I’m thinking that this is not quite the holiday gift that Ebay was expecting. According to Katie Hafner at the NYT the online auctionhouse is being sued by Tiffany & Company who is claiming that the auction house is responsible for the hundreds of thousands of counterfeit goods that are sold through their venue. And Ebay’s response: you hold the trademark and so you are the one who primarily responsible for the policing. We’ll let the court handle this one.– Joanne Molina, Senior Editor
Photo: Donna Iberico for NYT
Tiffany and eBay in Fight Over Fakes
SAN FRANCISCO, Nov. 26 — For years, eBay has defined itself simply as an online marketplace that links buyers and sellers.
But in a weeklong bench trial in Federal District Court in Manhattan that ended last Tuesday, lawyers for Tiffany & Company
argued that the online auction house was far more than that: it is a
distribution network that enables the trading of counterfeit Tiffany
If Tiffany wins its case, not only could other lawsuits
follow, but eBay’s business model could be threatened because it would
be difficult and extremely expensive for the company, based in San
Jose, Calif., to police a site that now has 248 million registered
users worldwide and approximately 102 million items for sale at any one
Tiffany has requested injunctive relief that would
require eBay to alter its procedures to eliminate counterfeit silver
Tiffany merchandise from its auctions. Judge Richard Sullivan
instructed both sides to file post-trial briefs by Dec. 7.
“I will hopefully turn this around quite quickly after that,” he told the lawyers.
Hani Durzy, an eBay spokesman, said eBay was not responsible for determining whether each product sold on the site was fake.
a marketplace, we never take possession of any of the goods sold on the
site, so it would be impossible for us to solely determine the
authenticity of an item,” Mr. Durzy said. “And we go above and beyond
what the law requires us to do to keep counterfeits off the site.”
in his closing argument last Tuesday, James B. Swire, the lawyer for
Tiffany, told Judge Sullivan that eBay directly advertised the sale of
Tiffany jewelry on its home page, and “because eBay profits from the
sales generated by these and other actions,” Tiffany considers its
actions direct copyright infringement.
Mr. Swire added that “there’s certainly much in the record to show that eBay is liable for contributory infringement.”
Rich, eBay’s lawyer, told the court the company had fulfilled its
obligation to prevent the sale of counterfeit goods. In his closing
argument, he said the law places the primary policing responsibility on
the trademark owner, Tiffany, because Tiffany has the necessary
expertise to identify counterfeits of its products.
fakes are sold everywhere, as anyone trying to dodge the street vendors
selling fake designer handbags in Times Square can attest. But the
anonymity and reach of the Internet makes it perfect for selling
knockoffs. And as the biggest online marketplace, eBay is the center of
a new universe of counterfeit products.
“The fact that eBay has
chosen to set up its business in a manner that makes it extremely
difficult for it to monitor the merchandise that is sold at its
auctions is not a defense,” said Geoffrey Potter, chairman of the
anticounterfeiting practice at Kramer Levin Naftalis & Frankel, a
New York law firm.
Mr. Potter said that if the judge found that
eBay had the same duty as flea markets and traditional retail stores to
not sell counterfeit products, “eBay will likely have to either stop
auctioning famous luxury products or radically alter the way it does
business so that it can precertify the authenticity of those products.”
“One way that eBay could do this would be to require proof that
Tiffany had been paid for the items, before eBay permits an auction of
multiple, identical alleged Tiffany products,” Mr. Potter said.
Potter said eBay did manage to keep other illegal items — human organs,
firearms, and child pornography — off the site. “The truth of the
matter is that if eBay wanted to keep counterfeit Tiffany goods off, it
probably could,” he said.
When Tiffany filed its suit against
eBay in 2004, it said that Tiffany employees had trolled eBay to find
fake Tiffany silver jewelry and concluded that 73 percent of 186 pieces
they purchased on eBay were counterfeit.
In its original
complaint, Tiffany maintained that anyone selling five or more pieces
of jewelry said to be Tiffany’s at a discount “is almost certainly
selling counterfeit Tiffany goods.” Other makers of luxury goods have
complained that sales of counterfeit items are hurting their
“Louis Vuitton believes that people avoid buying their signature bags because of all the fake ones out there,” Mr. Potter said.
his opening statement last week, Mr. Swire, Tiffany’s lawyer, said that
in 2003 Tiffany put eBay on notice about the counterfeit items and
requested that the company investigate. Yet “eBay simply turned a blind
eye,” Mr. Swire said.
Last Tuesday, Judge Sullivan questioned
Michael J. Kowalski, Tiffany’s chairman and chief executive, about the
measures Tiffany has taken to track down and prosecute the
Mr. Kowalski said it had been difficult — and
often fruitless — to pursue sellers who list counterfeits on eBay, as
they frequently change identity.
“We simply felt that we were
chasing ourselves,” he said, and “chasing phantom sites that would be
taken down one day and pop up another day, and so we were in a vicious
In the end, Mr. Kowalski said, “The heart of the issue was the distribution network,” referring to eBay.
Durzy said that eBay had put in place additional anticounterfeiting
measures since Tiffany filed its suit. These include closer monitoring
of categories chosen most often by counterfeiters, like expensive
jewelry and handbags, as well as PayPal verification requirements,
selective restrictions on sales volume and limits on cross-border sales.
“We’re very pleased with the way the trial went,” Mr. Durzy said.
each side presented closing arguments, the judge noted what he called
“a fundamental disagreement with respect to what the law is here.”
Judge Sullivan gave little indication of how he might rule, he pointed
to legal precedents that have found that if a manufacturer or
distributor continues to supply a product knowing it is engaging in
trademark infringement, that manufacturer or distributor is
“contributorily responsible” for any harm done as a result of the
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