Tiffany (NJ) Inc. v. eBay Inc.

Tiffany (NJ) Inc. v. eBay Inc.
Court	United States Court of Appeals for the Second Circuit
Full case name	TIFFANY (NJ) Inc. and Tiffany and Company v. eBay Inc
Argued	July 16 2009
Decided	April 1 2010
Citation	600 F.3d 93 (2010)
Holding
The court affirmed the judgment of the district court with respect to the claims of trademark infringement and dilution. The false advertising claim was returned to the district court for further processing, which was then ruled in favor of eBay.
Court membership
Judges sitting	SACK and B.D. PARKER, Circuit Judges, and GOLDBERG, Judge
Case opinions
Majority	SACK, Circuit Judge

Tiffany (NJ) Inc. v. eBay Inc. 600 F.3d 93 (2nd Cir. 2010), is a United States Court of Appeals for the Second Circuit case in which plaintiff Tiffany & Co. filed the complaint, first in 2004, alleging that eBay constituted direct and contributory trademark infringement, trademark dilution, and false advertising since it facilitated and advertised counterfeit Tiffany jewelries on its online market. On July 14, 2008, the District Court for S. D. N. Y. decided in favor of eBay on all claims. Tiffany appealed from these decisions to the Second Circuit. The court affirmed the judgment of the district court with respect to the claims of trademark infringement and dilution. The false advertising claim was returned to the district court for further processing, which was then ruled in favor of eBay.

Background

Founded in 1837, Tiffany & Co. is an established brand of luxury goods with high-end quality, including jewelry, watches, and home items. Created in New York City by Charles Lewis Tiffany, Tiffany is "renowned for its rare and magnificent diamonds" its "style is defined by groundbreaking designs and glamorous collections." Tiffany marks are famous and a valuable asset for the company and are closely controlled through the distribution chains of its goods.

eBay is an online-market place that allows its registered users to buy and sell items with other users. eBay has more than 97 million active users globally, and is the "world's largest online marketplace, where practically anyone can buy and sell practically anything." Sellers put listings of their items under certain categories, such as "Books" or "Electronics", and potential buyers can search the items they want by keyword search or by browsing under the category. The two parties contact each other directly and decide the payment and shipping details to complete a transaction. eBay makes revenue by charging the sellers a commission fee for its listing services and for each completed deal.

Starting from 2004, counterfeit Tiffany goods were found to be sold on eBay's website, which could also be linked from eBay's homepage as top-sale listings.

District Court findings

Direct trademark infringement

EBay's use of the Tiffany marks – Tiffany pointed out that eBay advertised the availability of Tiffany goods on eBay's market through several ways such as "on the eBay home page, through communications with sellers and buyers, and through lists of top search terms and popular brand names." From this, the Court ruled that "eBay's use of the Tiffany Marks on its website did not create the impression that Tiffany had affiliated itself with, sponsored, or endorsed the sale of Tiffany items on eBay" and that eBay's use of Tiffany marks on its homepage was "a protected nominative fair use."

1. eBay demonstrated that it is necessary to use the Tiffany marks in order to identify and describe their jewelry.
2. eBay demonstrated that it did not use the marks more than necessary to identify the item.
3. eBay showed that it did not do anything that would suggest that Tiffany & Co. was sponsoring or endorsing any of the listings or eBay itself.

Purchase of Sponsored Links. In response to Tiffany's assertion that eBay's practice of purchasing search engine advertising links constitutes direct trademark infringement, eBay claimed, under 1-800 Contacts, Inc. v. WhenU.Com, Inc. this conduct is not trademark "use" and thus is not infringing. While the Court found that 1-800 Contacts case is distinguishable from the current case, it concluded that the conduct is protected as a nominative fair use even if it was actually a use of the trademark. The reason is simply that eBay's use of the TIFFANY Marks in sponsored links is effectively identical to that on its own website, and thus the same conclusions can be made.

Joint and Several Liability. To support this allegation, Tiffany referred to Gucci America, Inc. v. Exclusive Imports International. The court held that, however, that the two cases were entirely distinguishable from one another because eBay "never takes possession of items sold through its website, and that eBay does not directly sell the counterfeit Tiffany merchandise to buyers." The court found that Tiffany's "joint and several liability" was misplaced and more applicable under the theory of contributory infringement rather than direct infringement and that eBay was not "liable for direct trademark infringement under state or federal law."

Contributory trademark infringement

Tiffany claimed the contributory trademark infringement of eBay, which was a judicially constructed doctrine articulated by the Supreme Court in Inwood Laboratories, Inc. v. Ives Laboratories, Inc. and found the liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another. As established in Inwood, "if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit." Using this finding, Tiffany claimed that eBay continued to provide its platform despite its knowledge, or reason to know, that counterfeit merchandise is being sold.

Product vs. service – eBay argued that its website was service that provides a "venue for listings created and posted by third parties" rather than a "product" as defined by the Inwood case. The Court agreed that eBay fell on the "service" side of the product/service distinction. After examining all the facts, the Court found that "eBay exercises sufficient control and monitoring over its websites" and is similar to a flea market and uses Hendrickson v. eBay as a case that eBay "features elements of both traditional swap meets—where sellers pay for use of space to display goods— and traditional auction houses where goods are sold in a highest bid process." The court concluded that "eBay's conduct must be assessed under the standard for contributory negligence set forth in Inwood."

