''Tiffany (NJ) Inc. v. eBay Inc.'' 600 F.3d 93 (2nd Cir. 2010),
is a
United States Court of Appeals for the Second Circuit
The United States Court of Appeals for the Second Circuit (in case citations, 2d Cir.) is one of the thirteen United States Courts of Appeals. Its territory comprises the states of Connecticut, New York and Vermont. The court has appellate ju ...
case in which plaintiff
Tiffany & Co. filed the complaint, first in 2004, alleging that eBay constituted direct and contributory
trademark infringement
Trademark infringement is a violation of the exclusive rights attached to a trademark without the authorization of the trademark owner or any licensees (provided that such authorization was within the scope of the licence). Infringement may ...
,
trademark dilution
Trademark dilution is a trademark law concept giving the owner of a famous trademark standing to forbid others from using that mark in a way that would lessen its uniqueness. In most cases, trademark dilution involves an unauthorized use of anoth ...
, and
false advertising since it facilitated and advertised counterfeit Tiffany jewelries on its online market. On July 14, 2008, the
District Court for S. D. N. Y. decided in favor of eBay on all claims. Tiffany appealed these decisions to the Second Circuit. The court affirmed the judgment of the district court with respect to the claims of trademark infringement and dilution. The false advertising claim was returned to the district court for further processing, which was then ruled in favor of eBay.
Background
Tiffany
Founded in 1837,
Tiffany & Co. is an established brand of luxury goods with high-end quality, including jewelry, watches, and home items.
Created in
New York City
New York, often called New York City or NYC, is the most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the most densely populated major city in the Un ...
by Charles Lewis Tiffany,
Tiffany is "renowned for its rare and magnificent diamonds"
its "style is defined by groundbreaking designs and glamorous collections."
Tiffany marks are famous and a valuable asset for the company and are closely controlled through the distribution chains of its goods.
In 2009, Tiffany had worldwide net earnings of $368.4 million, 90% of which derived from jewelry sales.
eBay
eBay
eBay Inc. ( ) is an American multinational e-commerce company based in San Jose, California, that facilitates consumer-to-consumer and business-to-consumer sales through its website. eBay was founded by Pierre Omidyar in 1995 and became ...
is an online-market place, founded in 1995,
that allows its registered users to buy and sell items with other users. eBay has more than 97 million active users globally,
In 2010, users worldwide collectively traded more than $2,000 worth of goods every second.
It is the "world's largest online marketplace, where practically anyone can buy and sell practically anything."
Sellers put listings of their items under certain categories, such as "Books" or "Electronics", and potential buyers can search the items they want by keyword search or by browsing under the category. The two parties contact each other directly and decide the payment and shipping details to complete a transaction. eBay makes revenue by charging the sellers a commission fee for its listing services and for each completed deal. eBay addresses trademark owners’ concerns through their Verified Rights Owner (VeRO) program and "fraud engine". Through VeRO, owners of trademarks report potentially infringing listings to eBay by submitting a Notice of Claimed Infringement form (NOCI).
eBay staff review submitted NOCIs and remove the offending listings if the information is accurate.
The fraud engine is a collection of
software
Software is a set of computer programs and associated software documentation, documentation and data (computing), data. This is in contrast to Computer hardware, hardware, from which the system is built and which actually performs the work.
...
rules and
model
A model is an informative representation of an object, person or system. The term originally denoted the plans of a building in late 16th-century English, and derived via French and Italian ultimately from Latin ''modulus'', a measure.
Models c ...
s that automatically find and remove listings that violate eBay policies.
Starting from 2004, counterfeit Tiffany goods were found to be sold on eBay's website, which could also be linked from eBay's homepage as top-sale listings.
Actions leading to litigation
In May 2003, Tiffany complained to eBay regarding the sale of counterfeit items on its website and eBay recommended Tiffany participate in VeRO.
