Tag Archives: Secondary Liability

EFF backs eBay in Tiffany spat

Originally posted 2008-12-05 00:01:56. Republished by Blog Post Promoter

See, we don’t agree with Public Citizen all the time!  Read on, via the Electronic Frontier Foundation (EFF):

[EFF] along with Public Citizen and Public Knowledge urged a U.S. court of appeals Wednesday to reject jewelry-maker Tiffany’s attempt to rewrite trademark law and create new barriers for online commerce and communication. . . .

“Millions of Americans use sites like eBay and craigslist to buy and sell goods,” said EFF Senior Intellectual Property Attorney Michael Kwun. “If Tiffany had its way, sites like eBay would be responsible for figuring out whether items its users are selling — items eBay itself never sees — are authentic or counterfeit. That’s an impossible task.”

It is?  Where are the metrics for “impossible”?  Can we start with nearly half a billion dollars in quarterly profits in the third quarter of this year? How do you get from that to “impossible”?

Here’s the EFF amicus brief.  Lots of talk about “burdens,” and “impossible,” but no data.  Yes, as a general rule the burden of proof is on the plaintiff in civil matters, but hasn’t Tiffany shifted that burden by coming forward with the undisputed claim that massive amounts of counterfeit merchandise is being sold on eBay?

Now take a look at the amicus brief of the International Anti-Counterfeiting Coalition (IACC), written by my friend David Bernstein and his partner Bruce Keller and counsel Michael Potenza. Read More…

Best of 2013: The Lanham Act’s surprising penumbras

First Columns and Roman law statue, First Department Courthousepublished on July 15, 2013.

Here I thought I understood something about the Lanham Act.  But wait, there’s more!  Did you know this?:

The purpose of the Lanham Act is to protect registered and valid copyrights, trademarks, and patents.

That’s from Coach, Inc. v. Southwest Flea Market., 2:10-CV-02410-DKV, 2012 WL 8470191 (W.D. Tenn. Feb. 21, 2012), an important decision concerning, among other things, the circumstances under which a flea market vendor can be held contributorily liable for the sale of counterfeit trademark merchandise by vendors after the Second Circuit’s ruling in Tiffany v. eBay.  Tiffany arguably raised, or at least firmly established, the standard by which a party operating a marketplace has legal responsibility for intellectual property infringment by sellers in that marketplace.

The Western District of Tennessee, in its 2012 opinion, found willful blindness by the flea market operator, and that the extent of its notice was sufficiently specific, unlike the general notice of counterfeiting found insufficient in Tiffany.  Moreover, unlike eBay where there was a record of affirmative remedial measures employed by the online auctioneer,  in Southwest the flea market’s purported remedial measures for discouraging the sale of counterfeits were pretty much a joke.

But the suggestion that the Lanham Act applies to copyrights and patents — what is that about?

And why was it “adopted” when the opinion was affirmed by the Sixth Circuit on May 31, 2013?  Yep, here’s what it says in that opinion:

 The Lanham Act protects registered copyrights, trademarks, and patents.

Really?

When I read the appellate opinion, I kept scratching my head, but not over that.  I just glossed over it.  But I did wonder:  Why was it worth it to the defendant to litigate over the other main issue in the appeal, namely the imposition of attorneys’ fees against the defendant for willful infringement?

The amount of fees sought was under $200,000.  What, I wondered, could be the point of litigation over this when there’s already a $5 million damages award out there?  Is this flea market going to pay that, really?   On reflection, and after discussion with the person in my house who brings these things (and who brought the Lanham Act “expansion) to my attention, we started to wonder if the answer hinged on the question of whether a finding of “willful blindness” — a component of contributory liability that is deemed to be constructive knowledge of infringement ineluctably leads to a finding of “willful conduct” relevant to the award of attorneys’ fees.

This, in turn — a finding of willfulness — might be very relevant to the dischargeability of a judgment debt based on trademark statutory damages, much less where there was (as in Southwest Flea Market) and element of default, in bankruptcy.

