Tiffany v eBay: Summary of the Ruling Rejecting Tiffany's Contributory Infringement Suit Against eBay
On July 14, the U.S. District Court for the Southern District of New York rejected Tiffany’s bid to invoke the doctrine of contributory infringement to hold eBay liable for the sale of counterfeit Tiffany jewelry by eBay sellers. Tiffany, Inc. v. eBay, Inc., Case No. 04-Civ-4607 (S.D.N.Y. July 14, 2008). Prior to filing the lawsuit, Tiffany had informed eBay that a large amount of counterfeit Tiffany jewelry was being sold on eBay and that sale of five or more of the same Tiffany items were very likely counterfeit. It had demanded that eBay preemptively remove listings containing five or more Tiffany items and automatically suspend the service of sellers that Tiffany identified as selling counterfeit goods. eBay refused to comply with these requests.
In its suit, Tiffany argued that the correct standard for liability as a contributory infringer should be whether wrongdoing by eBay might have been “reasonably anticipated” and that, under this standard, eBay is legally obligated to proactively investigate and take down auctions that raise a suspicion of counterfeiting, such as auctions offering multiple Tiffany items. The Court disagreed. It adopted a legal standard for contributory infringement under which an auction site is absolved of liability so long as it takes appropriate steps to remove listings and suspend sellers’ service when it receives specific knowledge of an infringing listing.
The District Court based its holding on a U.S. Supreme Court decision, Inwood Labs, Inc. v. Ives Labs, Inc., 546 U.S. 844 (1982), holding that the standard for contributory infringement articulated in, applies to businesses like eBay that provided a virtual marketplace. Inwood held that:
The Court was impressed by eBay’s evidence that it invested millions of dollars each year on personnel and computer resources to combat counterfeiting. When alerted to a potentially infringing listing, eBay would remove the listing, send a warning to the seller, place restrictions on the seller’s account (such as a selling restriction, temporary suspension, or indefinite suspension), and/or refer the matter to law enforcement. The Court found that eBay removed thousands of listings per month. In addition, eBay maintained the VeRO “notice-and-takedown” program, whereby trademark owners could report to eBay any listing offering potentially infringing items so that eBay could remove the listings. Indeed, the District Court found that, when Tiffany informed eBay of potentially counterfeit Tiffany listings, eBay never refused to remove a reported listing, acted in good faith in responding to Tiffany, and always provided Tiffany with the seller’s contact information.
The Court stated that trademark plaintiffs bear a high burden of establishing “knowledge” of contributory infringement and that the determination of “knowledge” under Inwood is a contextual and fact-specific test, requiring a district court to consider the nature and extent of the communication, whether the defendant explicitly or implicitly encouraged the trademark violation, the extent and nature of the violations being committed, and whether there was a bad faith refusal to exercise a clear contractual power to halt the infringing activities. Given the presence of authentic goods sold on eBay, the Court found that generalized knowledge of counterfeiting is insufficient to impute knowledge to eBay of any specific acts of actual infringement.
Tiffany also argued that eBay improperly allowed repeat offenders to sell counterfeit goods even after it informed eBay of their misconduct. The Court again disagreed. First, it held that eBay’s refusal to suspend a seller after receiving notice of a single potential infringement was not inappropriate because Tiffany’s notices did not constitute a definitive finding that the item was counterfeit. Without knowledge of actual counterfeiting, Tiffany could not demonstrate that eBay should have permanently suspended a seller. Second, suspension represented a serious penalty, particularly to those sellers who relied on eBay for their livelihoods. Third, eBay’s policy was generally effective in preventing sellers from relisting potentially counterfeit items, and eBay never refused to take down a particular listing upon receiving a notice from Tiffany that particular item listed was a counterfeit. Finally, Tiffany did not prove that actual counterfeit items were sold by sellers who had previously been subject of a take-down notice filed by Tiffany.
The Court also concluded that eBay did not continue to supply its service to sellers whom eBay knew to be selling actual counterfeits because: (a) the evidence did not show that counterfeiters could return with impunity to sell counterfeit Tiffany products on eBay, and (b) eBay did not encourage sellers whose listing had been removed to simply re-list the items or list other counterfeit items.
Thanks to Paul Kobak of Kluger, Peretz, Kaplan & Berlin for assistance in preparing this summary.
