eBay Decision

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

_____________________ N 04 Civ. 4607 (RJS)

o

_____________________

T

IFFANY

(NJ)

I

NC

.

AND

T

IFFANY AND

C

OMPANY

,

Plaintiffs

,

V

ERSUS

E

B

AY

,

I

NC

.,

Defendant

. ___________________

O

PINION AFTER

B

ENCH

T

RIAL

July 14, 2008 ___________________

R

ICHARD

J.

S

ULLIVAN

, District Judge:Tiffany, the famous jeweler with thecoveted blue boxes, brings this action againsteBay, the prominent online marketplace, for the sale of counterfeit Tiffany silver jewelryon its website. Specifically, Tiffany allegesthat hundreds of thousands of counterfeitsilver jewelry items were offered for sale oneBay’s website from 2003 to 2006. Tiffanyseeks to hold eBay liable for direct andcontributory trademark infringement, unfair competition, false advertising, and direct andcontributory trademark dilution, on thegrounds that eBay facilitated and allowedthese counterfeit items to be sold on itswebsite.Tiffany acknowledges that individualsellers, rather than eBay, are responsible for listing and selling counterfeit Tiffany items. Nevertheless, Tiffany argues that eBay wason notice that a problem existed andaccordingly, that eBay had the obligation toinvestigate and control the illegal activities of these sellers — specifically, by preemptivelyrefusing to post any listing offering five or more Tiffany items and by immediatelysuspending sellers upon learning of Tiffany’s belief that the seller had engaged in

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potentially infringing activity. In response,eBay contends that it is Tiffany’s burden, noteBay’s, to monitor the eBay website for counterfeits and to bring counterfeits toeBay’s attention. eBay claims that in practice, when potentially infringing listingswere reported to eBay, eBay immediatelyremoved the offending listings. It is clear thatTiffany and eBay alike have an interest ineliminating counterfeit Tiffany merchandisefrom eBay — Tiffany to protect its famous brand name, and eBay to preserve thereputation of its website as a safe place to do business. Accordingly, the heart of thisdispute is not whether counterfeit Tiffany jewelry should flourish on eBay, but rather,who should bear the burden of policingTiffany’s valuable trademarks in Internetcommerce.Having held a bench trial in this action,the Court issues the following Findings of Fact and Conclusions of Law, as required byRule 52(a) of the Federal Rules of CivilProcedure. Specifically, after carefullyconsidering the evidence introduced at trial,the arguments of counsel, and the law pertaining to this matter, the Court concludesthat Tiffany has failed to carry its burden withrespect to each claim alleged in the complaint.First, the Court finds that eBay’s use of Tiffany’s trademarks in its advertising, on itshomepage, and in sponsored links purchasedthrough Yahoo! and Google, is a protected,nominative fair use of the marks.Second, the Court finds that eBay is notliable for contributory trademark infringement. In determining whether eBay isliable, the standard is not whether eBay couldreasonably anticipate possible infringement, but rather whether eBay continued to supplyits services to sellers when it knew or hadreason to know of infringement by thosesellers.

See Inwood Labs., Inc. v. Ives Labs., Inc.

, 456 U.S. 844, 854 (1982). Indeed, theSupreme Court has specifically disavowed thereasonable anticipation standard as a “watereddown” and incorrect standard.

Id.

at 854 n.13.Here, when Tiffany put eBay on notice of specific items that Tiffany believed to beinfringing, eBay immediately removed thoselistings. eBay refused, however, to monitor its website and preemptively remove listingsof Tiffany jewelry before the listings became public. The law does not impose liability for contributory trademark infringement on eBayfor its refusal to take such preemptive steps inlight of eBay’s “reasonable anticipation” or generalized knowledge that counterfeit goodsmight be sold on its website. Quite simply,the law demands more specific knowledge asto which items are infringing and which seller is listing those items before requiring eBay totake action.The result of the application of this legalstandard is that Tiffany must ultimately bear the burden of protecting its trademark.Policymakers may yet decide that the law as itstands is inadequate to protect rights ownersin light of the increasing scope of Internetcommerce and the concomitant rise in potential trademark infringement. Nevertheless, under the law as it currentlystands, it does not matter whether eBay or Tiffany could more efficiently bear the burden of policing the eBay website for Tiffany counterfeits — an open question leftunresolved by this trial. Instead, the issue iswhether eBay continued to provide itswebsite to sellers when eBay knew or hadreason to know that those sellers were usingthe website to traffic in counterfeit Tiffany