That’s not such a clear question.   Read More…

eBay, VeRO and the Scientologists

Originally posted 2008-12-10 23:26:21. Republished by Blog Post Promoter

Last February Scott Pilutik, an aggressively anti-religion blogger and lawyer, posted this excellent piece about the abuse by the Scientology cult of eBay’s VeRO program, which eBay waves around to show what it’s doing to combat counterfeiting on the Internet (though of course the courts have mainly relieved it of having to do much of anything).  The “church” uses VeRO to prevent ex-members from selling a piece of mechanical garbage called an e-meter to either novitiates, souvenir hunters or whoever else would want to buy them on eBay.

Like tanning goop manufacturers Australian Gold and Designer Skin, Scientology wants to control distribution of its merchandise; like those companies as well, it is mostly selling packaging and marketing, not value, so control over distribution is key to the business model.  Market prices are bad for business when you’re selling something that’s not “really” worth all that much.  Businesses such as these therefore use fallacious claims sounding in intellectual property infringement as proxies for price-inflating market forces that don’t exist.  All too often, the regimes that purport to enforce those laws, be they judges or private companies such as eBay, are all too willing to help outfits such as these abuse them.

Let’s pick up the action here: Read More…

The Lanham Act’s surprising penumbras

Columns and Roman law statue, First Department CourthouseHere I thought I understood something about the Lanham Act.  But wait, there’s more!  Did you know this?:

The purpose of the Lanham Act is to protect registered and valid copyrights, trademarks, and patents.

That’s from Coach, Inc. v. Southwest Flea Market., 2:10-CV-02410-DKV, 2012 WL 8470191 (W.D. Tenn. Feb. 21, 2012), an important decision concerning, among other things, the circumstances under which a flea market vendor can be held contributorily liable for the sale of counterfeit trademark merchandise by vendors after the Second Circuit’s ruling in Tiffany v. eBay.  Tiffany arguably raised, or at least firmly established, the standard by which a party operating a marketplace has legal responsibility for intellectual property infringment by sellers in that marketplace.

The Western District of Tennessee, in its 2012 opinion, found willful blindness by the flea market operator, and that the extent of its notice was sufficiently specific, unlike the general notice of counterfeiting found insufficient in Tiffany.  Moreover, unlike eBay where there was a record of affirmative remedial measures employed by the online auctioneer,  in Southwest the flea market’s purported remedial measures for discouraging the sale of counterfeits were pretty much a joke.

But the suggestion that the Lanham Act applies to copyrights and patents — what is that about?

And why was it “adopted” when the opinion was affirmed by the Sixth Circuit on May 31, 2013?  Yep, here’s what it says in that opinion:

 The Lanham Act protects registered copyrights, trademarks, and patents.

Really?

When I read the appellate opinion, I kept scratching my head, but not over that.  I just glossed over it.  But I did wonder:  Why was it worth it to the defendant to litigate over the other main issue in the appeal, namely the imposition of attorneys’ fees against the defendant for willful infringement?

The amount of fees sought was under $200,000.  What, I wondered, could be the point of litigation over this when there’s already a $5 million damages award out there?  Is this flea market going to pay that, really?   On reflection, and after discussion with the person in my house who brings these things (and who brought the Lanham Act “expansion) to my attention, we started to wonder if the answer hinged on the question of whether a finding of “willful blindness” — a component of contributory liability that is deemed to be constructive knowledge of infringement ineluctably leads to a finding of “willful conduct” relevant to the award of attorneys’ fees.

This, in turn — a finding of willfulness — might be very relevant to the dischargeability of a judgment debt based on trademark statutory damages, much less where there was (as in Southwest Flea Market) and element of default, in bankruptcy.

That’s not such a clear question.   Read More…

Best of 2010: Forget breakfast — eBay eats Tiffany’s lunch

Originally posted 2010-12-23 08:00:54. Republished by Blog Post Promoter

Tiffany's NYC The Second Circuit, unsurprisingly according to most commentators, has affirmed the decision of the Southern District of New York refusing to find eBay liable for contributory trademark infrintgement in the Tiffany v. eBay case.  I have been following the case since before it was filed (yeah, bitter as usual!) and have written bunches of posts on it — see, look?

