US Judge Rules for EBay in Counterfeit Case

A U.S. judge has ruled that eBay is not legally liable for counterfeit Tiffany jewelry items that were sold on its auction site, despite a French court ruling against eBay last month in a similar lawsuit.

Judge Richard Sullivan, of the U.S. District Court for the Southern District of New York, ruled Monday that eBay has taken sufficient steps to guard against counterfeit items being sold there, and it's Tiffany's responsibility to further protect its trademark.

Tiffany officials argued, in a trial in late 2007, that hundreds of thousands of fake Tiffany silver jewelry items were sold through eBay between 2003 and 2006. EBay had an obligation to investigate the authenticity of items before they were offered for sale, Tiffany argued.

But eBay pulled items suspected of being counterfeit as soon as they were reported to the auction giant, Sullivan wrote in his opinion. "When Tiffany put eBay on notice of specific items that Tiffany believed to be infringing, eBay immediately removed those listings," Sullivan wrote. "EBay refused, however, to monitor its website and preemptively remove listings of Tiffany jewelry before the listings became public. Quite simply, the law demands more specific knowledge as to which items are infringing and which seller is listing those items before requiring eBay to take action."

Current U.S. law doesn't require eBay to take additional steps, Sullivan added. "Policymakers may yet decide that the law as it stands is inadequate to protect rights owners in light of the increasing scope of Internet commerce and the concomitant rise in potential trademark infringement," he wrote. "Nevertheless, under the law as it currently stands, it does not matter whether eBay or Tiffany could more efficiently bear the burden of policing the eBay website for Tiffany counterfeits -- an open question left unresolved by this trial."

Sullivan said he was "not unsympathetic" to Tiffany and other trademark holders, but U.S. law was clear that the trademark owner has the burden of protecting the trademark.

Sullivan's ruling comes two weeks after Tribunal de Commerce in Paris fined eBay €40 million (US $63.4 million) for allowing the sale of Louis Vuitton Malletier and Christian Dior Couture counterfeit goods. EBay has said it will appeal the decision and spends about US$20 million a year on efforts to remove counterfeit products from its site.

EBay on Monday said it was pleased with Sullivan's ruling.

"Today's decision is a victory for consumers," eBay said in a statement. "The ruling confirms that eBay acted reasonably and has adequate procedures in place to effectively address counterfeiting. The ruling appropriately establishes that protecting brands and trademarks is the primary burden of rights owners. While today's decision is a victory for consumer choice, it is a shame that so much effort has been wasted when Tiffany could have worked with eBay to more effectively fight counterfeits."

A spokeswoman for Tiffany wasn't immediately available for comment.

As of Monday afternoon, there were more than 1,300 Tiffany items listed for sale in eBay's jewelry and watches section.