Written By:HAHAHAHAHA
On August 1, 2008 10:32 AM
In its suit, Tiffany argued that the correct standard for liability as a contributory infringer should be whether wrongdoing by eBay might have been “reasonably anticipated” and that, under this standard, eBay is legally obligated to proactively investigate and take down auctions that raise a suspicion of counterfeiting, such as auctions offering multiple Tiffany items. The Court disagreed. It adopted a legal standard for contributory infringement under which an auction site is absolved of liability so long as it takes appropriate steps to remove listings and suspend sellers’ service when it receives specific knowledge of an infringing listing.
The District Court based its holding on a U.S. Supreme Court decision, Inwood Labs, Inc. v. Ives Labs, Inc., 546 U.S. 844 (1982), holding that the standard for contributory infringement articulated in, applies to businesses like eBay that provided a virtual marketplace. Inwood held that:
If a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.The District Court in the Tiffany case held that the eBay auction service was a “product” for purposes of the Inwood test. It then concluded that (a) the correct legal standard is whether eBay knew or had reason to know of a particular infringement, not whether eBay could reasonably anticipate the infringement based on “known” patterns, such as Tiffany’s claim that any auction offering more than five of its products was likely to be counterfeit; (b) generalized knowledge is insufficient to impute knowledge of any and all instances of infringing activity to eBay; (c) Tiffany’s demand letters, its undercover buying programs, and its notices to eBay provided only generalized knowledge to eBay, which is insufficient to establish a duty to act; (d) eBay was not willfully blind to infringement; (e) when eBay had knowledge of specific infringing listings, eBay promptly terminated those listings; (f) when eBay had knowledge that a seller was repeatedly engaging in counterfeit activity, eBay’s practice was to suspend that seller and then take further corrective action; and finally, (g) the burden of policing the Tiffany mark should appropriately be placed on Tiffany.
The Court was impressed by eBay’s evidence that it invested millions of dollars each year on personnel and computer resources to combat counterfeiting. When alerted to a potentially infringing listing, eBay would remove the listing, send a warning to the seller, place restrictions on the seller’s account (such as a selling restriction, temporary suspension, or indefinite suspension), and/or refer the matter to law enforcement. The Court found that eBay removed thousands of listings per month. In addition, eBay maintained the VeRO “notice-and-takedown” program, whereby trademark owners could report to eBay any listing offering potentially infringing items so that eBay could remove the listings. Indeed, the District Court found that, when Tiffany informed eBay of potentially counterfeit Tiffany listings, eBay never refused to remove a reported listing, acted in good faith in responding to Tiffany, and always provided Tiffany with the seller’s contact information.
The Court stated that trademark plaintiffs bear a high burden of establishing “knowledge” of contributory infringement and that the determination of “knowledge” under Inwood is a contextual and fact-specific test, requiring a district court to consider the nature and extent of the communication, whether the defendant explicitly or implicitly encouraged the trademark violation, the extent and nature of the violations being committed, and whether there was a bad faith refusal to exercise a clear contractual power to halt the infringing activities. Given the presence of authentic goods sold on eBay, the Court found that generalized knowledge of counterfeiting is insufficient to impute knowledge to eBay of any specific acts of actual infringement.
Tiffany also argued that eBay improperly allowed repeat offenders to sell counterfeit goods even after it informed eBay of their misconduct. The Court again disagreed. First, it held that eBay’s refusal to suspend a seller after receiving notice of a single potential infringement was not inappropriate because Tiffany’s notices did not constitute a definitive finding that the item was counterfeit. Without knowledge of actual counterfeiting, Tiffany could not demonstrate that eBay should have permanently suspended a seller. Second, suspension represented a serious penalty, particularly to those sellers who relied on eBay for their livelihoods. Third, eBay’s policy was generally effective in preventing sellers from relisting potentially counterfeit items, and eBay never refused to take down a particular listing upon receiving a notice from Tiffany that particular item listed was a counterfeit. Finally, Tiffany did not prove that actual counterfeit items were sold by sellers who had previously been subject of a take-down notice filed by Tiffany.
The Court also concluded that eBay did not continue to supply its service to sellers whom eBay knew to be selling actual counterfeits because: (a) the evidence did not show that counterfeiters could return with impunity to sell counterfeit Tiffany products on eBay, and (b) eBay did not encourage sellers whose listing had been removed to simply re-list the items or list other counterfeit items.
Thanks to Paul Kobak of Kluger, Peretz, Kaplan & Berlin for assistance in preparing this summary.
I bet if the court had come across this video first, there would have been a different outcome:
http://www.youtube.com/watch?v=1DJWNP9LKEA
Don't like to click on links, just go to youtube and type in "paypal counterfeit", without the quotes and it is the first video there.
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