The recent decision in Tiffany v. eBay, No. 04 Civ. 4607 (RJS), represents a thorough and well-considered exploration of the basis for finding secondary liability in the electronic marketplace for those who facilitate the sale of infringing goods without even selling a product and, conversely, the way for the maker of the marketplace to avoid liability for infringements by those who sell on its site.
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<i>Tiffany v. eBay</i>
The issue of direct liability is tied to the scope of the defense of nominative fair use: the rights to advertise the availability of trademarked goods by the use of the trademark, whether or not some of the offered goods are counterfeit, and whether or not some or all of the trademarked goods have been diverted from the manufacturer/trademark user's authorized channels of distribution.
The issue of secondary liability is tied to whether or not it sufficed for eBay to be aware that Tiffany counterfeits were being sold on eBay. Tiffany argued that it should suffice that eBay was aware that counterfeit merchandise was being sold for eBay to be obligated to take affirmative pro-active measures to stop the listing of counterfeit products. The determining factor for the court in discounting this argument was the Supreme Court's decision in Inwood Labs, Inc. v. Ives Labs, Inc., 456 U.S. 844, 854 (1982). Simply put, generalized knowledge that counterfeiting was taking place did not suffice to impose any obligation, or liability, on eBay. Specific knowledge about which items are infringing, and which seller is listing the items, is required to be shown before any obligation to act could properly be imposed on eBay.
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