In 2004 (and again in 2005 after litigation ensued), Tiffany conducted surveys to determine the extent of counterfeiting occurring on eBay. Tiffany hired a third party to purchase a random sample of items bought from eBay using the keywords "Tiffany" and "sterling" and then inspected these items for authenticity.
136 pieces were purchased in 2004, 73.1% of which were counterfeit, 5% were authentic, and the remaining 21.9% were unverifiable.
139 items were purchased in 2005, 75.5% of which were counterfeit.
After counterfeit items continued to be sold on eBay, Tiffany made 5 different demands on eBay in June 2004 – (1.) Prevent sellers from listing 5 or more Tiffany jewelry items at once, (2.) Ban the sale of silver Tiffany jewelry, (3.) Ban the sale of items advertised as counterfeit Tiffany, (4.) Stop advertising the availability of Tiffany merchandise, and (5.) Remove ‘Tiffany’
sponsored link advertisements on
search engines
A search engine is a software system designed to carry out web searches. They search the World Wide Web in a systematic way for particular information specified in a textual web search query. The search results are generally presented in a ...
.
Although eBay continued to allow the sale of Tiffany jewelry and buy sponsored link advertisements through a third party, eBay’s refusal to categorically ban sellers listing more than 5 Tiffany items at a time triggered this lawsuit.
District Court findings
On July 14, 2008 the district court ruled in favor of eBay on all issues.
Tiffany appealed and on April 1, 2010 the
Second Circuit
The United States Court of Appeals for the Second Circuit (in case citations, 2d Cir.) is one of the thirteen United States Courts of Appeals. Its territory comprises the states of Connecticut, New York and Vermont. The court has appellate jur ...
court ruled in favor of eBay on all issues, except the false advertising claim, which it
remanded back to the district court.
On remand, the district court again ruled in favor of eBay on the last issue on Sept. 13, 2010.
[''Tiffany v. eBay, Inc.'', 2010 WL 3733894]
Direct trademark infringement
EBay's use of the Tiffany marks – Tiffany pointed out that eBay advertised the availability of Tiffany goods on eBay's market through several ways such as "on the eBay home page, through communications with sellers and buyers, and through lists of top search terms and popular brand names."
From this, the Court ruled that "eBay's use of the Tiffany Marks on its website did not create the impression that Tiffany had affiliated itself with, sponsored, or endorsed the sale of Tiffany items on eBay" and that eBay's use of Tiffany marks on its homepage was "a protected nominative fair use."
# eBay demonstrated that it is necessary to use the Tiffany marks in order to identify and describe their jewelry.
# eBay demonstrated that it did not use the marks more than necessary to identify the item.
# eBay showed that it did not do anything that would suggest that Tiffany & Co. was sponsoring or endorsing any of the listings or eBay itself.
Tiffany alleged eBay violated the
Lanham Act
The Lanham (Trademark) Act (, codified at et seq. () is the primary federal trademark statute of law in the United States. The Act prohibits a number of activities, including trademark infringement, trademark dilution, and false advertising. ...
and
New York state
New York, officially the State of New York, is a state in the Northeastern United States. It is often called New York State to distinguish it from its largest city, New York City. With a total area of , New York is the 27th-largest U.S. stat ...
common law
In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipres ...
by directly infringing on its trademark in three ways.
First, eBay profited from the sales of Tiffany jewelry resulting from the Tiffany trademark.
Second, eBay bought sponsored links on
Google
Google LLC () is an American Multinational corporation, multinational technology company focusing on Search Engine, search engine technology, online advertising, cloud computing, software, computer software, quantum computing, e-commerce, ar ...
and
Yahoo!
Yahoo! (, styled yahoo''!'' in its logo) is an American web services provider. It is headquartered in Sunnyvale, California and operated by the namesake company Yahoo Inc., which is 90% owned by investment funds managed by Apollo Global Manage ...
that advertised eBay listings for Tiffany items.
Lastly, eBay should be held liable
jointly and severally with the offending sellers, even though eBay didn’t directly list counterfeit items.
