The Tiffany standard shields online platforms from contributory liability

Tiffany v. eBay: The Standard That May Hinder the Ability to Adequately Address Trademark Infringement and Prevent Online Sale of Counterfeit Goods

One of the most discussed cases to address the knowledge requirement under the second prong of the Inwood framework is Tiffany (NJ) Inc. v. eBay Inc, 600 F.3d 93 (2d Cir. 2010). Tiffany arguably had more impact on the issue than any decision since Inwood and is one of only a relatively few decisions analyzing the issue specific to the e-commerce context.

In Tiffany, the Second Circuit considered contributory liability for eBay based on sales of counterfeit Tiffany products by third-party sellers through eBay’s online marketplace. Id. at 103–10. The district court acknowledged that eBay had the requisite control over such third-party sellers, so the primary issue on appeal related to the knowledge eBay needed to have in order to be found contributorily liable. Id. at 105. Specifically, the issue on appeal was whether eBay could be contributorily liable for counterfeit sales of Tiffany products made through its site where it had general knowledge of such widespread sales, but did not know or have reason to know of specific counterfeit sellers or listings. Id. at 106–07.

Even though the district court found that for a certain period of time a “significant portion of” certain Tiffany products sold on eBay were counterfeit, and eBay effectively conceded to knowing as a general matter that counterfeit Tiffany products were sold through its site, the Second Circuit found that this was not enough to establish requisite knowledge under the second prong of the Inwood framework. Id. at 98, 110. In particular, the Court held that “[f]or contributory trademark infringement liability to lie, a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods. Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.” Id. at 107 (emphasis added). Thus, eBay’s general knowledge of Tiffany counterfeits being sold in its marketplace was insufficient for liability to attach unless Tiffany “identif[ied] particular sellers who Tiffany thought were then offering or would offer counterfeit goods,” and eBay failed to act. Id. at 109.

While the Second Circuit described the variety of steps eBay took to combat counterfeit sales in its marketplace6—which had 100 million listings at any given time and generated more than six million new listings each day—the Court did not suggest that such actions played any role in its holding that particularized knowledge was required to find contributory liability. Id. at 97. These efforts did, however, play some role in the Court’s finding on “willful blindness,” which the Court confirmed also could lead to contributory liability for eBay. The Court explained: “[I]f eBay had reason to suspect that counterfeit Tiffany goods were being sold through its website, and intentionally shielded itself from discovering the offending listings or the identity of the sellers behind them, eBay might very well have been charged with knowledge of those sales sufficient to satisfy Inwood’s ‘knows or has reason to know’ prong.” Id. at 109. The Court found that no such willful blindness was present in this case because even though eBay was undeniably made generally aware of infringement in its online marketplace, it did not ignore that fact, as evidenced by the programs it implemented. Id. at 110, 110 n.17.

Under the Tiffany standard, eBay and similar platforms may continue to profit from the sale of counterfeit goods sold through their sites without facing liability—even if they acknowledge that such sales are fairly widespread—so long as they do not have particularized knowledge of which sales were infringing, or which sellers were engaging in infringement. The result of applying the Tiffany standard, which functions closer to an actual knowledge standard than the “reason to know” standard set out by the Supreme Court, is that the burden of addressing and preventing the sale of counterfeit goods is disproportionally placed on trademark owners and consumers. This is because the doctrine does not incentivize e-commerce platforms to take any further steps to prevent infringement and counterfeiting than those that it might take already (such as system for takedowns and customer complaints). Thus, under this standard, trademark owners are effectively required to police e-commerce platforms for issues and notify the platforms of particular listings and sellers in order for the platforms to be deemed to have sufficient knowledge to be found liable; moreover liability would most likely only follow upon a failure to act in relation to those specific listings and sellers. Similarly, without more proactive steps to prevent such listings from being posted, customers bear the risk of increasingly buying counterfeit products.

As discussed below, additional mandates or incentives, either in the way of greater application of the SHOP SAFE Act or new legal standards, are necessary to ensure all e-commerce marketplaces take available steps to sufficiently guard against these issues. The Tiffany standard does not provide the incentive to do so. Notably, when introducing the SHOP SAFE Act, Congress agreed, expressly stating that one purpose of the Act was to overrule Tiffany v. eBay.