While many of us have “watched” auction items on the online auction house eBay, a recent appellate court opinion dealt with a different type of eBay watching – and in the process, addressed important questions concerning the liability of online intermediaries and the responsibilities of trademark owners.
In 2004, Tiffany & Co. filed suit against eBay, Inc. premised on eBay listings for counterfeit Tiffany jewelry. As an online auction house and electronic marketplace, eBay contains millions of product listings. Included in these listings is “Tiffany” jewelry. While some of these listings are for genuine pieces of “Tiffany” jewelry, many of these listings are for counterfeit goods – according to Tiffany’s research, upwards of 75% of the listings.
Tiffany alleged that by letting counterfeit items be sold on its site, eBay was liable for direct and contributory trademark infringement, trademark dilution, and false advertising. The lawsuit was filed in federal district court in New York and after a bench trial, the court ruled against Tiffany in 2008. Tiffany appealed, and in an opinion issued April 1, 2010, the Second Circuit Court of Appeals upheld the district court’s ruling. It remains to be scene whether Tiffany will appeal the decision to the U.S. Supreme Court.
Considering the claims, the appellate court noted that a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods for contributory trademark infringement to lie. In other words, eBay must have had knowledge of specific sellers of counterfeit items and fail to act in addressing these sellers to give rise to liability. The court noted eBay’s extensive anti-counterfeiting measures (including its VeRO notice-and-take-down program) and cooperation with intellectual property rights holders, and agreed with the district court that eBay’s conduct did not give rise to contributory infringement. With regard to liability for direct infringement, the court found that eBay’s use of Tiffany’s marks was lawful, as the marks were used to describe genuine goods offered in its listings. The court also rejected the claim for trademark dilution, as eBay did not use Tiffany’s marks to refer to its own products or services.
In considering the claim of false advertising, the appellate court remanded the case to the district court for further consideration. While the appellate court agreed with the district court’s ruling that eBay’s advertisements were not literally false (because its listings contained genuine Tiffany products), it noted that an advertisement may be false if it is likely to mislead or confuse consumers. As such, the Second Circuit returned the case to the district court for consideration as to whether the advertisements were misleading.
The appellate court’s decision carries implications for both trademark owners and online intermediaries. The decision affirmed that brand owners ultimately bear the responsibility for developing and implementing counterfeit enforcement plans. It is important for trademark holders to have a system in place to monitor for infringement and the sale of counterfeit goods. The decision also indicates that false advertising might present an additional viable avenue for recovery for trademark owners in trademark related claims. For online intermediaries, such companies need to have a system in place to address fraud and counterfeit goods-related complaints (i.e., at least a notice-and-take-down process) and should consider working with intellectual property rights owners to address these intellectual property concerns.
With any questions on how to protect your intellectual property, please contact
Matthew Bierlein at 614-229-4403.