The Tiffany case shifted the burden of policing counterfeit trademarks entirely to brands

In 2010, the Second Circuit decided Tiffany v. eBay—the first case to test contributory trademark infringement for online shopping platforms.48 eBay hosts third-party listings and auctions, and Tiffany is an iconic, high-end jewelry company that noticed numerous counterfeit Tiffany products listed on eBay’s website.49 Between 2000 and 2004, eBay earned approximately $4.1 million dollars in revenue from Tiffany jewelry listings on its website, some of which were counterfeits.50 Tiffany reported the general problem to eBay and asked eBay to take down the listings.51 Although eBay took down the listings that Tiffany specifically complained about, it did not review all Tiffany product listings to find counterfeits.52 As a result, Tiffany sued eBay for contributory infringement.53 After a bench trial, the district court found in favor of eBay.54

On appeal, Tiffany claimed eBay was “willfully blind” to counterfeits sold on their website and argued that if eBay was not held liable for contributory trademark infringement, eBay and similar websites would have no incentive to police its service.55 Tiffany and similar retailers feared that not holding eBay liable would create an unreasonable burden on brand owners to police these service providers all day, every day.56 While the court recognized that a service provider “may not shield itself from learning of the particular infringing transactions by looking the other way,” the Second Circuit found the district court was not clearly erroneous in determining eBay was not willfully blind to countless counterfeit Tiffany products sold on its website.57

Recognizing this as a case of first impression, the court adopted a test for contributory liability created by the Supreme Court in 1982, in Inwood Laboratories v. Ives Laboratories.58 Under Inwood, contributory liability occurs when (1) the service provider “intentionally induces another to infringe a trademark” and (2) the service provider “continues to supply its [service] to one whom it knows or has reason to know is engaging in trademark infringement.”59 In regard to the level of knowledge required for a service provider, the court determined there needed to be more than mere “general knowledge” that an infringement occurred.60 The court held that Tiffany’s notification of sixteen separate counterfeit Tiffany products on eBay, in addition to numerous customer complaints about counterfeit Tiffany products, was insufficient to establish the requisite level of knowledge required under Inwood.61 The court reasoned that eBay’s efforts to reduce counterfeits through removing specific listings and suspending repeat infringers’ accounts weighed against liability under Inwood.62

The Second Circuit’s decision in Tiffany set the foundation for online marketplaces’ abilities to abdicate responsibility for actively and aggressively policing for counterfeits.63 Brand owners are given the insurmountable burden of policing all websites and navigating infringement reporting policies for each online marketplace to protect their brand.64 The discrepancy in responsibilities between the marketplace and the brand owner resulting from Tiffany leads to a failure in the regulation of online infringements.65 Although brand owners can try their best to stay vigilant, without support from the service providers that host listings, both brands and consumers continue to suffer.66