In terms of the Second Circuit opinion itself, you can find that here.  If at some point I have something really original to say about it–after all the blogging is done by everyone else–you’ll be the first to know.  But here’s a little roundup of “takes.” First, the WSJ Law Blog on the thrust of the story:

So long as eBay takes steps to remove listings it knows are bogus — and isn’t otherwise willfully blind to fraudulent sales — it can avoid liability, the court ruled.  Judge Robert Sack, writing for the three-judge panel, seemed to hang his hat on the “market”:

We are disposed to think, and the record suggests, that private market forces give eBay and those operating similar businesses a strong incentive to minimize the counterfeit goods sold on their Web sites . . .

EBay received many complaints from users claiming to have been duped into buying counterfeit Tiffany products sold on eBay. The risk of alienating these users gives eBay a reason to identify and remove counterfeit listings. Indeed, it has spent millions of dollars in that effort. . . .

Tiffany had argued that eBay knew it had a problem with counterfeit items being listed on its Web site and did little to clean it up. EBay insisted the obligation rested with the New York jeweler to identify and alert it to auctions of counterfeit Tiffany silver jewelry.

But that’s not the whole story, exactly, though it mostly is.  As Law.com’s Corporate Counsel explains:

The court sent the case back to the district level for more discussion of whether eBay may be guilty of false advertising because it promotes the presence of “Tiffany” products on its site in both direct advertisements and paid ads that pop up when users search for Tiffany on Google and other search engines.

Those ads could be deemed false, because eBay is aware that “a significant portion” of goods advertised as Tiffany items on eBay are actually counterfeit, the court said. (The exact percentage of counterfeit Tiffany items among all those advertised is in dispute). EBay has pointed out that its site contains a special “About Me” page for Tiffany (and controlled by Tiffany) in which users are told that any Tiffany item advertised for sale on eBay is likely to be a fake.

To win a false advertising claim, Tiffany will have to produce evidence that consumers were confused by the advertisements, the court said. So far, Tiffany has not produced that sort of evidence, which usually comes in the form of consumer surveys.

Usually?  Well, usually if anyone’s actually watching, I guess.  Anyway, some more–here’s a great article by a partner at Pattishall McAuliffe (the law firm that bears the name of my late trademark law prof)  named Uli Widmaier that gets to the heart of the matter (I’ve removed the citations for bloggy reading and added a link or two):

In other words, for a defendant to be liable for contributory trademark infringement, the defendant must have knowledge of specific individuals engaged in infringing activities. General knowledge that infringing activity might take place is not enough. This is an application of the “narrow standard” of contributory liability articulated in Inwood Laboratories, Inc. v. Ives Laboratories, Inc. eBay argued in the district court that this standard did not apply, but accepted the Inwood standard for purposes of the appeal.  Thus, the Court “assume[d] without deciding that Inwood’s test for contributory trademark infringement governs.

Tiffany had also argued that eBay was “willfully blind” as to the sale of counterfeit Tiffany goods on eBay’s website. The Court stated that, as a general matter, “[a] service provider is not, we think, permitted willful blindness. When it has reason to suspect that users of its service are infringing a protected mark, it may not shield itself from learning of the particular infringing transactions by looking the other way.” However, the Court declined to impose liability for contributory trademark infringement on this ground because “eBay did not ignore the information it was given about counterfeit sales on its website.”

In sum, the Second Circuit affirmed that a service provider is not permitted to be willfully blind to alleged trademark infringement. But eBay’s removal of listings identified as counterfeit by Tiffany, as well as eBay’s affirmative steps to police its website for counterfeiters were enough to render eBay not willfully blind. Had eBay done less, it might have been found liable. Unfortunately, the decision gives very little guidance as to the dividing line between “willful blindness” and sufficient vigilance.