Purchase of Sponsored Links.
In response to Tiffany's assertion that eBay's practice of purchasing search engine advertising links constitutes direct trademark infringement, eBay claimed, under 1-800 Contacts, Inc. v. WhenU.Com, Inc. this conduct is not trademark "use" and thus is not infringing. While the Court found that
1-800 Contacts
1-800 Contacts Inc. is an American contact lens retailer based in Draper, Utah. The brands that 1-800 Contacts use includes Johnson & Johnson Vision Care, Alcon, Bausch & Lomb and CooperVision. The company was founded as the industry's first way ...
case is distinguishable from the current case, it concluded that the conduct is protected as a
nominative fair use even if it was actually a use of the trademark. The reason is simply that eBay's use of the TIFFANY Marks in sponsored links is effectively identical to that on its own website, and thus the same conclusions can be made.
Joint and Several Liability.
To support this allegation, Tiffany referred to Gucci America, Inc. v. Exclusive Imports International. The court held that, however, that the two cases were entirely distinguishable from one another because eBay "never takes possession of items sold through its website, and that eBay does not directly sell the counterfeit Tiffany merchandise to buyers." The court found that Tiffany's "joint and several liability" was misplaced and more applicable under the theory of
contributory infringement rather than
direct infringement and that eBay was not "liable for direct trademark infringement under state or federal law."
The Second Circuit held that the
nominative fair use defense protected eBay’s activities because eBay needed to reference the Tiffany name to identify the jewelry, eBay only used enough of the trademark as was "reasonably necessary" to make that identification, and eBay did not suggest endorsement or sponsorship by Tiffany.
Further, because eBay does not take possession of counterfeit goods, nor does eBay directly sell items, this issue would be more properly argued under contributory trademark infringement.
Contributory trademark infringement
Tiffany claimed the contributory trademark infringement of eBay, which was a judicially constructed doctrine articulated by the Supreme Court in
Inwood Laboratories, Inc. v. Ives Laboratories, Inc. and found the liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another. As established in Inwood, "if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit."
[.] Using this finding, Tiffany claimed that eBay continued to provide its platform despite its knowledge, or reason to know, that counterfeit merchandise is being sold.
Product vs. service – eBay argued that its website was service that provides a "venue for listings created and posted by third parties" rather than a "product" as defined by the Inwood case. The Court agreed that eBay fell on the "service" side of the product/service distinction. After examining all the facts, the Court found that "eBay exercises sufficient control and monitoring over its websites" and is similar to a flea market and uses Hendrickson v. eBay as a case that eBay "features elements of both traditional swap meets—where sellers pay for use of space to display goods— and traditional auction houses where goods are sold in a highest bid process."
The court concluded that "eBay's conduct must be assessed under the standard for contributory negligence set forth in Inwood."
The Second Circuit held that eBay did not have the requisite level of knowledge to satisfy the ''Inwood'' standard.
"For contributory trademark infringement liability…, a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods."
Here, Tiffany did not identify specific cases of infringement to eBay; and when NOCIs did identify specific sellers, eBay suspended them.
Therefore, eBay was not liable for contributory trademark infringement.
Knowledge Or Reason To Know.
Tiffany provided the evidence that eBay had been notified "that some portion of the Tiffany goods sold on its website might be counterfeit."
Tiffany informed eBay by sending demand letters in 2003 and 2004, buying products in eBay's 2004 Buying Program and appraising that 73.1% of Tiffany's purchases were counterfeit and filing thousands of
Notices of Claimed Infringement (NOCIs) submissions.
Tiffany argued that eBay's generalized knowledge of the counterfeit items should have prompted them to "preemptively remedy the problem at the very moment that it knew or had reason to know that the infringing conduct was generally occurring, even without specific knowledge as to individual instances of infringing listings or sellers."
The court ruled that the generalized knowledge that eBay possessed was insufficient under the Inwood test and that eBay could not be forced to remedy the problem.
