Tiffany loses trademark ruling in case vs. eBay
Fake items sold are not website's problem
NEW YORK - EBay Inc. isn't responsible for the sale of fake Tiffany & Co. jewelry on its website, a judge ruled in a case eBay said had the potential to "wreak havoc" with Internet commerce.
US District Judge Richard Sullivan in New York rejected Tiffany's claim that eBay, the biggest online auctioneer, wrongfully allowed sales of thousands of fake bracelets and necklaces. Yesterday's decision followed a nonjury trial in which Tiffany called eBay a "rat's nest" of trademark violations.
"It is the trademark owner's burden to police its mark," Sullivan said in the ruling. "Companies like eBay cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might be occurring on their websites."
The decision, pitting a 171-year-old US luxury-goods pioneer against a leader of the online economy, will likely discourage similar "anticonsumer and anti-Internet" suits, said Jeffrey Lindsay, of Sanford C. Bernstein & Co. It contrasted with a French court ruling last month that ordered eBay to pay $63.6 million to LVMH Moet Hennessy Louis Vuitton SA, over claims the site didn't do enough to block the sale of counterfeits.
Yesterday's decision "will stop the momentum that may have been building up among brand owners, to try more of these kinds of lawsuits on," said Lindsay, a New York-based analyst who advises buying eBay stock.
Tiffany, based in New York, sought a ruling to remove fakes it said threaten its reputation and reduce demand for the real thing. Tiffany notified eBay of more than 284,000 listings it believed were counterfeits, and most were removed by the auction site, court records show.
EBay, based in San Jose, Calif., fell 52 cents, or 1.9 percent, to $27.49 in Nasdaq Stock Market trading. Tiffany rose 29 cents to $37.32 in New York Stock Exchange composite trading.
Tiffany might appeal, spokesman Mark Aaron said. "We are shocked and deeply disappointed in the district court's erroneous reading of the law," he said.
Judge Sullivan said policy makers may yet decide that the law is inadequate to protect rights owners as online sales rise.
"The court is not unsympathetic to Tiffany and other rights owners who have invested enormous resources in developing their brands, only to see them illicitly and efficiently exploited by others on the Internet," Sullivan said in his 66-page judgment.
Tiffany and other retailers have alleged online sales of fake brands of clothes, bags, and jewelry cost the industry about $30 billion a year.
Last month's French ruling also ordered eBay to stop all sales of LVMH perfumes on its French site.
Another French court, in a case filed by Hermes International, said last month that eBay is a partner to its vendors and must take more steps to ban fakes.
Last year, Germany's highest court said eBay needed to better police online sales, in a case bought by Rolex Group.