Great point.  There’s something about trademark law that, for some reasons, makes judges want to make lawyers and businesses guess about liability until it’s too late.  As usual, Eric Goldman gets that, too: Read More…

Give the man credit

Originally posted 2010-06-28 01:00:01. Republished by Blog Post Promoter

Federal squares

Let's hear it for New York

Judge Harold Baer of the U.S. District Court for the Southern District of New York (the “home court” for LIKELIHOOD OF CONFUSION®)  has never been afraid to stick his neck out, at least a little bit.  He’s done it this time in the battle of, or rather by, the brands against trademark counterfeiting.   In a decision dated June 23rd, Judge Baer has bucked the trend against finding secondary trademark liability against hardly any party that profits from counterfeiting by denying a motion to dismiss claims of contributory trademark infringement brought by Gucci against a group of credit card processing companies in Gucci America Inc. v. Frontline Processing Corp., et al. (The decision is here.)

This is a favorite topic of mine, and obviously a still developing area of law.  Three years ago almost to the day I wrote the following in these very pixels:

Reuters reports that in Perfect 10, Inc. v. Visa Intl. Serv. Assn., 494 F.3d 788, 793 (9th Cir. 2007) the Ninth Circuit has affirmed (opinion here), 2-1, a ruling that there is no third-party copyright or trademark liability for credit card companies such as Visa and MasterCard or the banks that process their transactions, arising from their central — essential, really — role in the sale of counterfeit merchandise (including, as in this case, unauthorized copies of dirty pictures) on the Internet:

Writing for the majority, Judge Milan Smith Jr. said credit card processors, unlike Web search providers, do not direct online traffic. “They in no way assist or enable Internet users to locate infringing material, and they do not distribute it,” Smith wrote.“Here, the infringement rests on the reproduction, alteration, display and distribution of Perfect 10′s images over the Internet,” Smith wrote.

If you didn’t guess from the title, I disagree with this. Why do judges keep missing this? The credit card companies are very much in the profit chain of infringing websites — websites that do nothing but sell counterfeit goods — and they make no serious effort, even when notified, to prevent this activity from occurring. . . . I’m not alone; not by a long shot. The dissenter? Only Alex Kozinski, who also recognizes that the majority errs — really, in my view, demonstrates real intellectual dishonesty — in that they

recognize, as they must, that helping consumers locate infringing content can constitute contributory infringement but they consign the means of payment to secondary status. … But why is locating infringing images more central to infringement than paying for them?

Here Judge Baer, considering the facts as alleged in the Gucci case, had no problem overcoming the high (too high, I’ve argued) standard set by the Second Circuit in Tiffany v. eBay for a finding of  “willful blindness“:

Here, Gucci has made substantial factual allegations about the knowledge of all three defendants.   Read More…

Jane Coleman’s “Secondary Trademark Infringement”: Update for 2011-12

Secondary Trademark InfringementIt’s here!  Jane Coleman on Secondary Trademark Infringement, the free (for now) online (for now) treatise has been updated for the coming year.  Whereas last year’s update featured a host of new cases, this year Jane has not only added the latest reported decisions on contributory and vicarious liability for trademark infringement, she has expanded the topical reach of the treatise by adding entirely new sections.

Here’s an excerpt from the updated overview:[stextbox id="grey"]

Since the initial release of this treatise in September 2009, courts have addressed a number of novel issues:

  • Affiliate Marketing — Should online retailers be liable for their affiliates’ trademark infringement?   Two courts have declined to extend contributory liability to online merchants for the infringing activities of their affiliates. The attenuated relationship between the two parties did not support a claim of either contributory or vicarious liability in 1-800 Contacts v. Lens.com and Sellify v. Amazon.
  • Is the licensing of IP rights in cartoon characters used to make counterfeit jewelry a “service” or a “product”?  The plaintiff in Nomination Di Antonio E Paolo Gensini S.N.C. v. H.E.R. Accessories, Ltd. argued unsuccessfully that the defendant licensors supplied a “product,” albeit an intangible one. The court disagreed, and saw the defendants as providers of a “service,” triggering a “direct control and monitoring” analysis. Indeed, the licensing of IP rights has been contemplated as a service, as for example in Fare Deals, which the court referenced. But Nomination seems distinguishable, because the right to use those characters became manifest as an integral component of the infringing product – the counterfeit jewelry depicting those characters and bearing the plaintiff’s mark – whereas in Fare Deals it did not.
  • Damage Awards – Can the  secondary infringer face higher damages than the direct infringer?  This was the outcome in Roger Cleveland Golf Co.  v. Price (sic),  where the jury was afforded broad discretion in awarding statutory damages. A new section on remedies explains that the law regards contributory infringers and direct infringers as joint-tortfeasors, and how a secondary infringer may be equally responsible for damages, notwithstanding his indirect role in the underlying infringement.

