Letter from AmeriKat I - Tiffany v eBay (Trade Mark Infringement)

The AmeriKat is on Kat duties this weekend and so to that end she has been dosing herself up on caffeine ready for any breaking IP news. In days gone by, the Easter weekend would present the AmeriKat with opportunities to dye eggs a variety of pastel shades (picture right) and eat copious amounts of chocolate while watching Fred and Judy in Easter Parade. The "Holy Grail" of the AmeriKat's kittenhood Easter basket was the almighty peanut-butter chocolate bunny. One bite of an ear off this bunny meant one's weekly calorie intake was satisfied. Nowadays, however, the AmeriKat has grander Easter basket present illusions. Something like this little 18K gold and diamond sparkling egg from Tiffany & Co would do quite nicely - and with far fewer calories than the bunny!

E-Bay may continue breakfasting on Tiffanys, rules 2nd Circuit Court of Appeals

Tiffany & Co may be feeling less sparkling than their pendant this week following the Court of Appeals for the 2nd Circuit ruling in the eBay case. In 2004 Tiffany issued proceedings against eBay for facilitating and advertising sale of counterfeit Tiffany goods and therefore such acts constituted trade mark infringement, dilution and false advertising. In July 2008, District Judge Sullivan concluded at summary judgment that eBay did not engage in trade mark infringement, false advertising or trade mark dilution despite counterfeit Tiffany merchandise being sold through its site. Tiffany appealed and this past week the Circuit Court of Appeals affirmed the ruling in relation to trade mark infringement and dilution but remanded the case for further determination in respect of Tiffany's claim of false advertising. For convenience the AmeriKat has divided the case between two posts: one dealing with the trade mark infringement aspects and one dealing with the false advertising claim.

Direct Trade Mark Infringement

Tiffany alleged that eBay used Tiffany's mark when purchasing sponsored links and selling products under Tiffany's mark on their website. However, Judge Sullivan found that the doctrine of nominative fair use protected eBay's use of Tiffany's mark. The doctrine allows eBay to use Tiffany's mark to identify their goods as long as there is no likelihood of confusion about the source of the product (Merk & Co. v Mediplan Health (2006)). The use has to be reasonably necessary to identify the product and eBay's use must do nothing that would suggest sponsorship or endorsement by Tiffany (New Kids on the Block v News Am Publishing (1992)). The 2nd Circuit Court of Appeals agreed with the district court that eBay used the mark to describe accurately the genuine Tiffany goods offered for sale on its website and its uses of the mark did not suggest an affiliation of Tiffany with eBay or endorse the sale of its products on the site.

In respect of goods that were being sold on eBay under the mark that were not genuine Tiffany argued that eBay was liable for direct trade mark infringement because they knew that there was "a substantial problem with the sale of counterfeit Tiffany silver jewellery." The Court of Appeals held that eBay's knowledge that counterfeit wares were offered on its website was only relevant to the issue of contributory trade mark infringement and to the issue of eBay's liability to false advertising, but it does not go to eBay's liability for direct trade mark infringement. In support, the court pointed to the fact that eBay removed listings that Tiffany pointed out were counterfeit and that to impose liability for direct infringement on eBay would "unduly inhibit the lawful resale of genuine Tiffany goods." The court referred to this quote from Poymer in support:

"As a general rule, trade mark law does not reach the sale of genuine goods bearing a true mark even though the sale is not authorized by the mark owner." (Polymer Tech Corp v Mimran (1992)).

Contributory Trade Mark Infringement

The more difficult issue the appeals court recognized was whether eBay was liable for contributory trade mark infringement for facilitating the infringing conduct of the counterfeiting vendors. Contributory trade mark infringement is a common law doctrine which tests a defendant's conduct by determining whether eBay intentionally induced vendors to infringe Tiffany's mark or knew or had reason to know that vendors were engaging in trade mark infringement but still allowed vendors to continue trading regardless (Inwood Laboratories v Ives Laboratories (1982)). The Inwood test applies to a service providers, like eBay, if he or she exercises sufficient control over the infringing conduct (Lockheed Martin Corp v Network Solutions (1999) and Polymer II (1994)). However, the appeals court recognized that the limited case law leaves the law of contributory trade mark infringement "ill-defined".

Tiffany did not argue the first strand of the Inwood test - that eBay induced the sale of counterfeit Tiffany goods on its website. It did, however, argue the second strand - that eBay continued to supply its services to sellers of counterfeit goods in circumstances where eBay knew or had reason to know that the vendors were selling counterfeit Tiffany products.

The district court rejected this argument because at the point of eBay knowing of a particular counterfeit listing, eBay promptly removed the content. The Circuit Court affirmed this decision in respect of the terminated listings. Tiffany however argued fervently that eBay knew or had reason to know that there were counterfeit Tiffany goods being sold ubiquitously on its website by virtue of their demand letters and other information provided about particular sellers of counterfeit goods. Tiffany argued that this evidence and information provided to eBay established eBay's knowledge of the widespread sale of counterfeit Tiffany products and therefore, in continuing to make its services available to infringing vendors was contributory liable. The district court rejected this argument because despite eBay having "generalized notice that some portion of the Tiffany goods sold on its website might by counterfeit" such generalized knowledge is insufficient under the Inwood test to impose such a substantial affirmative duty on eBay to police all vendors. This is because the Inwood test refers to a continued supply of services to 'one' whom it knows sells infringing products. Therefore to satisfy the test Tiffany would have to prove knowledge of particular instances of infringement, not general knowledge of infringement. Tiffany's broad interpretation of Inwood, said the Court of Appeals, was not supported by the Supreme Court's dicta of the test in Sony Corp. v Universal (1984). There the Supreme Court stated that the Inwood test was a "narrow standard" that required knowledge of "identified individuals" engaging in infringing conduct. The Court of Appeals thus found that eBay was not liable for contributory trade mark infringement.

Trade Mark Dilution

US federal and New York state law allow Tiffany, as an owner of a famous mark, to stop a person from using the Tiffany mark in commerce in a way that is likely to cause dilution by blurring or dilution by tarnishment of the mark. For a run-through of trade mark dilution see this Amerikat post. The district court rejected Tiffany's dilution by blurring argument because they found that eBay had never used the Tiffany mark in an

"effort to create an association with its own product, but instead, used the marks directly to advertise and identify the availability of authentic Tiffany merchandise" on its site.

For the same reasoning, the court found that the tarnishment claim failed. The Court of Appeals affirmed this decision:

"Tiffany argues that counterfeiting dilutes the value of its product. Perhaps. But insofar as eBay did not itself sell the goods at issue, it did not itself engage in dilution."