Tiffany v. eBay 3: (Counterfeit) silver lining?

First, Tiffany lost to eBay.  Badly.

Then, Tiffany appealed.  And waited.  And waited some more.

Now, the U.S. Court of Appeals for the Second Circuit has affirmed most of the district court's holdings, specifically that eBay is liable for neither direct trademark infringement nor contributory infringement nor dilution with regard to the sales of counterfeit Tiffany silver jewelry through its site.  However, on the issue of whether eBay engaged in false advertising, the Second Circuit has remanded the case to the lower court for additional consideration.  (Opinion here.)

While Tiffany's legal team still has reason to be blue, the new ruling on the false advertising claim may prove to be a silver lining for the storied jeweler.

In essence, the appellate court reasoned that eBay, by advertising Tiffany jewelry on its own site and buying the term "Tiffany" as a sponsored link on search sites, may have misled consumers.  Although there was a battle of experts at trial regarding exactly how much of the Tiffany silver jewelry sold on eBay was counterfeit, with Tiffany claiming some 75% and eBay admitting only to at least 30%, there's no question that a significant chunk of the challenged charms were fake.  Since eBay was aware that so many of the items offered by its sellers were counterfeit, even if it couldn't determine which ones were real and which ones weren't, its creation and purchase of links that directed consumers to "Tiffany" jewelry listings might be considered false advertising. 

This decision follows on the heels of last week's European Court of Justice ruling that, while Google is probably not liable for selling trademarked terms like "Vuitton" as AdWords, those advertisers who buy others' trademarks as sponsored links and use them for questionable purposes like peddling fakes can be found liable.  The Tiffany decision confirms that advertisers in the U.S. can face similar liability for purchasing deliberately misleading links.  It's now up to the district court to determine whether or not eBay's "Tiffany" links actually constituted false advertising, given that they led consumers to both real and fake goods.   

The moral of the story?  Think before you link.
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