More cases have been brought as contributory liability claims than as claims for vicarious infringement, though the law is certainly still evolving in this area. The key factor in determining the viability of a contributory liability claim is the defendant’s knowledge. Sometimes the knowledge requirement is readily met with direct evidence such as correspondence revealing a relationship between the direct and indirect infringers. At other times, however, plaintiffs are hard-pressed to meet the knowledge requirement under Inwood. Even where it has been met, it is often because the plaintiffs put the defendants on notice of the infringing activity, in which case the defendants may have taken remedial action, to which courts have been very sympathetic. In Tiffany v. eBay, for example, the court was satisfied that, notwithstanding the volume of complaints by Tiffany, eBay had taken “appropriate steps” through its notice-and-takedown system, the VeRO Program, to avoid liability. . . [/stextbox]It’s all there, including a new section on contributory cybersquatting.  Hurry — has your adversary already cut and pasted it into his motion papers?

 

Secondary liability conference Stanford thing

What if they called a conference on secondary liability on the Internet and no one told … well, me?

It happens.  I mean, that people could forget to tell me.  Imagine!  Whether the symposium itself really happened, well, there is a lot of circumstantial evidence.  Al I’m saying is I just can’t swear to it myself.  Nor could I fly to it myself because no one invited me, me, me!

But evidently in March of this year the Stanford Technology Law Review held a symposium called Secondary and Intermediary Liability on the Internet, “to discuss current and emerging issues in secondary and intermediary liability on the Internet. Panels focused on three areas of the law: Trademark, Copyright, and Privacy.”

You can check out the program and download audio of the three panels at the link.

I can’t but chuckle when seeing that my buddy Eric Goldman moderated the panel on “Emerging Issues of Secondary Liability in Trademark Law,” a panel that included my new friend Stacey Dogan (who moderated the panel I was on earlier this week).  Here are Eric’s notes from that day.

Why do I chuckle?  Because notwithstanding that he seems always to be writing about it, and here he is moderating a panel about it, Eric also always seems to be denying that there’s much of a “future,” so to speak, in secondary liability litigation.  He could be right.  Could be this is just an Internet thing. But someone out there wants to talk about this topic, and read about it, too, and the ones in the second category seem to always get Eric for the first category!  Just because he knows a bunch of stuff?

Trademark blogger Ron ColemanOf course, the best place to read about it, at least regarding secondary trademark liability, is Jane Coleman’s definitive treatise on the topic.  (Heck, she went to Stanford herself, even!)

Yes, that’s the one everyone’s using to prepare their presentations and papers and the topic and — with some exceptions — not citing or acknowledging.  Bloggers we trust, mostly.  But everyone else?

We know, people.  We have the server logs.  We can predict with 99% certainty what law firm is about to publish a newsletter, blog post or white paper, or file a brief, on the topic.  We know what obsolete law reviews are about to roll out obscure articles and which “well known” treatises are about to substantially “update” their offerings with enhanced treatment of secondary trademark liability whose outlines just happen to track the Jane Coleman treatise.

Internet thing!

Secondary Trademark Infringement treatise updated for 2010-11

Secondary Trademark Infringement by Jane ColemanFrom the Overview to the update of Secondary Trademark Infringement by Jane Coleman, which is now complete:

Of all the contexts in which secondary liability has been raised, whether contributory or vicarious, the Internet has by far generated the most interest and attention. The advent of Internet commerce has created new problems for the law to address. On the Internet, buying and selling take place among a seemingly infinite number of parties in a matter of moments, making it difficult both to police and remediate infringement. These issues came to light in Tiffany v. eBay, where the court observed that “more than six million new listings are posted on eBay daily, and at any given time, some 100 million listings appear on the website.” Tiffany v. eBay, 576 F.Supp.2d 463, 475 (S.D.N.Y. 2008), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010). For application of secondary liability doctrine in a variety of specific Internet contexts, see the treatise outline.