Willful Blindness.
The Court considered whether eBay was
willfully blind to the infringement.
Tiffany contended that eBay was obligated to perform investigations on the infringing behaviors on its websites, given the knowledge and evidences provided by Tiffany. Nevertheless, evidence showed that eBay had spent significant efforts to fight with the sales of counterfeit items on its websites, including the VeRO program and the fraud engine. Upon the general knowledge of the problem, eBay also took reasonable steps to remedy the problem through its general anti-fraud tools. The Court thus held that eBay was not willfully blind. The court concluded that eBay did not ignore the infringing activities and tried to prevent the sale of counterfeit items, as evidenced by the VeRO program and the "fraud engine".
In addition, eBay had no affirmative duty to search for potentially infringing items without specific knowledge.
The appellate court also agreed with the district court’s ruling that eBay was not liable for contributory trademark infringement in specific cases where eBay received a NOCI from Tiffany and didn’t permanently ban the seller.
In these cases, Tiffany argued that the filing of the NOCI satisfied the ''Inwood'' "knowledge or reason to know of infringement" requirement for these specific infringing sales.
The district court concluded, however, that eBay needed only to take "appropriate steps" after receiving the NOCI.
A NOCI was not conclusive evidence of actual infringement; instead, it was a good-faith assertion by the trademark owner of infringement.
Therefore, permanently suspending the seller was unnecessary, and eBay’s prompt removal of potentially violating listings was appropriate.
While eBay could have screened out potentially infringing listings more cost efficiently than Tiffany, the trademark right holder has the responsibility to police for infringement.
Continue to Supply.
Although the general evidence was not sufficient for eBay to take the duty, the NOCIs filed by Tiffany to eBay clearly provided the specific knowledge of infringement. Tiffany argued that eBay continued to serve individual infringers by failing to take adequate steps in response to the NOCIs submissions, and the same listing with the same username appeared on the website even if they were pointed out in NOCIs. The Court held that, first of all, Tiffany wrongly equated the NOCIs, which were merely a good belief, with the determination of counterfeit, and moreover, Tiffany failed to provide evidence for this claim, as the record showed that eBay took appropriate steps to remove such listings and warn the users who sold counterfeit items, instead of continuing to supply such individual sales.
Other Causes of Action
Unfair Competition.
Tiffany alleged "
unfair competition
Unfair may refer to:
* Double Taz and Double LeBron James in multiverses ''fair''; unfairness or injustice
Injustice is a quality relating to unfairness or undeserved outcomes. The term may be applied in reference to a particular event or situ ...
,
infringement, and the use of false descriptions and representations under Section 43(a) of the
Lanham Act
The Lanham (Trademark) Act (, codified at et seq. () is the primary federal trademark statute of law in the United States. The Act prohibits a number of activities, including trademark infringement, trademark dilution, and false advertising. ...
and New York common law."
According to Starbucks Corp. v. Wolfe's Borough Coffee, Inc., in which the Lanham Act infringement and Section 43(a) claims were considered jointly, the Section 43(a) claims of Tiffany are governed by the same legal analysis as its federal infringement claims. Thus, Tiffany's Section 43(a) claims must fail as the contributory and direct infringement claims failed. Since eBay routinely removed listings that Tiffany reported to it and spent significant efforts on investigating the items, Tiffany has failed to show the bad faith by eBay.
False advertising – Tiffany alleged false advertising under Section 43(a)(1)(B) of the Lanham Act, as eBay engaged in advertising the counterfeit Tiffany merchandise on its homepage and on sponsored links for the Yahoo! and Google search engines.
The court disagreed, due to the following reasons:
# eBay's use of the term "Tiffany" was fair use.
# Although eBay had the generalized knowledge that many Tiffany products sold on its website were counterfeit, Tiffany did not prove that eBay had specific knowledge on which product was counterfeit.
