The Tiffany vs. eBay lawsuit nears its verdict
In its war against counterfeits, the jeweller has accused the auction site of benefiting from illegal transactions. The stakes are high, especially as eBay is facing other lawsuits outside the United States.
Are online platforms responsible for the content they display? Often debated, the question is back on the cards as part of the legal battle between two giants. Indeed, Tiffany has eBay in its firing line. The jeweller has accused the auction site of facilitating the sale of counterfeit Tiffany goods through its site and, because it takes a commission, of benefiting from the sale of counterfeit goods. In a word, eBay is accused of profiting from illegal transactions. The verdict should be returned soon, ending – temporarily if the case goes to appeal – a lawsuit that began on November 13th 2004.
Thousands of listings taken down
The affair is more complex than it may at first seem. “Theoretically, a virtual marketplace such as eBay is not legally responsible for hosted content,” explains Bruce Sunstein, co-founder of Bromberg & Sunstein, a Boston-based intellectual property law firm. “It is not its role to ensure that the objects exchanged are genuine, unless platform managers are aware of or have been informed of fraud and know that the objects they list are counterfeit.” Which is exactly Tiffany’s premise. The jeweller, which asserts that the sale of counterfeit goods over the Internet amounts to more than $30 billion worldwide, claims that eBay is fully aware of the contentious transactions taking place on its site.
Tiffany has informed the website of the growing number of frauds on multiple occasions. In its complaint filed in July 2004, the jeweller notes that over a five-month period during 2003 and 2004, its employees had more than 19,000 auctions removed from eBay that were selling counterfeit Tiffany merchandise. Furthermore, the luxury brand randomly purchased 186 items on eBay that displayed the Tiffany trademark. Only 5% of these items were genuine. The jeweller concludes that the overwhelming majority of jewellery items sold through eBay and which use the Tiffany trademark are in fact counterfeit, and that eBay has been wilfully blind to the sale of this unlawful merchandise.
The stakes are high
“Is alerting the operator of a virtual platform to counterfeits enough to make it liable for the authenticity of the objects exchanged? That is the question this lawsuit must answer,” notes Lee J. Eulgen, attorney and partner at Neal Gerber & Eisenberg in Chicago. The eBay group denies all responsibility, arguing that it acts only as an intermediary and therefore cannot police every item put up for sale on its site. Furthermore, as it is never in direct possession of these goods, it has no way of examining and authenticating them. Removing counterfeits from online marketplaces is also made harder by the fact that sellers regularly change their virtual identities. A lot hangs in the balance for eBay: a court ruling in Tiffany’s favour would jeopardise the online marketplace’s entire business model.
With some 250 million registered users and over a hundred million objects in circulation at any one time, the California-based company would indeed be hard-pressed to check the authenticity of every listing without implementing hugely costly procedures. If Tiffany wins its lawsuit, the consequences could be huge for other online sales platforms, which would also be forced to police the products on their site. Lee J. Eulgen prefers to mitigate: “It would be premature to conclude that every online sales platform is at risk of being sued for counterfeiting. These sites use various business models with very different rules. Also, eBay has been singled out first of all because it has a large share of the market.” Says Bruce Sunstein, “this type of platform can only operate on the assumption that its users are honest.”
Different standards
Which measures must be taken against virtual marketplaces has yet to be defined. “If the judge rules in favour of Tiffany, eBay will have to improve its VeRO program,” comments Lee J. Eulgen. The legal consequences are as yet unknown. “This is a particularly complex matter as we are working with different standards. We use these platforms to exchange objects. For some of these objects, a lawnmower say, we don’t ask ourselves whether it’s counterfeit or not whereas we want to be sure that jewellery is genuine. How should we legislate? With different laws for different categories of object?” asks Bruce Sunstein, not without irony.
As eBay – which refuses to comment on the case – fears, the lawsuit against Tiffany could lead to further complaints being filed by other luxury groups in the United States, even if, as the Chicago-based attorney points out, not all would be advised to do so given the costs involved in this type of procedure.
In view of the complexity of this case, and how much is at stake, the verdict, when it is finally returned, will carry a lot of weight, particularly as eBay is involved in other lawsuits outside the United States. But whatever the judge’s decision, the chances it will put an end to the matter are slim. “There will almost certainly be an appeal. Especially if the verdict is in Tiffany’s favour,” concludes Lee J. Eulgen.
