The recent decision by the US Second Circuit Court of Appeals in Tiffany (NJ) Inc v eBay Inc confirms that brand owners bear the ultimate responsibility to stop counterfeits. According to the Second Circuit Court of Appeals, a service provider like eBay becomes liable for contributing to infringement only when it continues to provide services to a specific individual whom it knows, or has reason to know, is selling counterfeit merchandise.
Tiffany & Co filed a lawsuit against eBay in the US District Court of Manhattan on 15 July 2004 alleging that by using the TIFFANY mark in its advertising, by failing to take more drastic measures to stop the sales of counterfeit Tiffany items, and by advertising in such a way to mislead consumers into believing that all Tiffany items sold on eBay were genuine, eBay had engaged in direct and contributory trademark infringement, trademark dilution, and false advertising. In July 2008, the District Court entered judgement against Tiffany on all claims. In its ruling delivered on 1 April 2010, the Second Circuit Court of Appeals affirmed the District Court’s ruling on the issues of direct and contributory trademark infringement and trademark dilution, but remanded the false advertising claim to the District Court.
On the issue of contributory trademark infringement, the Second Circuit Court of Appeal held that a service provider must have “contemporary knowledge of which particular listings are infringing or will infringe in the future” to be liable for contributory infringement. eBay knew in general that counterfeit Tiffany products were listed, but this general knowledge was not specific enough to impart contributory liability. Tiffany’s claim of direct trademark dilution also failed because eBay did not use the TIFFANY marks to refer to a product of its own, nor was eBay using the TIFFANY mark in association with any counterfeit products.
The Second Circuit was also impressed by eBay’s anti-counterfeiting efforts, including devoting more than 200 employees to combat infringement and employing a Verified Rights Owner Program (VeRO) whereby eBay would remove a listing promptly if notified by a trademark owner of a potential infringing item on its website. These efforts also convinced the courts that eBay should be allowed to continue with the “notice and takedown” approach to counterfeiting on its website.