Second Circuit to Rule on Whether Retailer May Be Held Liable for Failing to Stop Sales of Counterfeit Products


Our Illinois trademark infringement lawyers and many others involved in online commerce are awaiting an important ruling from the Second U.S. Circuit Court of Appeals. As the American Lawyer noted July 17, the court heard oral arguments the day before in Tiffany v. eBay (USDC SD NY opinion), in which the famous jewelry retailer sued online auction company eBay for trademark infringement. Tiffany does not claim that eBay directly infringed its trademarks, but that the auction company fails to do enough to stop its users from selling counterfeit Tiffany products. The appeal to the Second Circuit followed a loss for Tiffany in trial court, where a New York judge ruled that the company failed to make its case for trademark infringement, unfair competition, false advertising and dilution.

In the original suit, Tiffany alleged that eBay allowed hundreds of thousands of counterfeit silver jewelry items to be sold on its Web site over three years. Even though these items were sold by individual users of the site rather than eBay itself, Tiffany argued that eBay was liable for not taking strong enough steps to stop the infringing sellers. As Richard J. Sullvian, the trial judge in the case, observed, the heart of the case was the question of who should police Tiffany’s trademarks online. That judge found that the burden fell on Tiffany itself. Relying on Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982), the judge wrote that eBay should only be liable if it continued to permit sellers after it knew or should have known about their infringement. He ruled that it did not, and in fact went into detail about eBay’s efforts to reduce counterfeiting.

The same issues were the focus of the Second Circuit’s oral arguments, the American Lawyer said. According to the article, a trademark attorney for Tiffany argued that eBay is aware of ongoing problems with counterfeiting, yet continues to allow sellers to sell alleged Tiffany products at suspiciously low prices. He suggested remedies to the court including a zero-tolerance approach to sellers caught counterfeiting and a policy of verifying suspicious goods before they are publicly posted. In response, an attorney for eBay noted that the company spends $18 million a year fighting counterfeiters and takes down listings immediately when their legality is challenged. He further suggested that Tiffany is trying to force eBay to shoulder the work and cost of policing Tiffany’s brand.

This is a closely watched case, with amicus briefs filed by major online retailers and Internet companies, as well as by companies and industry groups whose products are frequently counterfeited. Our Chicago Internet trademark litigation attorneys would not be surprised to see a further appeal to the U.S. Supreme Court after the ruling comes down from the Second Circuit. Trademark holders like Tiffany have a very good reason to be vigilant about trademarks. Allowing others to hijack their brand names dilutes the value of their products, and thus their businesses. However, forcing online companies like eBay to preemptively take down all listings could cripple their business and, ironically, encourage users to move to a black market site willing to break the law.

Lubin Austermuehle has an active practice representing businesses and individuals involved in litigation over online trademark infringement, dilution or unfair and untrue attacks on their businesses. Our Illinois and DuPage County Illinois trademark litigation and trade libel lawyers and DuPage and Cook County trial attorneys have a strong record of success in trademark cases and related business cases, involving both online and offline conduct. Based in Oakbrook Terrace and Chicago, we represent clients of all sizes throughout the states of Illinois, Indiana and Wisconsin, and throughout the United States. If your business is under fire and you’d like to learn about how we can help, please contact us through the Internet or call us at 630-333-0333 to set up a confidential consultation.

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