eBay wins legal tussle with Tiffany over counterfeit jewellery sales

In a stunning reversal of fortunes, online retailer eBay, under manufacturers' fire and suffering regulators' ire for selling counterfeit goods through its portal, scored a major legal victory yesterday when a federal judge absolved it of taking more steps to guard against fake Tiffany jewellery being sold on its website and held that brand owners are ultimately responsible for protecting their own trademarks.

The decision marks a significant victory for online retailers, who have sought to deflect criticism that they should bear responsibility for monitoring sales to combat counterfeiting. In the case, eBay had argued that it could act against sales of fake Tiffany merchandise on the site only if alerted to such sales by the famed jeweller.

US District Judge Richard Sullivan wrote that Tiffany must be responsible for monitoring the infringement of its trademark, not online retailers such as eBay. This was in marked contrast to a decision taken by a French court last month which had found eBay guilty on a similar charge. (See: French court imposes $61 million damages on eBay for selling counterfeit goods)

"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," Judge Sullivan said in a court filing. "Nevertheless, the law is clear: it is the trademark owner's burden to police its mark."

Tiffany had wanted eBay to preemptively take down listings that offered five or more of its items and immediately suspend sellers Tiffany suspected of fraud. It had also sought monetary damages from eBay. The judge rejected all claims.

Countering allegations of laxity, eBay said it takes down more than 90 per cent of fake goods from its site within four hours of their posting after being alerted by trademark holders.

Judge Sullivan found that Tiffany's claim ultimately failed due to Tiffany's choice to sue eBay, rather than individual sellers, and because eBay stops fraudulent listings after being alerted to violations.

An eBay spokeswoman said in a prepared statement that "the ruling confirms that eBay acted reasonably and has adequate procedures in place to effectively address counterfeiting." Calling the ruling a "victory for consumers,'' eBay said it "appropriately establishes that protecting brands and trademarks is the primary burden of rights owners."

A spokesman for Tiffany said the company is "very disappointed." James Swire, an attorney representing Tiffany, said, "I don't think a decision has been made on an appeal, but I'd be very surprised if they didn't."

The company management confirmed this sentiment. "All I can say to that is that I'd be surprised if Tiffany did not appeal this decision," said Mark Aaron, Tiffany's vice president of investor relations.