There has been a lot of chatter on our site about the recent ruling in the Tiffany-ebay case. I just wanted to clarify the issues, based on my morning going through the court papers (which can be seen here (PDF)):
– Everyone acknowledges that quite a bit of the Tiffany merchandise sold on ebay is fake. However, “a substantial number of authentic Tiffany goods are [also] sold on eBay,” the court wrote.
– Overall, “eBay earned $4.1 million in revenue from completed listings with ‘Tiffany’ in the listing title in the Jewelry & Watches category.”
– Ebay does police its site, through its “Trust and Safety” division and Vero (owners’ rights) program. These efforts cost it some $20 million a year. It has over 200 workers addressing counterfeit issues, and when Tiffany asks for a counterfeit item to be taken down, it is, generally in 24 hours, sometimes quicker
The problem with this last point is that while ebay takes things down, because of the volume of Tiffany goods (real and fake) sold on ebay, having to constantly notify ebay was creating a burden for the company. In its brief in support of Tiffany’s position, the Council of Fashion Designers argued that, by putting the burden (somewhat) on the copyright holder, “this means they would have to police ebay 24 hours a day, and 365 days a year …They urge that this is a burden that most mark holders cannot afford to bear.”
True enough. On the other hand, if ebay simply removed everything labeled “Tiffany” from its website, that would be an easy way to solve the problem, but this “would unduly inhibit the lawful resale of genuine Tiffany goods,” the court ruled. And, of course, that would likely cause other copyright holders to follow suit. I don’t think it’s an exaggeration to suggest this case could have led to a big change in ebay’s business model.
These questions are difficult enough that while American courts have tended to side with ebay, several overseas courts have gone against it. As the result of one case, no one in France is allowed to sell certain perfume brands (even if they are authentic) on ebay.
In this case, the court upheld the initial verdict on behalf of ebay, arguing it did “not ignore the information about counterfeit items sold on its site,” and therefore was not liable for every piece sold on it.
Tiffany did win on one point. Ebay purchased sponsored link advertisements on google and yahoo to promote the Tiffany items on its site. But Tiffany argued those ads were misleading, given ebay knew how many fakes were on there.
The appeals court agreed there was an issue here: “The law prohibits an advertisement that implies that all of the goods offered on a defendant’s website are genuine when in fact, as here, a sizable proportion of there are not.” The appeals court sent the issue back to the original judge to look at again, suggesting there were ways the ads could be modified (such as a disclaimer.) [UPDATE: Tiffany has now lost this point too.]
These are tough issues, reflecting the very new world we are in. (Many have compared this case to Viacom vs. youtube, which also deals with how responsible a site is for what its users do.) Tiffany is upset enough about the ruling that it may appeal to the Supreme Court. This may not get settled for quite a bit …