Knowledge Or Reason To Know. Tiffany provided the evidence that eBay had been notified "that some portion of the Tiffany goods sold on its website might be counterfeit." Tiffany informed eBay by sending demand letters in 2003 and 2004, buying products in eBay's 2004 Buying Program and appraising that 73.1% of Tiffany's purchases were counterfeit and filing thousands of Notices of Claimed Infringement (NOCIs) submissions.

Tiffany argued that eBay's generalized knowledge of the counterfeit items should have prompted them to "preemptively remedy the problem at the very moment that it knew or had reason to know that the infringing conduct was generally occurring, even without specific knowledge as to individual instances of infringing listings or sellers." The court ruled that the generalized knowledge that eBay possessed was insufficient under the Inwood test and that eBay could not be forced to remedy the problem.

Willful Blindness. Tiffany contended that eBay was obligated to perform investigations on the infringing behaviors on its websites, given the knowledge and evidences provided by Tiffany. Nevertheless, evidence showed that eBay had spent significant efforts to fight with the sales of counterfeit items on its websites, including the VeRO program and the fraud engine. Upon the general knowledge of the problem, eBay also took reasonable steps to remedy the problem through its general anti-fraud tools. The Court thus held that eBay was not willfully blind.

Continue to Supply. Although the general evidence was not sufficient for eBay to take the duty, the NOCIs filed by Tiffany to eBay clearly provided the specific knowledge of infringement. Tiffany argued that eBay continued to serve individual infringers by failing to take adequate steps in response to the NOCIs submissions, and the same listing with the same username appeared on the website even if they were pointed out in NOCIs. The Court held that, first of all, Tiffany wrongly equated the NOCIs, which were merely a good belief, with the determination of counterfeit, and moreover, Tiffany failed to provide evidence for this claim, as the record showed that eBay took appropriate steps to remove such listings and warn the users who sold counterfeit items, instead of continuing to supply such individual sales.

Other Causes of Action

Unfair Competition. Tiffany alleged "unfair competition, infringement, and the use of false descriptions and representations under Section 43(a) of the Lanham Act and New York common law." According to Starbucks Corp. v. Wolfe's Borough Coffee, Inc., in which the Lanham Act infringement and Section 43(a) claims were considered jointly, the Section 43(a) claims of Tiffany are governed by the same legal analysis as its federal infringement claims. Thus, Tiffany's Section 43(a) claims must fail as the contributory and direct infringement claims failed. Since eBay routinely removed listings that Tiffany reported to it and spent significant efforts on investigating the items, Tiffany has failed to show the bad faith by eBay.

False advertising – Tiffany alleged false advertising under Section 43(a)(1)(B) of the Lanham Act, as eBay engaged in advertising the counterfeit Tiffany merchandise on its homepage and on sponsored links for the Yahoo! and Google search engines. The court disagreed, due to the following reasons:

1. eBay's use of the term "Tiffany" was fair use.
2. Although eBay had the generalized knowledge that many Tiffany products sold on its website were counterfeit, Tiffany did not prove that eBay had specific knowledge on which product was counterfeit.
3. To the extent that the advertising was false, it was the responsibility of the third-party sellers rather than eBay's.

Also the court stated that because eBay was actively removing the purportedly counterfeit items from its listings, they could not be seen as misleading costumers.

Trademark dilution – Tiffany also challenged eBay's practice constitute trademark dilution under the Lanham Act, 15 U.S.C. § 1125(c), as well as under New York General Business Law § 360-l. Specifically, Tiffany argued that eBay was liable for dilution by blurring and dilution by tarnishment. In addition, Tiffany also claimed the contributory trademark dilution of eBay. The Court concluded that, however, Tiffany failed to prove that eBay was liable for trademark dilution and that even if that eBay could be liable for dilution, eBay's use of the Tiffany marks was a protected, nominative fair use.

Court of Appeals (Second Circuit) Opinions

Direct Trademark Infringement

The Court agreed with the district court that eBay's use of the Tiffany marks did not constitute direct trademark infringement. The court saw eBay's use of the mark as a way "to describe accurately the genuine Tiffany goods offered for sale on its website." The court also used the fact that the "About Me" page of Tiffany that is located on eBay's website explains that "[m]ost of the purported `TIFFANY & CO.' silver jewelry and packaging available on eBay is counterfeit."

Contributory Copyright Infringement

The Court confirmed the decision the district court made in favor of eBay regarding contributory copyright infringement. Although the Inwood test was meant for regulating the manufactures or distributor of products, Courts have decided to extend it to services, which eBay provided in this case. When Tiffany argued that eBay was liable because it "continues to supply its service to one whom it knows or has reason to know is engaging in trademark infringement", the district court's opinion was eBay does not have specific knowledge of the infringement instances. Tiffany disagreed. Tiffany argued that eBay knew clearly that the infringing sales were ubiquitous on its websites and continued to provide its services. The Court rejected this argument and found such general knowledge was still insufficient for eBay to take an affirmative duty.

Trademark Dilution

The district court rejected Tiffany's claim of dilution by blurring as eBay never attempted to associate the Tiffany marks with its own products. By such, the dilution by tarnishment also could not be held. Tiffany did not bring this decision on appeal.

False Advertising

Tiffany submitted that eBay was liable for false advertising as they advertised in various ways the availability of the Tiffany jewelry and most of them were in fact counterfeit. The district court rejected this claim and thought eBay's advertisement was not literally false because genuine products were indeed sold on their websites.

Supreme Court

Tiffany filed a petition to the Supreme Court on November 2011 and was dismissed by Justice Sotomayor.

See also

• Lanham Act
• Starbucks Corp. v. Wolfe's Borough Coffee, Inc.