NEW YORK EBay Inc. scored an important victory in court Monday, as a federal judge said companies such as jeweler Tiffany & Co. are responsible for policing their trademarks online, not auction platforms like eBay.
Tiffany had sued eBay in 2004, arguing that most items listed for sale as genuine Tiffany products on eBay's sites were fakes.
But U.S. District Judge Richard J. Sullivan in New York ruled that eBay can't be held liable for trademark infringement "based solely on their generalized knowledge that trademark infringement might be occurring on their Web sites."
The judge said that when Tiffany notified eBay of suspected counterfeit goods, eBay "immediately removed those listings." Although the online auction company refused to go further, by pre-emptively taking down suspicious listings for Tiffany jewelry, the judge said eBay didn't have to make such a move.
EBay spokeswoman Nichola Sharpe said Monday that the ruling "confirms that that eBay acted reasonably and has adequate procedures in place to effectively address counterfeiting."
Mark Aaron, a spokesman for Tiffany, said the company was "shocked and deeply dismayed" by the decision. Tiffany lawyer James Swire said his company might appeal it. Swire said eBay should be responsible for counterfeits on its sites, or else sellers of fakes could "go on victimizing consumers."
The Tiffany ruling was a welcome twist for eBay, which recently lost a different case stemming from counterfeit luxury goods. Last month, a French court ordered eBay to pay more than $61 million to LVMH Moet Hennessy Louis Vuitton SA, which complained it was hurt by sale of knockoff bags, perfume and clothes. EBay is appealing that ruling.
EBay says it spends tens of millions each year to combat counterfeiting. It runs a program that lets companies review listings and inform eBay of those they believe are for fake goods. EBay removes ones that participants flag. The company also suspends and blocks users who have been found selling or are suspected of selling fake goods on eBay.
EBay says that in 2007, 50,000 sellers were thrown out over counterfeits, with 40,000 previously suspended sellers blocked from returning.
Anthony LoCicero, a lawyer at New York firm Amster Rothstein & Ebenstein who specializes in trademark and patent law, called the decision "tremendously important" for eBay and commerce on the Internet.
"Brand owners have to be vigilant," he said. "That's the message."
If the case had gone the other way, it could have made it much harder for people to legitimately buy and sell used but trademarked goods, said Wendy Seltzer, a fellow at Harvard University's Berkman Center for Internet and Society.
"If eBay had to pre-emptively examine the trademark status of every item that were posted is it genuine, is it counterfeit it would be much more expensive to put a listing on eBay, because it would be much more expensive for eBay to process and host this listing," she said.
Separately, the judge said eBay could use the Tiffany name in its ads, both on its home page and in sponsored links eBay buys through the search engines run by Yahoo Inc. and Google Inc. That has been an unsettled legal question for search engines, which have faced lawsuits over the use of trademarked terms in paid search listings.