# To the extent that the advertising was false, it was the responsibility of the third-party sellers rather than eBay's.
Also the court stated that because eBay was actively removing the purportedly counterfeit items from its listings, they could not be seen as misleading customers. The district court found nothing literally false in eBay’s advertisements since eBay did sell authentic Tiffany products for sale, making eBay’s advertising practices a nominative fair use.
The Second Circuit reversed, holding that extrinsic evidence was necessary to determine if eBay’s advertisements were likely to mislead or confuse consumers.
Since the district court did not look at extrinsic evidence, the appellate court remanded this case to the district court.
On remand, the district court concluded that no extrinsic evidence indicated that the advertisement in question misled or confused any consumers.
Therefore, there was no Lanham Act false advertising violation.
Trademark dilution – Tiffany also challenged eBay's practice constitute trademark dilution under the Lanham Act, 15 U.S.C. § 1125(c), as well as under New York General Business Law § 360-l. Specifically, Tiffany argued that eBay was liable for dilution by blurring and dilution by tarnishment. In addition, Tiffany also claimed the contributory trademark dilution of eBay. The Court concluded that, however, Tiffany failed to prove that eBay was liable for trademark dilution and that even if that eBay could be liable for dilution, eBay's use of the Tiffany marks was a protected, nominative fair use.
Court of Appeals (Second Circuit) Opinions
Direct Trademark Infringement
The Court agreed with the district court that eBay's use of the Tiffany marks did not constitute direct trademark infringement. The court saw eBay's use of the mark as a way "to describe accurately the genuine Tiffany goods offered for sale on its website."
The court also used the fact that the "About Me" page of Tiffany that is located on eBay's website explains that "
st of the purported `TIFFANY & CO.' silver jewelry and packaging available on eBay is counterfeit."
Contributory Copyright Infringement
The Court affirmed the decision the district court made in favor of eBay regarding contributory copyright infringement. Although the Inwood test was meant for regulating the manufactures or distributor of products, Courts have decided to extend it to services, which eBay provided in this case. When Tiffany argued that eBay was liable because it "continues to supply its service to one whom it knows or has reason to know is engaging in trademark infringement", the district court's opinion was eBay does not have specific knowledge of the infringement instances. Tiffany disagreed. Tiffany argued that eBay knew clearly that the infringing sales were ubiquitous on its websites and continued to provide its services. The Court rejected this argument and found such general knowledge was still insufficient for eBay to take an affirmative duty.
Trademark Dilution
Tiffany contended that eBay’s advertising practices constituted trademark dilution under the Lanham Act and New York state business law.
Tiffany argued that counterfeit items of inferior quality were sold, harming the distinctiveness, value, and reputation of the trademark.
In addition, Tiffany argued that eBay should be liable for contributory dilution for encouraging third parties to dilute its trademark.
The district court reasoned that eBay was not liable because eBay did not try to confuse the Tiffany trademark with its own product, an online auction website, but used the mark to advertise the availability of authentic Tiffany merchandise on its website.
There was "no second mark or product at issue here to blur with or to tarnish" the Tiffany trademark and therefore, no trademark dilution.
The district court rejected Tiffany's claim of dilution by blurring as eBay never attempted to associate the Tiffany marks with its own products. By such, the dilution by tarnishment also could not be held. Tiffany did not bring this decision on appeal.
False Advertising
Tiffany submitted that eBay was liable for false advertising as they advertised in various ways the availability of the Tiffany jewelry and most of them were in fact counterfeit. The district court rejected this claim and thought eBay's advertisement was not literally false because genuine products were indeed sold on their websites.
Supreme Court
Tiffany filed a petition for a
writ of certiorari
In law, ''certiorari'' is a court process to seek judicial review of a decision of a lower court or government agency. ''Certiorari'' comes from the name of an English prerogative writ, issued by a superior court to direct that the record of ...
to the Supreme Court, which was denied on Nov. 29, 2010. Justice Sotomayor took no part in the decision.
