Tiffany-EBay Case Goes to Court

The Tiffany vs. eBay counterfeit suit has gone to trial, and if eBay loses it could open the door for more suits and possibly hurt eBay as a business, some experts say.

Tiffany is suing the auction site for hosting counterfeit merchandise. It says when it conducted a test buy, it found that 73 percent of the products listed as "Tiffany" were counterfeit. In its first day in court, Tiffany's lawyer charged that eBay "turned a blind eye" to counterfeiting.

EBay responded that it already spends $10 million a year tracking down counterfeits through its VeRO program. It has argued that it needs the help of the copyright owners in detecting fakes.

This is the first major trial on this question in the United States, and it's being watched closely by lawyers like Brian Brokate, of law firm Gibney, Anthony & Flaherty, general counsel to Rolex. Rolex has successfully sued eBay over this issue in Germany.

"The best result for eBay in this lawsuit is for a judge to say, 'EBay, you are doing enough [to stop counterfeiting],'" Brokate says. "My sense is that won't happen. The big key will be if the court issues a roadmap for eBay [to handle these issues]. That is what everyone is going to be looking at very keenly."

A major loss for eBay "could completely change [eBay's] business model and directly cut into its profits," Brokate adds. "It will make them spend a whole lot more money and time policing their site."

An ideal outcome for copyright holders would be for eBay to discontinue listings for certain brands. "That would completely solve the counterfeiting problem, although it would also stop the legitimate trade [in those brands] on eBay," Brokate says.

He notes that now that eBay has cracked down somewhat, much of the counterfeiting has migrated to other places, like Craigslist and other auction sites. He adds that, since both sides will likely appeal no matter what the ruling, it could take two to three years for the case to be settled.