting its trademark.
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.
The district court further found that when eBay possessed the requisite knowledge, it took appropriate steps to remove listings and suspend service. Under these circumstances, the district court refused to impose liability for contributory trademark infringement.
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