On July 14, 2008, the U.S. District Court for the Southern District of New York, in the closely watched case of Tiffany (NJ) Inc., et al. v. eBay, Inc., entered judgment in favor of eBay.  Following a bench trial, the Court held that  Tiffany failed to carry its burden with respect to all of its claims against eBay - direct and contributory copyright infringement, unfair competition, false advertising and direct and contributory trademark dilution.  Tiffany sought to hold eBay liable for these causes of action on the grounds that eBay facilitated and allowed the counterfeit items to be sold on its websote. In particular, Tiffany argued that having been on notice of the problem, eBay was obligated to investigate and control the illegal activities of individual sellers using its service. 

 

I. Direct Infringement

 

With respect to its direct infringement claim, Tiffany argued that eBay directly infringed its trademark by its (1) advertising the availability of Tiffany jewelry on eBay by using the Tiffany  name on the eBay home page and in eBay documents and publications, and by subsequently deriving revenue from the sale of that jewelry on its websote; (2) purchasing “sponsored links on Google and Yahoo! Advertising eBay listings that offer Tiffany jewelry for sale; (3) participating in the sale of counterfeit merchandise on the eBay websote, thereby becoming jointly and severally liable. 

 

With respect to eBay’s use of the Tiffany name, the Court concluded eBay’s use of Tiffany marks was protected under the nominative fair use. The Court decision was based on the facts that the product in question was not readily identifiable without the use of the Tiffany trademark; eBay had used only so much of the mark as was reasonably necessary to identify the product or service; and eBay did not do anything that would suggest sponsorship or endorsement by Tiffany. 

 

With respect to the sponsored links, the Court held that eBay’s use of the Tiffany marks in sponsored links is effectively identical to its use of the Tiffany name on the eBay websote and, as such, is also protected under the “nominative fair use doctrine.” 

 

Regarding Tiffany’s allegation of joint and several liability, the Court found the argument to be misplaced, because eBay never takes possession of items sold through its websote and does not directly sell the counterfeit.   For these reasons, the Court held that eBay was not liable for directed trademark infringement.

 

II. Contributory Infringement

 

Tiffany’s claim for contributory infringement was predicated on the allegation that eBay continued to supply its sales platform despite its knowledge that, or reason to know, that counterfeit merchandise was being sold. In the alternative, Tiffany argued that that eBay failed to take reasonable precautions against the occurrence of third person’s infringing conduct under circumstances in which eBay could “reasonably anticipate” the infringing conduct.  The Court found that eBay exerted sufficient control over its websote that the test for contributory infringement established by the Supreme Court in Inwood Laboratories, Inc. v. Ives Laboratories, Inc.[1] applied.  However, the Court quickly dismissed Tiffany’s “reasonable anticipation,” theory, holding that the Supreme Court’s decision in Inwood forecloses  the “reasonable anticipation” standard as a basis to impose liability for contributory trademark infringement.  Further, while the evidence demonstrated that some portion of the Tiffany goods sold on its websote might be counterfeit, the court rejected Tiffany’s position that such generalized knowledge required eBay to preemptively remedy  the problem at the very moment that it knew or had reason to know that the infringing conduct  was generally occurring, even without specific knowledge as to individual instances of infringing listings or sellers.  This conclusion was based on the Court’s  finding that eBay responded appropriately to Tiffany’s notices of specific infringing items, and that eBay’s general knowledge of infringement is insufficient to impute knowledge to eBay of specific infringing listings.  The Court also rejected Tiffany’s position that, faced with Tiffany’s letters and other evidence that the problem existed, eBay was obligated to conduct an investigation to determine the extent of counterfeit Tiffany jewelry available on its site and, eBay’s failure to do so constituted willful blindness. Specifically, the Court concluded that Tiffany had failed by a preponderance of the evidence that eBay deliberately ignored counterfeiting activity of which it was aware. Instead, the evidence established that when eBay had general knowledge of counterfeiting on its website it took reasonable steps to investigate and stop that wrongdoing through general anti-fraud measures.

 

The court summarily denied Tiffany’s unfair competition claims, noting that the elements required to prevail on a trademark infringement and unfair competition claims under New York common law mirror the Lanham Act claims for the trademark infringement and unfair competition. The Court concluded, therefore, that since Tiffany had failed to prove its Lanham act claims, its common law clams also fail.

 

III. False Advertising

 

In support of its false advertising claims under the Lanham Act, Tiffany challenged certain advertising practices  eBay – namely, eBay’s (i) references to Tiffany merchandise in promotional features on the eBay home page, and (ii) purchases of the “Tiffany” keyword so as to indicate the availability of Tiffany merchandise via “sponsored links” on Internet search engines such as Google and Yahoo!.  In response, the Court first concluded that eBay’s use of the term “Tiffany” in advertising is protected, nominative fair use. Second, to the extent that to the extent that Tiffany argues that eBay’s advertising was impliedly false, Tiffany failed to prove that eBay had specific knowledge as to the illicit nature of individual listings. Finally, to the extent that the advertising was false, the Court concluded that the falsity was the responsibility  of third party sellers, not eBay. In short, Tiffany failed to establish that eBay’s ads were likely to mislead consumers because authentic items were offered for sale, and inauthentic items were only listed on eBay due to the illicit acts of third parties.

 

IV. Trademark Dilution

 

The court denied Tiffany’s claim of trademark dilution on the basis that Tiffany failed to show that eBay used the marks in a way that was likely to cause either dilution by blurring or tarnishment  More, the Court found that eBay’s use of the Tiffany marks on its website and through its purchase of sponsored links was protected by the statutory defense of nominative fair use.

 

V. Contributory Dilution

 

Finally, with respect to Tiffany’s claim of contributory dilution, the court questioned whether such cause of action even exists. The Court noted that, even assuming arguendo that a contributory dilution claim exists, it would fail for the same reasons with respect to Tiffany’s contributory infringement claim. In other words, Tiffany failed to demonstrate that eBay knowingly encouraged others to dilute Tiffany’s trademarks.  Instead, to the extent that eBay may have had general knowledge of infringement and dilution by sellers on its website, eBay did not possess knowledge or a reason to know of specific instances of trademark infringement or dilution as required under law.

 

VI.  Conclusion

 

            This case appears to maintain the American law principle that a third-party conduit website should not be held liable for acts conducted by people who use their website.  This contrasts significantly from a recent French judgment that eBay lost.