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jewelry. The Court finds that when eBay possessed the requisite knowledge, it took appropriate steps to remove listings andsuspend service. Under these circumstances,the Court declines to impose liability for contributory trademark infringement.Third, the Court finds that Tiffany hasfailed to meet its burden in proving its claimsfor unfair competition. Fourth, in regard toTiffany’s claim for false advertising, theCourt concludes that eBay’s use of theTiffany trademarks in advertising is a protected, nominative fair use of the marks.Finally, the Court finds that Tiffany has failedto prove that eBay’s use of the TIFFANYMarks is likely to cause dilution. Evenassuming

arguendo

that Tiffany could be saidto have made out a claim for trademark dilution, the Court finds that eBay’s use of themarks is protected by the statutory defense of nominative fair use.Accordingly, the Court hereby enters judgment for eBay. The Court’s judgment issupported by the following Findings of Factand Conclusions of Law.I. P

ROCEDURAL

H

ISTORY

Plaintiffs Tiffany (NJ) Inc. and Tiffanyand Company commenced this action on

1

June 18, 2004. The Amended Complaint,

2

filed on July 15, 2004, alleges that defendanteBay, Inc. (“eBay”) is liable,

inter alia

, for direct and contributory infringement of Tiffany’s trademarks by virtue of theassistance that it provides to, and the profits itderives from, individuals who sell counterfeitTiffany goods on eBay. Specifically,Tiffany’s Amended Complaint asserts thefollowing six causes of action: (1) direct andcontributory trademark infringement of Tiffany’s trademarks in violation of Sections32(1), 15 U.S.C. § 1114(1), and 34(d), 15U.S.C. § 1116(d), of the Lanham Act; (2)trademark infringement and the use of falsedescriptions and representations in violationof Sections 43(a)(1)(A) and (B) of theLanham Act, 15 U.S.C. § 1125(a)(1)(A) and(B); (3) direct and contributory trademark infringement under common law; (4) directand contributory unfair competition under common law; (5) trademark dilution inviolation of Section 43(c) of the Lanham Act,15 U.S.C. § 1125(c); and (6) trademark dilution in violation of New York GeneralBusiness Law § 360-1.In anticipation of trial, the parties filed aJoint Pretrial Order (“PTO”) on October 6,2006, including those facts to which both parties stipulated. In April 2007, the partiesfiled Proposed Findings of Fact and Law (“Pr.Findings”) as well as Pretrial Memoranda(“Pretrial Mem.”).

3

The two Tiffany corporate entities are hereinafter

1

collectively referred to as “Tiffany.”The case was originally assigned to the Honorable

2

Naomi Reice Buchwald, District Judge. On November 3, 2005, the case was reassigned to the HonorableKenneth M. Karas, District Judge. On September 4,2007, the case was reassigned to my docket.Defendant eBay also filed two motions

in limine

,

3

seeking to exclude 1) expert witness testimony fromGeorge Mantis, and 2) evidence relating to trademarksidentified for the first time in Tiffany’s ProposedFindings of Fact. The motions were, respectively,denied and granted on November 9, 2007.

See

Tiffany(NJ) Inc. v. eBay, Inc.

, 75 Fed. R. Evid. Serv. 109, 109(S.D.N.Y. 2007) (denying motion);

Tiffany (NJ) Inc. v.eBay, Inc.

, No. 04 Civ. 4607 (RJS), 2007 WL4104037, at *1 (S.D.N.Y. Nov. 9, 2007) (grantingmotion).

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