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

Case(s): Tiffany (NJ), Inc. v. eBay, Inc., 2010 WL 3733894 (S.D.N.Y. Sept. 10, 2010); Tiffany (NJ), Inc., v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010).

Facts: Tiffany & Co., a luxury jewelry and specialty retailer headquartered in New York, sells jewelry and other accessories under the federally registered trademarks TIFFANY and TIFFANY & CO. since 1837. eBay, Inc. (“eBay”) is an American multinational corporation and e-commerce company in the business of providing consumer to consumer and business to consumer sales services via its internet marketplace platforms.

Prior to 2003, eBay “actively promoted the availability of Tiffany & Co. (“Tiffany”) jewelry on its website, including through sponsored-link advertisements on various search engines.  One sponsored-link advertisement that appeared on a search engine read ‘Tiffany on eBay.  Find Tiffany items at low prices.’ In 2003, Tiffany complained to eBay about its sponsored-link advertisements and, shortly thereafter, eBay ceased placing the ads.” (Finnegan).

Upon conducting investigations as to the authenticity of Tiffany & Co. goods that were being sold on eBay by third-party sellers, the New York-based jewelry company determined that over 70% of “Tiffany” items purchased on eBay were counterfeit. As a result, Tiffany filed a lawsuit against eBay in 2004 in the U.S. District Court for the Southern District of New York, asserting a range of claims arising out of the sale of counterfeit Tiffany merchandise on eBay, including trademark infringement, unfair competition, contributory trademark dilution, and false-advertising claims. Additionally, Tiffany alleged that eBay’s conduct in participating in the sale and advertising of “Tiffany” goods constituted contributory trademark infringement.

District Court

In 2008, the trial court ruled against Tiffany on all claims and the jewelry company appealed.

Court of Appeals

The Second Circuit affirmed the lower court’s decision in April 2010, which did not find eBay liable for contributory trademark infringement for the sale of counterfeit Tiffany goods by third-party sellers on its website. Moreover, the court found for eBay on the direct trademark infringement claim, finding that its uses of the Tiffany marks on its website were protected by the nominative fair use doctrine. The court remanded Tiffany’s false-advertising claim to the district court for further consideration.

Analysis

(1) Direct Trademark Infringement by eBay

Tiffany argued that eBay’s purchase of online advertisements – as well as the purchase of Google and Yahoo keywords – that utilized its “TIFFANY” trademark, including one that read, “Tiffany on eBay.  Find Tiffany items at low prices,” constituted direct trademark infringement. eBay defended its use of Tiffany’s marks under the doctrine of nominative fair use, arguing it was “entitled to inform third parties of the availability of listings of Tiffany merchandise on its website.”

The Court of Appeals held that eBay’s use of the Tiffany brand name was not infringement, as it was protected under the doctrine of nominative fair use doctrine. Nominative fair use allows sellers to use a trademark holder’s mark for the purpose of describing the trademark holder’s product as long as the use does not create a likelihood of confusion as to the source of the product or create the impression that the trademark holder has in some way sponsored or become affiliated with the specific sale at issue.

In particular, the court held that Tiffany’s jewelry was not identifiable without the use of its name mark, stating: “[a]bsent the Tiffany brand, a silver heart necklace . . . would simply be a piece of jewelry, instead of a symbol of luxury.” The court further held that eBay’s use of the Tiffany marks was limited to the Tiffany and eBay did not make use of any of Tiffany’s fonts or logos. Finally, the court found that eBay did not suggest sponsorship or endorsement by Tiffany, which was bolstered by the fact as there was no evidence presented that the public thought Tiffany was selling its own merchandise through eBay. “According to the court, ‘while customers may have been confused about whether the product they purchased was an authentic Tiffany [product] or a counterfeit, they were certainly not confused about the immediate source of the silver jewelry namely, individual eBay sellers.’”  (Finnegan). The court also held that the nominative fair use protected eBay’s purchase of the Tiffany trademarks as Google and Yahoo! keywords.

Ultimately, “the court rejected Tiffany’s argument that eBay was directly liable for trademark infringement on the theory that eBay was jointly and severely liable with the sellers of counterfeit TIFFANY products because: (1) eBay never took possession of products sold through its website, and (2) eBay did not directly sell the counterfeit TIFFANY goods to buyers.” (Finnegan).

(2) Contributory Trademark Infringement by eBay

The Court of Appeals focused its attention most significantly on Tiffany’s claim that eBay should be liable for contributory infringement, analyzing the case at hand in accordance with the standard set forth by the Supreme Court in Inwood Labs v. Ives Labs, 456 U.S. 844 (1982), which provided for liability if “a manufacturer or distributor . . . continues to supply its product to one who it knows or has reason to know is engaging in trademark infringement.”

In particular, Tiffany claimed that eBay contributed to infringement by “continu[ing] to provide its platform despite knowledge, or reason to know, that counterfeit merchandise is being sold.” eBay countered by asserting that it had “adequate fraud-detection processes in place, including systems that allowed Tiffany employees to monitor Tiffany auctions and submit to eBay a Notice of Claimed Infringement form (“NOCI”) requesting investigation and removal of any auction offering counterfeit goods.” (Finnegan).

The court found that the Inwood Labs standard was not limited to manufacturers or distributors of products and did, in fact, apply to eBay’s online marketplace services over which it exercised control. The court found that while Tiffany had provided eBay with notification that  “that large quantities of counterfeit Tiffany merchandise were being sold” on its platform, this amounted to knowledge that was too “generalized” to warrant a finding of contributory liability. “In finding this evidence too generalized, the court cited ‘a substantial number of authentic items sold on eBay’ and refused to expand Tiffany’s rights in its marks to the point that legitimate sales of Tiffany goods on eBay were stifled. The court also rejected Tiffany’s Buying Program evidence, which was not provided to eBay until after the lawsuit was filed, as ‘methodologically flawed and of questionable value.’ Tiffany also failed to establish that eBay was “willfully blind” to counterfeiting activities on its website.” (Finnegan).

The court found that eBay had continually taken steps sufficient to exempt it from a finding of contributory trademark infringement. Specifically, it found that eBay continually worked to refine its anti-fraud measures and that eBay invested “significant resources” to detect and eliminate counterfeit goods. Moreover, the court found that when eBay had sufficient knowledge of an infringement it removed that listing, and that eBay suspended sellers who repeatedly engaged in counterfeit activity. Accordingly, the court found that eBay was not liable for contributory trademark infringement.