Since the initial release of this treatise in September 2009, newsworthy developments have taken place in the following areas:

  • Search EnginesRosetta Stone v. Google. The court declined to extend contributory liability for trademark infringement to the search engine Google for supplying trademark-protected keywords to infringing websites, importing the court’s reasoning in Tiffany v. eBay.
  • Credit Card Processing ServicesGucci v. Frontline Processing. The essential role played by credit card companies in online trademark infringement was recognized in Gucci v. Frontline Processing, where the court allowed contributory liability claims to go forward against companies that had established credit card processing for an online counterfeit merchant. The payment for the counterfeit goods sold on its website was part of the infringing process, the court reasoned, drawing on Judge Kozinski’s dissent in Perfect 10, and most of the infringing sales – of which the companies allegedly knew or should have known — were allegedly consummated using credit cards.
  • Domain Name RegistrarsTransamerica Corp. v. Moniker Online. Although domain name registrars have generally not been subject to contributory liability, in a case where the plaintiff’s allegations against the defendant domain name registrar made out a complex scheme of cybersquatting, the court allowed the contributory liability claim to proceed against it. Far from the “rote translation” involved in Lockheed, the facts alleged in Transamerica depicted a domain name registrar that acted in concert with other defendants to profit from the infringing activities of its customers.

In all, the following decisions have been integrated into the treatise text:

New material is highlighted in red on the site through the end of the month.

But, of course

Originally posted 2007-09-10 15:09:53. Republished by Blog Post Promoter

Shoes are dropping all over Europe:

L’Oreal, the world’s largest cosmetics group, has launched legal action against eBay, alleging the online auctioneer does not do enough to combat the sale of counterfeits, the company said on Monday.

We’ve been genuinely interested in this issue for a long time — if you’re new, click here and here.

Home cookin’ a la mode, with a most undeserving dessert

Originally posted 2008-07-01 02:15:56. Republished by Blog Post Promoter

From the WSJ Law Blog:

A French court today cracked down on counterfeits — and an outlet that sells them — ordering eBay to pay Louis Vuitton and other luxury brands — Kenzo, Guerlain, Dior and Givenchy — $63.1 million in damages for auctioning fake goods. Here’s the early story from WSJ. . . .

“I was really surprised by the number,” J. Michael Huget, the head of IP at Butzel Long, told the Law Blog. “There’s definitely a hometown flavor to it. I don’t know how you get there on a disgorgement of profit basis, unless there’s some unique penalty provision that exists under French law. But even with that, it’s not like it’s a company that’s gone over there and hurt people. You don’t want to discount the value of a brand, but that’d be a huge number even in our system.”

Well, unless there’s some, like, Frenchie legal reason for it, yeah? I’d run that down. Genuine expertise demonstrated by Butzel Long, and crack reporting there by the WSJ! I blame the reporter more than I do Michael Huget. Wouldn’t want to have to dial another number and risk finding out that law part.

On the other hand… “it’s not like it’s a company that’s gone over there and hurt people”? Oh, is that the test, then, given what we… know? … about French law? Remember, Michael, what our teeny dollars look like to Europeans!

Oh, all right. It does sound like a huge number. Yet on the other hand — hometown-wise, frankly I couldn’t blame the French (yes, I did just write that) for getting the impression that there’s only one way to get eBay’s attention?

Having said all that — this is actually really troubling:

As for perfumer-plaintiffs Kenzo, Guerlain, Dior and Givenchy, the judge ruled that, even though the perfumes sold by eBay were legitimate, the company was liable for unauthorized sales. LVMH strictly limits their distribution to authorized dealers such as perfume chains and department stores.

Oh no. No!!!!!!  Now what do I do?!

(Jaunty beret-tip to Marty.)

Forget breakfast — eBay eats Tiffany’s lunch

Tiffany's NYC The Second Circuit, unsurprisingly according to most commentators, has affirmed the decision of the Southern District of New York refusing to find eBay liable for contributory trademark infrintgement in the Tiffany v. eBay case.  I have been following the case since before it was filed (yeah, bitter as usual!) and have written bunches of posts on it — see, look?

