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On the heels of a $61 million loss to French luxury goods group LVMH, eBay on Monday secured a legal victory in its trademark battle with jeweler Tiffany.
The online auction site has been battling with the luxury jewelry retailer since 2004, when Tiffany sued eBay for allegedly allowing the sale of counterfeit Tiffany items.
Judge Richard Sullivan with the Southern District Court of New York rejected the idea that eBay is responsible for policing its site for fake Tiffany items.
"The court is not unsympathetic to Tiffany and other rights owners who have invested enormous resources in developing their brands, only to see them illicitly and efficiently exploited by others on the Internet," Sullivan wrote in his 66-page ruling [PDF]. "Nevertheless, the law is clear: it is the trademark owner's burden to police its mark, and companies like eBay cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might be occurring on their websites."
EBay said the judge's decision was a "victory for consumers."
"The ruling confirms that eBay acted reasonably and has adequate procedures in place to effectively address counterfeiting," the company said in a statement. "The ruling appropriately establishes that protecting brands and trademarks is the primary burden of rights owners."
EBay chastised Tiffany for taking the battle to court instead of working with the online auction site "to more effectively fight counterfeits."
Tiffany was not pleased.
"We're shocked and deeply disappointed in the district court's erroneous reading of the law," according to a spokesman. "The sale of counterfeit Tiffany merchandise on eBay is an issue not only for Tiffany but also for members of the public who may believe they are buying authentic tiffany items on eBay when in fact there is a great chance that they are buying counterfeit goods."
"We continue to believe that eBay is legally responsible for the trademark infringement of those selling counterfeit Tiffany jewelry and that eBay cannot avoid liability by placing the entire burden for enforcement on Tiffany and on other manufacturers of well-known brand-name products," he continued.
"I would be surprised if we didn't appeal" the ruling, the spokesman said, though he did not have a timetable for when that might occur.
"This decision sends a clear signal to intermediaries worried about their liability for their users' potentially infringing activity: it is not your job to police all potential infringement on your site," Michael Kwun, a senior staff attorney at the Electronic Frontier Foundation (EFF), wrote in a blog post. "That is a good thing for free speech of all kinds."
EBay was not as fortunate last month when a French court ordered the company to pay $61 million for allowing the sale of fake merchandise. EBay has vowed to fight the ruling.
Editor's Note: This story was updated at 6pm Eastern with comment from Tiffany.
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