How To (Try To) Destroy the Online Secondary Market In One Easy Lawsuit

Remember that case where Tiffany sued eBay, saying that eBay should be liable for trademark infringement whenever one of their users posts a counterfeit item on their site? Back in July, the trial court judge ruled for eBay, slapping down Tiffany’s attempt to change the law so that eBay had to police every one of the 6 million items which are posted daily to make sure no trademarks were infringed. On Tuesday, we joined EFF and Public Citizen in filing a “friend of the court” brief with the Court of Appeals asking them to affirm the lower court’s decision and continue to protect the online marketplace from unjustified, crippling liability and overbroad policing requirements. For a little more detail on the legal arguments we make, read on.

The brief makes three basic points:

First, the doctrine which says that suppliers of a product can be held liable for downstream trademark infringement does not apply in cases where the party has no direct ability to determine whether a product is genuine. Because eBay does not actually provide the products, it is not even feasible for them to inspect the products posted by users, a requirement that eBay make such a determination would be impossible to follow.

Second, liability for eBay for users’ posting of a counterfeit Tiffany product cannot be premised on a generalized suspicion that somewhere on the eBay site, someone is probably selling some counterfeit goods. The resulting policy would say that eBay (and any other sizeable market) had to somehow figure out if every single posting was for a genuine product or not. A quick search on “Tiffany” yields over 11,000 hits to police right now. Faced with such an impossible task, eBay would most likely cease allowing users to post any products which contained any trademarks at all, destroying the online secondary market in a single stroke.

The third point has to do with “nominative fair use” – that is, when eBay is solely using a trademark to identify the mark’s owner, and not to suggest any sponsorship by that owner. Nominative fair use allows vendors and consumers to freely discuss an actual mark owner without fear of liability (and say safely say things like “Tiffany jewelry is very nice”). As the brief points out, when eBay raises a nominative fair use defense, it does not also need to show that the use is not confusing, and therefore non-infringing. To require this would be to eviscerate nominative fair use, making it a defense only when there was nothing to defend in the first place. This would have chilling free speech implications, hindering the ability of Internet users to engage in online discussion of products and companies.

We’ll keep you updated on the case here. For more information, read Ari’s previous posts on the cast, check out EFF’s case page and their press release about the brief, or for the legal details, wade right in and read the brief for yourself.

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