In terms of the Second Circuit opinion itself, you can find that here.  If at some point I have something really original to say about it–after all the blogging is done by everyone else–you’ll be the first to know. But here’s a little roundup of “takes.” First, the WSJ Law Blog on the thrust of the story:

So long as eBay takes steps to remove listings it knows are bogus — and isn’t otherwise willfully blind to fraudulent sales — it can avoid liability, the court ruled.  Judge Robert Sack, writing for the three-judge panel, seemed to hang his hat on the “market”:

We are disposed to think, and the record suggests, that private market forces give eBay and those operating similar businesses a strong incentive to minimize the counterfeit goods sold on their Web sites . . .

EBay received many complaints from users claiming to have been duped into buying counterfeit Tiffany products sold on eBay. The risk of alienating these users gives eBay a reason to identify and remove counterfeit listings. Indeed, it has spent millions of dollars in that effort. . . .

Tiffany had argued that eBay knew it had a problem with counterfeit items being listed on its Web site and did little to clean it up. EBay insisted the obligation rested with the New York jeweler to identify and alert it to auctions of counterfeit Tiffany silver jewelry.

But that’s not the whole story, exactly, though it mostly is.  As Law.com’s Corporate Counsel explains:

The court sent the case back to the district level for more discussion of whether eBay may be guilty of false advertising because it promotes the presence of “Tiffany” products on its site in both direct advertisements and paid ads that pop up when users search for Tiffany on Google and other search engines.

Those ads could be deemed false, because eBay is aware that “a significant portion” of goods advertised as Tiffany items on eBay are actually counterfeit, the court said. (The exact percentage of counterfeit Tiffany items among all those advertised is in dispute). EBay has pointed out that its site contains a special “About Me” page for Tiffany (and controlled by Tiffany) in which users are told that any Tiffany item advertised for sale on eBay is likely to be a fake.

To win a false advertising claim, Tiffany will have to produce evidence that consumers were confused by the advertisements, the court said. So far, Tiffany has not produced that sort of evidence, which usually comes in the form of consumer surveys.

Usually?  Well, usually if anyone’s actually watching, I guess.  Anyway, some more–here’s a great article by a partner at Pattishall McAuliffe (the law firm that bears the name of my late trademark law prof)  named Uli Widmaier that gets to the heart of the matter (I’ve removed the citations for bloggy reading and added a link or two):

In other words, for a defendant to be liable for contributory trademark infringement, the defendant must have knowledge of specific individuals engaged in infringing activities. General knowledge that infringing activity might take place is not enough. This is an application of the “narrow standard” of contributory liability articulated in Inwood Laboratories, Inc. v. Ives Laboratories, Inc. eBay argued in the district court that this standard did not apply, but accepted the Inwood standard for purposes of the appeal.  Thus, the Court “assume[d] without deciding that Inwood’s test for contributory trademark infringement governs.

Tiffany had also argued that eBay was “willfully blind” as to the sale of counterfeit Tiffany goods on eBay’s website. The Court stated that, as a general matter, “[a] service provider is not, we think, permitted willful blindness. When it has reason to suspect that users of its service are infringing a protected mark, it may not shield itself from learning of the particular infringing transactions by looking the other way.” However, the Court declined to impose liability for contributory trademark infringement on this ground because “eBay did not ignore the information it was given about counterfeit sales on its website.”

In sum, the Second Circuit affirmed that a service provider is not permitted to be willfully blind to alleged trademark infringement. But eBay’s removal of listings identified as counterfeit by Tiffany, as well as eBay’s affirmative steps to police its website for counterfeiters were enough to render eBay not willfully blind. Had eBay done less, it might have been found liable. Unfortunately, the decision gives very little guidance as to the dividing line between “willful blindness” and sufficient vigilance.

Great point.  There’s something about trademark law that, for some reasons, makes judges want to make lawyers and businesses guess about liability until it’s too late.  As usual, Eric Goldman gets that, too: Read More…