eBay vs. Tiffany Roundup

We will continue to monitor the press for impressions and interpretations of this landmark decision, but articles can be found here, here, and here.

Declan McCullagh notes that given Amazon's success in working with large sellers, eBay's strategy would have likely been different had Tiffany filed suit today.

Mark Hamblett of New York Law Journal has a particularly comprehensive analysis here.

Martin Schwimmer at The Trademark Blog posts his first impressions here.

My first impressions – It is clear that Judge Sullivan hewed closely to current trademark law.

While Tiffany attempted to argue that eBay’s direct infringement was analogous to the liability a store would incur should a store employee sell infringing items on its premises, Judge Sullivan disagreed. Judge Sullivan noted that eBay never took possession of the items sold on its website, and never directly sold counterfeit items to Tiffany buyers.

On the issue of contributory rather than direct infringement, Sullivan rejected measures proposed by Tiffany that presume trademark infringement, including a “five or more” rule that would prescribe listings of five or more Tiffany items on eBay as presumptively infringing. He instead maintained that eBay needed specific knowledge of infringement before being required to act, not a more generalized knowledge that infringement might be occurring on any class of listings. And Judge Sullivan noted that eBay took efforts to prevent repeat infringement offenders from setting up shop on eBay’s website.

Judge Sullivan seemed uncomfortable in delving into the policy arena, even if warranted. He does, in fact, imply that Congress could make policy in this arena, noting that the current law does not allow him to weigh the relative burden or efficiencies between Tiffany or eBay for policing counterfeits in eBay’s marketplace.

On the facts, Judge Sullivan noted that while eBay earned over $4 million from fees generated from the listing of Tiffany items on its website between 2000 and 2004,
eBay’s efforts to combat counterfeiting were extensive. These efforts included eBay’s Trust and Safety Department, its Fraud Engine that uses complex models to automatically searches its website for auctions violating eBay’s Terms of Service, and eBay’s Verified Rights Owner (VeRO) program that provides a mechanism for trademark owners to flag potential infringement in auctions not yet closed.

Sullivan also noted Tiffany’s relative lack of effort in policing its trademarks on eBay. Beginning in 2003, Tiffany has used a non-dedicated motley of security personnel, paralegals and temps that amounted to less than two full-time employees per month dedicated to policing Tiffany trademarks on eBay. Judge Sullivan also cited the budget outlays made by Tiffany for enforcement of its trademarks were consumed in large part by the litigation between Tiffany and eBay.

The Bottom line: Judge Sullivan maintained current American trademark precedent by ruling that trademark owners are the parties primarily responsible for policing their own trademarks.