Federal judge: eBay needn’t police Tiffany fakes

by Walter Olson on July 15, 2008

The ruling (Slashdot) seems relatively unsurprising given the favorable posture of U.S. law toward online middlemen like eBay, but a number of readers have asked about how it relates to the ruling the other week by a French court in favor of much more sweeping claims against eBay by luxury goods maker LVMH (Louis Vuitton Moët Hennessy). The answer, unfortunately, may not be simply that the various eBay sites have to follow different local rules depending on where they are based or to whom a purchase is being shipped. Per Roger Parloff’s Fortune piece, the earlier ruling “applies to all eBay sites worldwide to the extent that they are accessible from France, and not merely to the company’s French site at ebay.fr, according to [French lawyers on both sides]“.

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eBay and counterfeits, cont’d
07.28.08 at 3:32 pm

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1 Dave D 07.15.08 at 9:51 am

Considering our governments stance on online gambling
I don’t find this as absurd as it should be. We are
merely reaping what our government has sown. I
suspect we can expect more of the same.

2 Deoxy 07.15.08 at 10:53 am

If I were eBay, I would simply stop doing business in France. Put it in the terms of service, get rid of ebay.fr, and block access from any French IP addresses, and block bids by people with shipping addresses in France.

Sure, some people would simply proxy around it, but it should protect from the French government (and make sure that the REASON for this is posted as well).

Of course, the online gambling stuff could simply do the same thing… stay out of our country, and our laws don’t apply to you.

Consistency is a neat thing. :-)

3 Deoxy 07.15.08 at 10:55 am

I forgot to mention one thing: yes, I find the online gambling thing to be stupid, but the principle of it (that just because something is on the internet doesn’t mean it can ignore our laws) is sound, and I support that portion.

To put it another way, it’s a lousy law, but that doesn’t mean we should give up on laws altogether, even in the context of the internet.

4 rxc 07.15.08 at 10:56 am

This is also a natural consequence of the attempts to regulate internet-porn by local governments. Business has figured that if government can do it, so can they, and intellectual property rights are a prime area for internet lawsuits.

Trouble is, how are the courts and governments going to enforce these judgements? I guess they can go after well-organized sellers like e-bay now, but what about less organized ones, like CraigsList? And what about local BB lists? I guess they could eventually go after Google…

5 David 07.15.08 at 5:05 pm

It is clear to me that eBay is aware that counterfeit goods are being sold on its system, and it does very little to put an end to it. A $2,000 handbag selling for $200 should be a red flag that the item isn’t legit. Yet, eBay continues to profit off of the selling of counterfeit goods.

6 gitarcarver 07.15.08 at 6:01 pm

It is clear to me that eBay is aware that counterfeit goods are being sold on its system, and it does very little to put an end to it.

With all due respect, I think that statement is overly broad.

From this CNet article:
http://news.cnet.com/8301-1023_3-9990543-93.html?hhTest=1

“For its part, eBay says it spends $5 million a year in maintaining its fraud search engine, which has 13,000 rules that are designed to identify counterfeit listings based on words such as “replica” or “knock-off.” Listings flagged by the search engine are manually reviewed by customer service representatives.”

“In addition, eBay offers a Verified Rights Owner (“VeRO”) program that lets trademark owners report and remove infringing listings. Tiffany is one of more than 14,000 companies and individuals participating in the VeRO program.”

……

“On Monday, Judge Sullivan put an end to that argument: “As a factual matter, there is little support for Tiffany’s allegation that a seller listing five or more pieces of Tiffany jewelry is presumptively trafficking in counterfeit goods.” In addition, Sullivan concluded that eBay always removed listings promptly after receiving notification from Tiffany, and noted that eBay delayed listings of Tiffany products by 6 to 12 hours to provide time for a manual review. ”

Additionally, Tiffany’s lawyers had demanded that eBay stop users from selling any and all Tiffany merchandise – even the genuine article.

Absent of actually inspecting the item in person, what more can eBay do? Or rather, what more should they be expected to do?

I realize that conterfeiting is a problem and an issue for auction sites, but Tiffany’s approach of “stop all sales” takes the position that a legal Tiffany item, bought at Tiffany’s, is not the possession of the person who bought the item. Tiffany’s wants to have control and rights over those with legal possession of goods because of the actions of a few criminals.

Go after the crooks – not the law abiding citizens.

