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Policing Counterfeits on eBay

Charles R. Macedo is a partner at Amster, Rothstein & Ebenstein LLP, and the author of 9780195381177The Corporate Insider’s Guide to US Patent Practice, which provides a basic understanding of patent practice in the United States as it relates to both obtaining and enforcing patents. Macedo’s practice specializes in all facets of intellectual property law including patents, trademarks and copyrights.  In the article below he looks at the Tiffany v. eBay case.  Read his other OUPblog posts here. [FN: The author wishes to thank Michael J. Kasdan for his thoughtful comments on this blog entry]

One of my favorite parodies is Weird Al Yankovich’s song, “I Got It On eBay.” It reminds me of the largest garage sale outlet ever conceived, where one person’s garbage becomes another person’s gold. Anyone can hawk their old things (usually at a discount), but perhaps at a better price than one could expect by offering it on their front lawn on a sunny weekend afternoon in May.

Unfortunately, not every item sold on eBay is authentic. The large numbers of counterfeit items is a source of consternation to purveyors of authentic luxury items, apparel and consumer goods.

Over the past few years, a series of litigations have been commenced by luxury good manufacturers (such as LVMH and Tiffany and others) against eBay, seeking to hold eBay liable for damages associated with actual counterfeit sales made through its website. These cases raise the important questions of whose burden it is to police eBay for counterfeit items, and whether eBay should pay damages associated with actual counterfeit sales made through its website.

The results of these cases have been dramatically different. Some courts, most notably in France, have found that eBay should bear significant responsibility when counterfeit items are actually sold on its websites. Other courts, most notably the Federal Court in New York, have found that the precautions eBay has taken are sufficient and place a heavier burden on the brand owners to police their own marks.

In my own parody of Charles Dicken’s A Tale of Two Cities, I previously authored an article comparing the French and New York treatment of this issue entitled “eBay: A Tale of Two Defenses”, IP Law360, August 22, 2008 (available at www.arelaw.com).

On April 1, 2010, the U.S. Court of Appeals for the Second Circuit (located in New York City) weighed in on this issue, affirming for the most part the decision that eBay’s activities (at least with respect to Tiffany® brand items on its website) do not constitute trademark infringement of Tiffany marks. See Tiffany (NJ), Inc. v. eBay Inc., No. 08-3947-cv, Slip op. (2d Cir. Apr. 1, 2010). The Second Circuit did however leave open the possibility that eBay’s practices of advertising that “Tiffany” items are available on its websites can expose it to claims for false advertising when counterfeit items are also available. The Second Circuit also cautioned eBay (and others similarly situated) that trademark liability could result if these parties bury their heads in the sand like an ostrich and do not maintain meaningful anti-counterfeiting measures.

This latest pronouncement from the Second Circuit further refines the legal guidance regarding the respective duties of eBay and trademark owners in the U.S. to police against counterfeits. The message remains clear that U.S. courts expect both sides to participate and act responsibly in their efforts to police against counterfeit goods.

For more information on the eBay decisions, please check out our firm website at www.arelaw.com, which includes extensive writings on the subject, and will be including more writings in the near future.

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