Internet Law: New York Caselaw: Trademark Infringement: On July 14, 2008, the U.S. District Court for the Southern District of New York issued a decision siding with eBay in a landmark trademark infringement lawsuit brought against the online auction site by Tiffany, Inc. and Tiffany and Company (collectively, “Tiffany”). Tiffany, Inc. v. eBay, Inc., Case No. 04-Civ-4607 (S.D.N.Y. July 14, 2008). In its suit, Tiffany sought to hold eBay liable for the sale of counterfeit Tiffany jewelry by eBay sellers under the doctrine of contributory trademark infringement. The Court rejected Tiffany’s claim, declining to accept a theory of liability which would have drastically expanded the reach of contributory trademark infringement.
Prior to bringing suit, Tiffany had informed eBay that a substantial amount of counterfeit Tiffany jewelry was being sold on the auction site. Tiffany demanded that eBay immediately suspend access to the site to any sellers that Tiffany identified as selling counterfeit goods. It also insisted that eBay remove any listings that offered five or more of the same Tiffany item for sale, contending that where a listing offered a large number of the same Tiffany item, the item was likely counterfeit. In response, eBay refused to comply with Tiffany’s requests.
In bringing its claim, Tiffany argued that eBay should be held liable for contributory trademark infringement because it had been put on notice (by Tiffany) that its sellers were engaging in counterfeit sales and thus it should have “reasonably anticipated” the wrongful sales of counterfeit (and infringing) merchandise occurring on its site. Accordingly, Tiffany argued, eBay had a legal obligation to proactively investigate and remove any listings that raised a suspicion of wrongdoing.
The Court disagreed with Tiffany, holding that eBay should be absolved of liability as long as it takes appropriate steps to suspend access to the site and remove listings when it receives specific knowledge that a particular listing is infringing. The Court noted that a trademark owner has the burden of policing its own mark. It found that eBay cannot be held liable for contributory infringement simply because of its generalized knowledge that some of its sellers might be engaging in infringing behavior.
In support of its decision, the Court cited Coca-Cola Co. v. Snow Crest Beverages, an earlier contributory infringement case having a similar fact pattern. 64 F.Supp. 980 (D. Mass. 1946), aff’d, 162 F.2d 280 (1st Cir. 1947). In that case, Coca-Cola claimed that Snow Crest had contributorily infringed its mark by selling an item called “Polar Cola” to bartenders who mixed it into “rum and Coke” drinks. Coca-Cola argued that Snow Crest should have reasonably anticipated the infringement because Coca-Cola’s lawyers had informed Snow Crest that the practice was occurring in a number of bars. Coca-Cola did not, however, provide names of specific bars where the alleged infringing behavior was occurring. The Coca-Cola Court refused to impute knowledge of the infringing behavior to Snow Crest based on a “blanket demand” by Coca-Cola.
Just as the Coca-Cola Court had held that Snow Crest should be liable based on generalized notice of what some of its buyers might be doing, the Court in Tiffany v. eBay held that generalized notice that some of its users might be selling counterfeit goods on its site was insufficient to impute knowledge to eBay of any specific acts of actual infringement. The Court reasoned that “the doctrine of contributory trademark infringement should not be used to require defendants to refuse to provide a product or service to those who merely might infringe the mark.” The Court took particular note of the fact that eBay had devoted a substantial amount of resources to establishing and implementing procedures to combat the sales of counterfeit goods.
The decision is a favorable one for entities offering services similar to eBay. Its holding sends the message that such intermediaries will not be responsible for investigating and policing all of the potentially infringing activity on their sites. It also highlights an additional potential defense for websites that are sued for its “members” acts, emphasizing the importance of detailed notice. On the other hand, the decision should also serve as a warning to trademark owners that they bear the burden of policing others’ use of their marks. Moreover, it accentuates the importance of a trademark owner providing very specific and detailed notice in the event of an infringement.
Notably, in a separate case brought against eBay in the Tribunal de Commerce in Paris, the court’s holding went in the opposite direction. There, the court found that eBay was not taking adequate measures to prevent the auction of unauthorized and counterfeit goods. It is interesting to note that different jurisdictions are interpreting website responsibility differently, thus creating different legal standards for the operation of a website in different areas.
Comments/Questions: ljm@gdnlaw.com
© 2008 Nissenbaum Law Group, LLC
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Internet Websites May Be Vulnerable to Regulation by Foreign Countries
Commentary: International Websites: The Internet has been amazing tool; enabling even the smallest voice to reach people throughout the world. It has, in fact, breathed new life into many small businesses who now can reach millions of potential customers in mere keystrokes. Many companies elect not to, or do not think to, limit the reach of their website. As a result, it may be accessible to the international public, and the Company could be deemed to be offering its goods or services to customers throughout the world. Again, this may be beneficial from a business standpoint, but it presents some legal vulnerabilities. Quite simply, different countries have different rules and standards by which a website must operate.
By offering its goods or services to other countries’ residents, a foreign court could claim that it has jurisdiction over a US-based company. So, even if the company has lawfully established the website in the United States, and is complying with the Federal and State laws here but the website is accessible to residents in another country, that company could still be vulnerable to legal attack for failure to adhere to that country’s (or their state or provincial) laws.
The difference in international website standards was recently highlighted in the Beijing Olympics. A lot of press came out of the Olympic Games for China’s censorship of certain Internet content. There, the government merely banned access to certain websites. However, other countries may not be so proactive, and may instead allow access to the website but hold the website operator liable for illegalities on the site or in connection with the sale. The vulnerability regarding the international scope of websites also takes a prominent role in regard to the different definitions of “obscenity.” Other countries have different standards as to what is “obscene” as compared to the United States. Therefore, what might be acceptable here, and what might even be considered to be artwork here, may be banned as pornography elsewhere. Another example is that the European Union tends to generally have stricter rules when it comes to privacy regulations.
Unfortunately, this vulnerability is complicated in that there may be different standards in each locality in addition to those differing national standards. This is a challenge even within the United States. For instance, the Internet is not generally regulated at the Federal level. Rather, each state can have its own rules and regulations relating to the operation of an e-commerce company. For instance, California has an entire regime of laws relating to privacy protections and disclaimers that need to be on a website. Regardless from where a website is based, if it is marketing to California residents, it will arguably need to comply with those laws.
Accordingly, if a website is simply launched and offers services to everyone, there are numerous legal vulnerabilities given all of the levels of legal regulation to which it may be exposed. One of the best ways to manage this risk is to limit in some way the people to whom the company is offering its goods or services. This can be included in the website terms and conditions or other legal disclaimers, where a company can specifically require the user to indicate that they are a resident of a certain country or state. Moreover, a company could establish protocols to be sure that orders are not accepted from residents of certain states and territories. Therefore, a company can limit the reach of its offerings to those states and countries that it has evaluated with legal counsel to ensure that the website and its goods and services will not run afoul of the laws of those areas.
Comments/Questions: ljm@gdnlaw.com
© 2008 Nissenbaum Law Group, LLC
Please visit our website at www.gdnlaw.com and our other blogs at www.nissenbaumlawblog.com; www.foreclosuredefenselawblog.com; www.saleofbusinesslawblog.com; www.internetdefamationlawblog.com; www.constructionlawinfoblog.com; www.filmproductionlawblog.com; www.internetlawinfoblog.com; and www.njbusinesslawblog.com
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