7 Matt 07.15.08 at 7:20 pm

The question here is not whether or not counterfeiting is illegal (it is) or whether it’s inappropriate for counterfeit goods to be sold on eBay as legit goods (it is), but who should bear the cost. In eBay’s view, it should be Tiffany’s job to report counterfeits, and eBay would then take them down. In Tiffany’s view, eBay should have to “pre-clear” all Tiffany products before listing them. IMHO, it makes more sense for the trademark owner to bear the cost than the selling conduit, since the owner is in a far better position to recognize counterfeits, and eBay’s VeRO program makes it easy to do just that.

(Also of interest is that the court refused to adopt the 1-800-Contacts analysis/extension that a number of other district courts have in the Second Circuit on trademark use. Depending on how the Rescuecom case comes down, that could prove prescient or an alternative basis for affirmance.)

8 Deoxy 07.16.08 at 11:54 am

Absent of actually inspecting the item in person, what more can eBay do?

and

Tiffany’s approach of “stop all sales” takes the position that a legal Tiffany item, bought at Tiffany’s, is not the possession of the person who bought the item. Tiffany’s wants to have control and rights over those with legal possession of goods

Those are the meat, here. Any question eBay asked could simply be answered with a lie, and eBay has no way of knowing. Tiffany’s has some ways of knowing (they won’t catch all fakes, I’m sure).

So, either third-party auctions are simply impossible (Tiffany’s owns the stuff they suppoedly sold you), or Tiffany’s just has to get over it, as eBay is already doing as much as it possibly can with the format in question.

9 David 07.16.08 at 4:13 pm

gitarcarver – eBay can do a lot of things – things it refuses to do. It can, and should pull auctions when it is clear that the item is fake – a $1,000 piece of jewelry does not sell for $50. eBay turns a blind eye to a lot of illegal material that is sold on its site, such as kiddie porn, warez, and pirated software. Yet, somehow, eBay is able to identify and shut down (all on its own without any outside help) auctions for legal items that only violated eBay’s TOS. Can you explain that?

Also, how is this any different than the copyright infringement suits pending against YouTube? The theories are similar – YouTube knows or should know that copyrighted material is being posted to their website, yet doesn’t remove it, all the while running paid advertising next to the infringing material, hence profiting from it.

10 gitarcarver 07.16.08 at 5:25 pm

It can, and should pull auctions when it is clear that the item is fake – a $1,000 piece of jewelry does not sell for $50.

Yet eBay reviews and pull items that are suspected of being fake. Your supposition is that an item must be fake based on its cost. If you like, I can find lots of situations such as this:

http://news.aol.com/story/_a/experts-confirm-rembrandt-laughing-is-a/n20080618121109990004

In that case a Southby’s auction house sold a painting for a very low price that later turned out to be a real Rembrandt. The winning bid was approximately $1500 for a painting that is worth $30 – $40 million. Experts at the auction could not or did not verify the authenticity of the painting as being an actual Rembrant.

According to your theory, Southby’s should be held accountable for selling a $30 – $40 million dollar painting at a cheap price.

According to you, since the painting sold cheaply, it must be fake.

Yet as the article details, it was not a fake and therefore your supposition is wrong.

eBay turns a blind eye to a lot of illegal material that is sold on its site, such as kiddie porn, warez, and pirated software.

Sorry, but your statement is contrary to facts. EBay does have programs in place (as cited in the CNet article) to prevent such frauds. They are not turning a “blind eye” to anything and work with sellers and original manufacturors.

Also, how is this any different than the copyright infringement suits pending against YouTube?

Are you saying that YouTube doesn’t remove copyrighted material when they are notified? Are you saying that eBay doesn’t remove items when notified or items that don’t pass its own inspection?

11 Bill Alexander 07.16.08 at 6:03 pm

Also, regarding low prices, it is not unusual for an eBay item to start at an unreasonably low price even when they are legitimate. It took me about 20 seconds to find a one ounce gold coin that started at $50, and was sold for $860. At what point should eBay say it isn’t gold?

12 Deoxy 07.17.08 at 10:30 am

I start stuff on eBay at $.99 all the time, when I know it will sell. For instance, if there’s a commodities market for some product, and x quantity of the stuff will sell for $y, give or take a couple of bucks, I start it at $.99 and let the market do its thing.

Truly valuable stuff is usually safe to do that with.

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