The Private Counterfeiting Police: Tiffany (NJ), Inc. v. eBay Inc.

There is something for trademark holders and service providers alike in the Second Circuit’s opinion in Tiffany (NJ), Inc. v. eBay Inc. (PDF). In that case, the court held, among other things, that eBay’s Herculean anti-counterfeiting measures precluded direct and contributory liability for trademark infringement. The court reasoned that under either theory of liability, the mere fact that a service provider, such as eBay, knows in a very general sense that its website contains counterfeit products will not, standing alone, suffice to establish infringement. In the court’s view, liability premised on a service provider’s inducement of infringing conduct requires, at a minimum, that the service provider know or have reason to know that specific listings involve the sale of counterfeit goods.

  

While the court ultimately held that eBay did not directly or indirectly infringe the Tiffany trademarks, the extent of eBay’s efforts to combat the sale of counterfeit goods on its website sets the bar high for other online marketplaces utilizing similar business models. To the extent trademark holders may reasonably hold other service providers to eBay’s high anti-counterfeiting standards, service providers may soon finding themselves expending considerable resources to establish or strengthen their own policing regimes to insulate them from claims of contributory infringement. In dictum, the court suggested that the failure to take adequate counterfeiting measures, together with reason to suspect that counterfeit goods were being sold on a service provider’s website, could potentially support a contributory infringement claim grounded in a service provider’s willful blindness to infringing conduct. In those circumstances, a court may very well impute the requisite knowledge to the service provider.

Although eBay Inc. arguably imposes stringent anti-counterfeiting requirements on service providers, the opinion reaffirms a place for providers, such as eBay, in the secondary market for brand name goods.

The court did not let eBay entirely off the hook, however. Notwithstanding eBay’s efforts to combat the sale of counterfeit goods, the court held that eBay could be liable for false advertising insofar as eBay advertised the sale of Tiffany jewelry on its website knowing that some of the “Tiffany” products on its website were not authentic. In the absence of a carefully worded disclaimer, eBay’s advertisements representing that eBay sold Tiffany merchandise could have misled or confused consumers into believing that all products identified by eBay sellers as “Tiffany” goods were authentic. Because the district court did not consider consumer confusion, the court remanded the false advertising claim, thus warning service providers that general knowledge that a service provider may be providing a forum to counterfeiters may result in false advertising liability regardless of a service provider’s diligence in rooting out counterfeit goods.

The bottom line for resellers of branded goods is that they should adopt comprehensive policies to guard against the sale of counterfeit items, and, equally importantly, take appropriate steps to implement those policies and address any complaints in a timely manner. For their part, trademark holders should monitor whether counterfeits are being sold on resale sites, and bring any suspected counterfeits to the immediate attention of the reseller in accordance with the reseller’s posted policies. Should those efforts be unsuccessful, trademark holders should be prepared to confer with counsel and explore what next steps might be necessary.

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