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Ebay Case: Tiffany Knocked Out Over Knock Offs

July 15, 2008
A week after unequivocally losing a lawsuit over its listing of counterfeit items in France, ebay unequivocally won one here in the United States, with a judge ruling that Tiffany should shoulder the responsibility of policing counterfeit Tiffany items on ebay, not the site itself.

When I first spoke to Tiffany about this, they said they tried to participate in ebay's anti-counterfeiting programs, but "we had to devote two full time employees to it and the total [of items taken down] was staggering." But the judge apparently didn't think Tiffany was spending enough policing its marks, noting that a fair chunk of the money Tiffany has spent  so far on anti-counterfeiting measures has been on the ebay litigation. (Ouch!)

When we last discussed this issue, the point was raised that perhaps ebay should just disclaim responsibility for everything it sells. Apparently, that is how these issues were traditionally handled. But as this excellent analysis shows, ebay won points for going the other way:

Back in the 1990s, some caselaw suggested that affirmative efforts to suppress user activity might exacerbate liability, so the preferred strategy was to remain "passive" with respect to users. eBay chose a different approach. It proactively attempted to reduce the incidence of counterfeiting on the site through its VeRO program, its fraud engine, manual review efforts to seek out auctions that looked like they might be counterfeit goods. Further, eBay continues to innovate new ways to curb bad users or help brand owners.


A ruling like this validates eBay's investments. The judge fully acknowledged and appreciated that eBay didn't just stand on the sidelines and let Tiffany take it up with its users. Kudos to eBay's management and in-house legal department for navigating the liability issues in a way that clearly impressed the judge.

Another issue was Tiffany's proposed "five items or more" rule -- meaning, if someone is selling five or more Tiffany items on ebay, the listing should be pulled down, as Tiffany does not have a secondary market. This seems like a pretty sensible compromise to me, but the judge apparently rejected this logic, noting that Tiffany did not prove definitively that selling five or more items proves you are dealing in counterfeits.

Even so, as a good faith measure, ebay should at least flag people who are selling five or more Tiffany items, as it is pretty likely they are selling counterfeits.

These are not easy issues. Ebay apparently pulled down everything Tiffany asked it to. But we are presuming that Tiffany is acting in good faith. If a company simply wants to prevent a secondary market in its goods, can't it just flag everything as counterfeit? What would that mean to innocent sellers (who are, let's not forget, ebay's customers)?

Another issue that came up in the last thread is how ebay should respond to complaints. So for example, if I see a listing that is likely misleading or gemologically incorrect -- like, for example, this one (as CZs are not synthetic diamonds) -- how should ebay respond? Are they required to investigate? Should they have experts watching this stuff? There is no real rulebook here. Which is why we will likely see further litigation on this topic. (And Tiffany has indicated it's likely to appeal this ruling.)

Another interesting point, raised to me last year, is that, with ebay cracking down, most of the counterfeiting has migrated to other places, such as craigslist and other auction sites. Ebay seems to have won this round in part because it did have an active anti-counterfeiting program. But will other, less responsible, sites be taken more to task?

It does seem that, perhaps in part to avoid these issues, ebay is courting bigger names like buy.com, and leaving its mom and pop clientèle behind. I can see why it's doing that, although I think we would all lose something in the process. 

The ruling can be seen here (PDF). And again, I commend this analysis.

Posted by Rob Bates on July 15, 2008 | Comments (3)


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July 16, 2008
In response to: Ebay Case: Tiffany Knocked Out Over Knock Offs
Marty commented:

Rob.. Thanks for posting the links to the opinion and analysis.

It is my opinion, based on numerous attempts to prevent frauds taking place on Ebay, that the only way it will stop in the US, is by Ebay being sued for "specific performance of a contract", because of Ebays' financial partnership in the contract, and their complicity in letting that contract be entered into, even after they have been timely informed that it is, or will be, a fraud.


AND, speaking of that concept, just captured from the JCK site, bottom of page Gooooogle Ad while reading your article.

JCK should file a formal complaint to the FTC and at the minimum, stop taking and making money from allowing "Goooooogle" ads to partially fund their web page.

"Flawless Created Diamonds
By Diamond Nexus Labs- Stunning In Solid 14k Gold. Lifetime Guarantee!
www.DiamondNexusLabs.com"

Scum




July 16, 2008
In response to: Ebay Case: Tiffany Knocked Out Over Knock Offs
MRahm commented:

Thanks for the comments. I personally agree that Tiffany should be responsible for policing its own trademark. I've had lawyers breathing down my neck for selling a Jules Jurgensen watch that looked like a Cartier. I never mentioned the word Cartier or Cartier-inspired. I honestly had no idea it remotely resembled a Cartier. Yet I see websites all over using the name Tiffany and Tiffany-inspired etc. just to make a buck selling imitations. One website I recently stumbled across doesn't sell a single Tiffany piece, but has an entire bio about Tiffany & Co. on their website just to attract customers to their "Tiffany-inspired" pieces. I wonder how effectively Tiffany is policing their brand? I believe what eBay is doing to help monitor fraud is commendable. But to monitor every auction for trademark infringements seems a bit unrealistic to me. I think as reputable jewelers it is our duty to educate the public on the questionable practices out there. It is our duty to develop strong relationships with our customers so they know and understand they are buying from a reputable source. I think it is our duty NOT to engage in questionable activities just to make a buck.

Thanks for the info and thought-provoking commentary.




July 23, 2008
In response to: Ebay Case: Tiffany Knocked Out Over Knock Offs
Stuart commented:

Rob- nice reporting job!

Judge Sullivan is an idiot and probably got paid a pretty penny from eBay to toss the case out. eBay has not cracked down on anything.....all the intelligent people understand that eBay for years has been selling counterfeit and stolen merchandise, they have become the only publicly traded company outlet for stolen merchandise. Its apparent that the judge did not understand Tiffany's natural right to protect against counterfeit merchandise. If someone produces counterfeit merchandise and stands on the corner of 5th Ave and 34th St in NYC using Judge Sullivan's thinking thats ok, well sorry to tell you judge, its not ok, thats against the law and that person could and should go to jail for counterfeiting, same as wonderful eBay allowing counterfeits to be sold on their site.

This is just another example of the injustice the legal system allows, I would bet my last breadt of air that Judge Sullivan is now able to buy a new car compliments of eBay....so sad.





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