EBay wins ruling against Tiffany in lawsuit over counterfeit goods

A federal judge Monday came down on the side of eBay, the dominant online marketplace, in an epic battle with one of America’s leading luxury brand names, Tiffany.

The court handed eBay a crucial victory in a trademark case that could help settle how far an online marketplace need go to prevent the sale of counterfeit goods on its Web site.

Tiffany, which has cultivated an image of quality and luxury in its offerings of jewelry, sterling silver and crystal, sued eBay after it found knockoffs of its wares being sold on eBay at cut-rate prices.

But the court ruled that Tiffany was seeking too much control over online sales at eBay, which included not just fake Tiffany goods but legitimate secondhand items as well.

U.S. District Judge Richard Sullivan in New York ruled that it is chiefly Tiffany’s responsibility, and not the Internet auction giant’s, to police and protect against misuse of its brand name.

"Tiffany must ultimately bear the burden of protecting its trademark," the judge ruled.

Essentially, he told Tiffany to go after the counterfeiters rather than the Internet marketplace in which they sold their tainted wares.

The decision also vindicates San Jose-based eBay’s system for ferreting out and barring sellers of counterfeit items. "When eBay possessed the requisite knowledge, it took appropriate steps to remove listings and suspend service," the judge found.

Carl Tobias, a law professor at the University of Richmond in Virginia, called the ruling an important one for online commerce. "This ruling would put the responsibility on people who post on eBay, rather than on eBay." But he said he expects Tiffany to round up other retailers and seek changes in the law from Congress.

"The court ruling reaffirms we have been doing enough to keep counterfeits off the site," said Nichola Sharp, an eBay spokeswoman.

Tiffany reacted with dismay.

"We are shocked and deeply disappointed in the district court’s erroneous reading of the law," said Mark Aaron, a Tiffany vice president. "This ruling allows sellers of counterfeit goods on eBay to victimize consumers."

Aaron said he’d be "surprised" if Tiffany did not appeal.

The online auction house has been engaged in an ongoing legal tussle with several luxury-goods retailers. Two weeks ago, the Commercial Court of Paris awarded Luis Vuitton and other luxury retailers $63 million in a similar copyright infringement case against eBay.

Tiffany’s was the first lawsuit against eBay in the United States involving a major global luxury brand.

Sullivan agreed with estimates that "a significant portion" of Tiffany silver jewelry listed on eBay’s Web site during surveys by Tiffany was counterfeit, but that was largely Tiffany’s problem unless Congress changes the law.

"The court is not unsympathetic to Tiffany and other rights owners who have invested enormous resources in developing their brand, only to see them illicitly and efficiently exploited by others on the Internet," Sullivan concluded.

"Nevertheless, the 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 it might be occurring on their Web sites, he ruled.

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