July 29, 2004, 12:00 AM

Tiffany suit seeks to settle who’s responsible for fakes at eBay

Tiffany has filed a suit charging eBay with “direct and contributory trademark counterfeiting and infringement” after a survey commissioned by Tiffany found that 73% of items identified under its brand on eBay were fakes.

Tiffany suit seeks to settle who’s responsible for fakes at eBay

The sale of counterfeit goods on the web has long frustrated brand owners, who until recently received little recourse in the courts. “When the Internet started, counterfeit cases were thrown out because it could be shown that web hosts didn’t know what was going on on their web sites,” says Lou Ederer, an attorney specializing in trademark law.

But now things are changing, and the legal trend is toward requiring web sites to be held accountable for the validity of goods sold, whether or not the seller is a third party, he says.

That could spell a formidable legal challenge for eBay Inc., the target of a lawsuit by Tiffany & Co. alleging counterfeit sales of its vaulted brand of jewelry, says Ederer, a partner with Torys LLP in New York. Tiffany filed its suit in June in U.S. District Court in New York, charging eBay with “direct and contributory trademark counterfeiting and infringement” after a survey commissioned by Tiffany found that 73% of items identified under its brand on eBay were fakes. A court dismissed a counterfeit case against an Internet service provider several years ago because the ISP was only charging a site-hosting fee and not further involved with product sales, but now marketplace sites like eBay, which earn commissions on sales, are expected to be more aware of the validity of listed products, he adds.

EBay says it will fight the suit. “Through our Verified Rights Owner program, we have worked with Tiffany to develop substantial proactive monitoring efforts and given them the tools to report problem listings, which we promptly remove,” eBay said in a statement.

EBay discloses on its site that it is not an expert in intellectual property rights and cannot verify whether all sellers have the right to sell the millions of items sold on eBay.com every day. It says it needs help from brands to identify fraudulent listings.

Nonetheless, Tiffany’s evidence and the recent trend in counterfeit cases “could spell a long, difficult case for eBay,” Ederer says. “Based on the cases I’ve seen, shopping and auction sites, have to take a harder look at the level of due diligence they’re engaged in regarding sellers.”

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