Platforms won’t cooperate now – they’re shielded from liability as long as they don’t investigate

Courts recently grappled with the issue of contributory trademark liability for e-retailers in Tiffany (NJ) Inc. v. eBay Inc.41 In Tiffany, luxury jewelry brand Tiffany sued eBay for not doing enough to keep fake Tiffany goods from being sold on its platform (Tiffany did not list any of its goods on eBay’s platform).42 eBay did establish anticounterfeiting measures, including an antifraud program and its Verified Rights Owner Program, to allow potentially infringing items to be removed by eBay.43 Despite the measures taken by eBay, Tiffany alleged contributory trademark infringement because eBay was unable to catch all instances of counterfeit Tiffany articles and argued that eBay’s general knowledge of counterfeit Tiffany goods on its site was sufficient to attach liability to eBay.44

Ultimately, the Second Circuit rejected Tiffany’s general knowledge argument and found that contributory trademark infringement requires a higher quantum of knowledge.45 In other words, a platform’s general knowledge that third parties are selling counterfeit goods is not enough to attach liability; the platform must have knowledge of specific infringing listings or listings that will infringe in the future.46 The court in Tiffany looked at the actions eBay took to reduce infringement and the takedown of known infringing articles as the basis for its determination that there was no specific knowledge.47 This knowledge requirement is similar to the standard for contributory copyright liability under the Digital Millennium Copyright Act (“DMCA”).48 Therefore, Tiffany effectively created a safe harbor for e-retail platforms that is similar to the storage safe harbor under the DMCA in the copyright sphere.

Courts have since explored the contours of the Tiffany safe harbor. In BMW of North America, LLC v. Rocco,49 the United States District Court for the Central District of California refused to extend the safe harbor to capture resellers.50 There, plaintiff BMW sued defendant Adam Rocco, an internet reseller who listed and sold counterfeit BMW parts.51 The court did not extend the Tiffany safe harbor to Rocco because, unlike eBay in Tiffany, Rocco was able to inspect the counterfeit goods before selling them and was therefore not a venue merely facilitating the sale of goods.52 A key aspect of this analysis is that courts should give an e-retail platform extensive leeway only when its knowledge base is limited and gathering information would be unduly burdensome.53 However, this framework incentivizes e-retailers to know less in order to make falling into the safe harbor more likely. That, coupled with the financial incentives of having counterfeit goods on their platforms (revenue from sales of counterfeit goods), creates a perverse incentive for e-retailers to take the minimum steps to fall within the generous safe harbor while still allowing counterfeits to exist out of sight and out of mind.54 Other courts have also continued to fine tune the requirements initially set forth in Tiffany.55 Currently, the Tiffany safe harbor protects many e-retailers, and—perhaps as a result— many sellers list and sell counterfeit goods online.56