Tiffany (NJ) Inc. and Tiffany and Company v eBay Inc, United States District Court Southern District of New York, Case N°04 Civ 4607 (RJS), 14 July 2008.
The eBay business model is safe following this decision from the US District Court of New York, which found that eBay could not be liable for the sale of counterfeit Tiffany products solely on the basis of generalised knowledge that trademark infringement might be occurring on the site.
In this case, Tiffany, the world renowned retailer of luxury goods launched a lawsuit against eBay, for the sale of counterfeit jewellery on the eBay.com website. Tiffany argued that during the period between 2003 and 2006, eBay facilitated and allowed an important number of sales of fake Tiffany jewellery. Principally, Tiffany complained of direct and contributory trademark infringement but also entertained a number of other causes of action including unfair competition, false advertising under section 43(a)(1)(B) of the Lanham Act, trademark dilution and contributory dilution none of which succeeded.
No direct trademark infringement
Tiffany argues that eBay has infringed its trademark by advertising the availability of Tiffany jewellery on eBay (through Yahoo! And Google sponsored links), by using the Tiffany name on the eBay home page and by deriving revenue from the sale of the fake jewellery (through listing fees and final value fees levied after each successful sales).
eBay argued convincingly that the use of the Tiffany trademarks on its homepage and through the purchase of sponsored links was protected under the doctrine of nominative fair use. The court applied the test for nominative fair use established in New Kids on the Block v News Am. Publ’g Inc, 971 F 2d 302, 308 (9th Circuit 1992), which requires that the goods or service in question is not readily identifiable without the use of the trademark, that the trademark is used as is reasonably necessary to identify the product, and that the user must do nothing that would suggest sponsorship or endorsement by the trademark holder.
The court concluded that eBay’s use of the Tiffany marks was protected under nominative fair use because eBay demonstrated that the jewellery was not readily identifiable without the use of the Tiffany trademark. The court noted that “the Tiffany name is what gives the jewellery the cachet it enjoys. Absent the Tiffany brand, a silver heart necklace or a silver bracelet with an ID chain would simply be a piece of jewellery instead of a symbol of luxury. Indeed, were eBay precluded from using the term Tiffany to describe Tiffany jewellery, eBay would be forced into absurd circumlocution”. This reasoning was applicable to the use of the Tiffany trademarks on the eBay’s home page as well as in the purchase of sponsored links.
No contributory trademark infringement
Tiffany claimed that eBay knew or had reasons to know of the infringement at issue and should have done more to stop it occuring. The court analysed contributory infringement under the test articulated under Supreme Court case Inwood Laboratories Inc. v Ives Laboratories Inc., 546 U.S. 844 (1982) under which “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 reasons to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit”.
Whilst the case only mentions distribution and manufacture of products, contributory liability has been extended beyond this scope to include venues providing a service, focussing on the extent of the control exercised by the defendant over the third party’s means of infringement (Lockheed Martin Corporation v Network Solutions Inc., 194 F.3d 980, 984 (9th Cir. 1999)). As a result the court considered if eBay had direct control over the means of infringement. The Court had to consider if the generalised knowledge eBay had was sufficient to constitute “knowledge or reason to know” under the Inwood standard. Whilst the court did not deny that eBay had generalised knowledge of the infringement taking place on its site, it did not consider that such knowledge was sufficient to satisfy the requirement set in Inwood. This is because the standard in Inwood requires specific rather than general knowledge, and places a high burden on trademark owners to establish knowledge of contributory infringement.
The court then turned to applying the Inwood test to eBay’s action following receipt of notices to take down from Tiffany. The court noted that the test was not merely to establish that eBay had knowledge (which arguably the filing of a notice provided it with) but that having that knowledge it continued to supply its products to known infringers. The court found that it was eBay’s practice to promptly remove listings upon receipt of a take down notice and to warn sellers and buyers about the reasons for removal as well as reimburse listing and final value fees when appropriate. As a result, the court considered that eBay took appropriate steps despite refusing to suspend sellers at first or second notice to take down. Criticism targeted at the VERO programme were also dismissed, the judge noting that Tiffany’s commitment to reporting infringing listings through the VERO programme had been sporadic and relatively meagre. The court strongly stated that right holders bear the principal responsibility to police their trademarks and not eBay.
Amidst intense legal activity concerning eBay’s liability for the sale of fake items on its site around the world, the position adopted in the USA is favourable to eBay’s business model clearly stating that it is not for eBay to police the use of trademarks, but for the trademark owners to do so. In addition, the judge clearly states that eBay is doing enough to prevent counterfeit sales on its website. It is interesting to note a number of criticisms that the judge addressed to Tiffany and that may have been instrumental in tipping the balance towards eBay. First, the judge noted that Tiffany only had effectively one member of staff working on policing infringements of the Tiffany trademarks, a rather modest investment. Second the judge noted that Tiffany had not been forthcoming with its filings of take down notices under the VERO programme. It is easy to speculate that had Tiffany shown serious investments in policing their trademarks, eBay’s liability might have been viewed differently. The US approach is dissimilar to the approach taken in France where a series of case, one of which directly concerned trademark infringement, found that eBay was liable for the sale of fake items on its site. In Société Hermès International v Cindy F and S.A eBay France, and EBay International AG (T.G. Troyes 04 June 2008), the French court found that by offering fake Hermès bags for sale on eBay and by failing to prevent infringing use of the site, eBay was liable jointly with the seller of the fake handbags and ordered to pay damages to Hermès.