Lack of Specific Knowledge and Fair Use Protect Service Websites from Contributory Trademark Liability

Author: Robert Lopez

Tiffany sued eBay under the judicially constructed doctrines of contributory trademark infringement and dilution. To define contributory trademark infringement the court examined both the Third Restatement of Unfair Competition and the Supreme Court case of Inwood Labs, Inc. v. Ives Labs, Inc.. The court rejected the definition of the Restatement, requiring a party to take reasonable precautions when infringement can be reasonably anticipated. Instead the court applied the more restrictive Inwood test, examining whether eBay either continued to supply its product to known infringers or was ‘willfully blind’ towards infringement.

The court extended the Inwood test beyond ‘products’ to encompass eBay’s service website, determining that control over infringers creates potential liability for infringement. EBay demonstrated control through actively supplying customers to sellers, advertising the activity of sellers, and profiting from sellers.

Next the court determined if eBay knew of the infringement under the Inwood test. The court rejected Tiffany’s argument that generalized knowledge created liability since it contradicted precedent and stifled legitimate competition. The court reiterated the correct standard for contributory infringement, specific knowledge, stating that eBay lacked specific knowledge as it stopped servicing known infringers. The court also found eBay was not ‘willfully blind’ to infringement because eBay significantly invested in technology to fight infringement, beyond even Tiffany’s modest investment to police its mark on eBay. The court opined a more expansive definition of ‘willful blindness’ would make the Inwood test one of general knowledge, negating its purpose. The court refused to recognize a claim of contributory dilution but noted that even if such a claim existed it would fail for the same reason as the contributory infringement claim.

Tiffany also sued eBay for direct trademark infringement, trademark dilution, and false advertisement under the Lanham act and New York common law. Tiffany claimed eBay advertised Tiffany merchandise through its webpage, promoted Tiffany merchandise to its sellers and purchased sponsored links for Tiffany products. The court distinguished sponsored links displaying trademarks from those that secretly use the trademark; unlike links that merely use the trademark, sponsored links that display trademarks can violate the Lanham Act. For the dilution counts the court determined the broader standard, likely to cause dilution, of the Trademark Dilution Revision Act of 2006 applied retroactively in cases of injunctive relief. The court indicated that even under this broad definition of dilution eBay neither blurred nor tarnished Tiffany’s mark because it never associated the mark with eBay’s products. Also since eBay removed known diluters, it could not be held liable for their dilution. The court then ruled that even if Tiffany could prove eBay used the mark, the affirmative defense of fair use applied since eBay’s uses were descriptive, necessary to identify the merchandise, and did not imply Tiffany’s endorsement. All common law claims of infringement failed for the same reasons.

Tiffany (NJ) Inc. and Tiffany and Company v. eBay, Inc.

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