Implications
The Second Circuit ruling has been lauded by organizations such as the
Electronic Frontier Foundation (EFF), Public Citizen, and Public Knowledge.
EFF argued that internet commerce would be stifled if the burden of policing for trademarks were placed on intermediaries, such as eBay, because any listing even remotely suspicious would be removed.
Other commentators have noted that eBay’s investments in reducing the amount of counterfeit goods sold on its website helped it win in the lower courts and to cement the victory in the Circuit court.
Organizations such as the International AntiCounterfeiting Coalition (IACC), however, accuse eBay of "turning a blind eye" to the amount of counterfeiting that occurs on its website.
According to the IACC, 29% of online counterfeit sales occur through eBay.
Others have pointed out that the burden to police for counterfeits may hit small businesses particularly hard.
In addition, the Supreme Court’s denial of appeal leaves open the possibility that courts in different districts may come to a different conclusion in the future, leading to a conflict in case law.
Others have decried the court's focus on eBay's "investment" in reducing counterfeiting without reference to the overall economics of either eBay's profitability or the contribution of sales of counterfeits to its success.
More to the point, the court did make a finding that "eBay appears to concede that it knew as a general matter that counterfeit Tiffany products were listed and sold through its website," but this general knowledge was not sufficient to trigger liability. The liability appears to trigger only when specific individuals (i.e., sellers or stores) are engaged in the counterfeiting of goods, and can be notified to eBay.
French courts have disagreed with the Second Circuit decision. In 2008,
Louis Vuitton Moet Hennessy
LVMH Moët Hennessy Louis Vuitton (), commonly known as LVMH, is a French holding multinational corporation and conglomerate specializing in luxury goods, headquartered in Paris. The company was formed in 1987 through the merger of fashion house ...
(LVMH) sued eBay in
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of overseas regions and territories in the Americas and the Atlantic, Pacific and Indian Oceans. Its metropolitan area ...
over the sales of counterfeit
perfumes
Perfume (, ; french: parfum) is a mixture of fragrant essential oils or aroma compounds (fragrances), fixatives and solvents, usually in liquid form, used to give the human body, animals, food, objects, and living-spaces an agreeable scent. T ...
and
handbags
A handbag, commonly known as a purse or pocketbook in North American English, is a handled medium-to-large bag used to carry personal items.
Purse, handbag or pouch
The term "purse" originally referred to a small bag for holding coins. In man ...
on its website. LVMH alleged eBay had not done enough to stop the sale of counterfeit goods, but eBay lost the lawsuit.
In 2010, LVMH again sued eBay, this time for harming the reputation of the
Louis Vuitton
Louis Vuitton Malletier, commonly known as Louis Vuitton (, ), is a French high-end luxury fashion house and company founded in 1854 by Louis Vuitton. The label's LV monogram appears on most of its products, ranging from luxury bags and leather ...
trademark and
domain name
A domain name is a string that identifies a realm of administrative autonomy, authority or control within the Internet. Domain names are often used to identify services provided through the Internet, such as websites, email services and more. As ...
.
LVMH won and received 200,000
Euros in damages.
The French tribunal put the onus on eBay to enforce adequate measures to prevent illicit goods from entering the market. For example, sellers could be asked to provide receipts of purchase or even certificates of authenticity. eBay could also be made to notify customers when the origin of a good appears doubtful.
Commentators have suggested that this disparity between French and U.S. law may "weaken the integrity of the online marketplace."
See also
*
Lanham Act
The Lanham (Trademark) Act (, codified at et seq. () is the primary federal trademark statute of law in the United States. The Act prohibits a number of activities, including trademark infringement, trademark dilution, and false advertising. ...
References
External links
*
Starbucks Corp. v. Wolfe's Borough Coffee, Inc.
{{DEFAULTSORT:Tiffany (NJ) Inc. v. eBay Inc.
United States Court of Appeals for the Second Circuit cases
United States Internet case law
United States trademark case law
Tiffany & Co.
EBay litigation
2010 in United States case law