Posted by: bridget | 14 November 2007

An eBay Breakfast with Tiffany’s

Yesterday, the trial between Tiffany’s and eBay commenced (Hat tip: WSJ law blog).  The jewerly store is suing the online auctioneer for direct and contributory trademark infringement.  Some 95% of the items on eBay that claim to be from Tiffany’s are fakes.  Tiffany alleges that eBay’s practice of buying advertising space on search engines, then linking to counterfeit goods for sale on its site, constitutes a direct infringement on Tiffany’s trademarks.  Furthermore, it alleges that eBay engages in contributory infringement by aiding known counterfeiters. 

eBay has several procedures in place to combat fraud.  It allows companies to report IP infringement (through VeRO) and removes the fraudulent listings; employs a feedback system; and uses fraud protection software.   

The Lanham Act prohibits the

use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; 

(15 U.S.C. 1114(1)(a))  eBay is clearly using counterfeits in commerce, in connection with a sale.  Nevertheless, the Act also provides a safe harbour for innocent infringers whose violation is limited to paid advertising matter; the owners of trademarks may only seek an injunction against such persons (15 U.S.C. 1114(2)(b)). 

There is no clear rule on how this applies to electronic companies which maintain little control over the sales.  To analogise to copyright law, however, shows that eBay may not be liable for contributory infringement.  In the Napster case, the Ninth Circuit held that the company was liable for infringement because, unlike in Sony v. Universal Studios (the Betamax case), there are no non-infringing uses of the product.  The Supreme Court, in MGM v. Grokster, stated:

We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.

Should the courts import copyright and patent paradigms into trademark law, eBay will not be liable: the majority of the trading done on the site legitimate; furthermore, the company goes so far as to try to avoid IP infringement.

Tiffany makes much ado about the fact that eBay profits from the fraudulent transactions.  This does make the situation different from Betamax: those who sell VCRs will make the exact same amount of money if the customers use their VCRs for all day, every day copyright infringement; entirely legal uses; or as a doorstop.  Yet, eBay does not profit more off of a fraudulent transaction than a legitimate one; in fact, fraudulent transactions will tend to reduce its profits, as people will not use the site for shopping.  Furthermore, eBay cannot distinguish IP-infringing transactions from legal ones.

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Responses

  1. The legalese is above my head but the post is interesting in a news manner. It seems Tiffs miffed and wants to take it out on the easiest entity to track. Made me think though. How would it effect those “eBay stores” that do the work for you ? Bit by bit there seems to be a demand for the e world to get some precedents set. Interesting post 2 thumbs up.


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