eBay not liable for fakes sold on site

For the London Free Press - May 17, 2010 Read this on Canoe

Court says popular site is not responsible for counterfeit items

We are all familiar with the sayings: "buyer beware," "all that glitters is not gold" and "if it's too good to be true, it probably is." Case in point: On eBay, three out of every four items advertised as Tiffany's jewelry are counterfeit products.

Nonetheless, the United States Court of Appeals has recently upheld the decision that eBay is not liable for trademark violations as against the jewelry retailer Tiffany. This decision is significant to retailers and the general public alike.

In 2004, after suspecting knockoffs of its jewelry were being sold on the eBay site, employees of Tiffany's purchased hundreds of purported Tiffany's products and tested them. Tiffany's discovered three out of every four items were fake.

Based on this information, Tiffany sued eBay for trademark violations on its site. Tiffany alleged that eBay had general knowledge that the infringement was occurring.

As noted in the appeal decision, more than six million new listings are posted on eBay daily. And on any given day, it contains more than 100 million listings. eBay's evidence at trial was that it spends as much as $20 million a year on tools to promote trust and safety on its website. In fact, eBay has an entire "trust and safety" department with more than 4,000 employees.

One of the tools that eBay cited in its defence is a rapid notice-and-takedown system called VeRO -- the verified rights owner program.

This program allows eBay to respond very quickly to trademark complaints and, when necessary, to remove infringing content. Repeat offenders were suspended from selling their goods on eBay. EBay submitted that hundreds of thousands of infringing sellers were suspended each year.

The court has come to the right decision in this case. EBay itself is not the party selling counterfeit goods or violating trademarks. And it does deal with sellers making false claims when made aware of it.

If Tiffany had been successful, it would have likely resulted in over-policing of vendors by all online intermediary selling sites. (Other examples of such sites are Craigslist and Kijiji.) If these companies had to worry about trademark lawsuits and liability for every single sale that took place on their sites -- and thus verify the authenticity of everything offered for sale on their sites -- there would be a chill on e-commerce.

At the very least, there would certainly be much stricter guidelines for what could be sold on the site and who could sell it. Strict guidelines would undoubtedly result in higher costs and some legitimate sellers being excluded.

The ruling should be considered a win not only for the intermediary companies, but also for online sellers and consumers as well.

It should be noted, however, that eBay has not been so successful in other jurisdictions.

For example, in 2009 a French court found eBay responsible for brand counterfeiting and ordered them to pay the luxury group LVMH 80,000 euros in compensation for damages caused to famous perfume brands such as Christian Dior and Kenzo.