New York Federal Court Rejects Contributory Trademark Infringement Suit Brought by Tiffany Against eBay for the Sale of Counterfeit Goods

Internet Law: New York Caselaw: Trademark Infringement: On July 14, 2008, the U.S. District Court for the Southern District of New York issued a decision siding with eBay in a landmark trademark infringement lawsuit brought against the online auction site by Tiffany, Inc. and Tiffany and Company (collectively, “Tiffany”). Tiffany, Inc. v. eBay, Inc., Case No. 04-Civ-4607 (S.D.N.Y. July 14, 2008). In its suit, Tiffany sought to hold eBay liable for the sale of counterfeit Tiffany jewelry by eBay sellers under the doctrine of contributory trademark infringement. The Court rejected Tiffany’s claim, declining to accept a theory of liability which would have drastically expanded the reach of contributory trademark infringement.

Prior to bringing suit, Tiffany had informed eBay that a substantial amount of counterfeit Tiffany jewelry was being sold on the auction site. Tiffany demanded that eBay immediately suspend access to the site to any sellers that Tiffany identified as selling counterfeit goods. It also insisted that eBay remove any listings that offered five or more of the same Tiffany item for sale, contending that where a listing offered a large number of the same Tiffany item, the item was likely counterfeit. In response, eBay refused to comply with Tiffany’s requests.

In bringing its claim, Tiffany argued that eBay should be held liable for contributory trademark infringement because it had been put on notice (by Tiffany) that its sellers were engaging in counterfeit sales and thus it should have “reasonably anticipated” the wrongful sales of counterfeit (and infringing) merchandise occurring on its site. Accordingly, Tiffany argued, eBay had a legal obligation to proactively investigate and remove any listings that raised a suspicion of wrongdoing.

The Court disagreed with Tiffany, holding that eBay should be absolved of liability as long as it takes appropriate steps to suspend access to the site and remove listings when it receives specific knowledge that a particular listing is infringing. The Court noted that a trademark owner has the burden of policing its own mark. It found that eBay cannot be held liable for contributory infringement simply because of its generalized knowledge that some of its sellers might be engaging in infringing behavior.

In support of its decision, the Court cited Coca-Cola Co. v. Snow Crest Beverages, an earlier contributory infringement case having a similar fact pattern. 64 F.Supp. 980 (D. Mass. 1946), aff’d, 162 F.2d 280 (1st Cir. 1947). In that case, Coca-Cola claimed that Snow Crest had contributorily infringed its mark by selling an item called “Polar Cola” to bartenders who mixed it into “rum and Coke” drinks. Coca-Cola argued that Snow Crest should have reasonably anticipated the infringement because Coca-Cola’s lawyers had informed Snow Crest that the practice was occurring in a number of bars. Coca-Cola did not, however, provide names of specific bars where the alleged infringing behavior was occurring. The Coca-Cola Court refused to impute knowledge of the infringing behavior to Snow Crest based on a “blanket demand” by Coca-Cola.

Just as the Coca-Cola Court had held that Snow Crest should be liable based on generalized notice of what some of its buyers might be doing, the Court in Tiffany v. eBay held that generalized notice that some of its users might be selling counterfeit goods on its site was insufficient to impute knowledge to eBay of any specific acts of actual infringement. The Court reasoned that “the doctrine of contributory trademark infringement should not be used to require defendants to refuse to provide a product or service to those who merely might infringe the mark.” The Court took particular note of the fact that eBay had devoted a substantial amount of resources to establishing and implementing procedures to combat the sales of counterfeit goods.

The decision is a favorable one for entities offering services similar to eBay. Its holding sends the message that such intermediaries will not be responsible for investigating and policing all of the potentially infringing activity on their sites. It also highlights an additional potential defense for websites that are sued for its “members” acts, emphasizing the importance of detailed notice. On the other hand, the decision should also serve as a warning to trademark owners that they bear the burden of policing others’ use of their marks. Moreover, it accentuates the importance of a trademark owner providing very specific and detailed notice in the event of an infringement.

Notably, in a separate case brought against eBay in the Tribunal de Commerce in Paris, the court’s holding went in the opposite direction. There, the court found that eBay was not taking adequate measures to prevent the auction of unauthorized and counterfeit goods. It is interesting to note that different jurisdictions are interpreting website responsibility differently, thus creating different legal standards for the operation of a website in different areas.

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