Fordham CLIP Symposium: Panel, “Why is Tiffany Blue? 3rd Party Liability and the eBay Cases”
Live Blog of the Fordham Center for Law & Information Policy “Third Law & Information Society Symposium” — Intermediaries in the Information Society
Panel, “Why is Tiffany Blue? 3rd Party Liability and the eBay Cases”
Moderator: Susan Scafidi
Panelists: William R. Engles, Jr.; Frederick Felman, Joseph C. Gioconda, Randi W. Singer, James B. Swire.
[Blogged live by Jason Lunardi, citations edited subsequently]
[11:10] Moderator Susan Scafidi introduces the topic of Tiffany Inc. v. Ebay Inc., 576 F. Supp. 2d 463 (S.D.N.Y. 2008), and similar cases dealing with counterfeit merchandise on internet auction sites.
Litigation scorecard … One of the earliest cases was with Rolex case. Europe looked like it was moving in one direction, eBay losing — Germany [Rolex], France [LVMH Moet Hennessy Louis Vuitton SA and Hermes International]. Then, in the Brussels case, eBay won [L’oreal]. Then, the US case, eBay won [Tiffany].
Additional issues are eBay’s nominative fair use in US case. In Europe, unauthorized channels of sale.
[11:14] First speaker, Joe Gioconda:
(Disclosure that his firm has represented Tiffany in the past, so he speaks in their shoes).
Because the defendants are often judgment proof, became necessary for designers to go after defendants where the legal attack would be effective. As it evolved, the designers would look to the buildings in New York where the counterfeits were being sold in the basement. Slapping the counterfeiters with cease & desist and putting them in jail would be ineffective an inhumane. So, law enforcement involved, going after the landlords of the buildings. Put them on actual notice of the illegal sales, and ask them to curtail the counterfeit sales. Getting the landlords on the side of the designers,
This strategy began bleeding over to the online world.
Now, evolving into situation where firm is even suing pharmaceutical sales companies for selling drugs online because they are killing people!
Question is, can eBay afford to do what they did? The court found that the general notice that would be given to landlord, isn’t effective in an eBay situation. Lawyer must ask, how do you go after a site with such a safe-harbor?
[11:21] Second Speaker, Randi Singer:
Background of the case . . . Judge Sullivan, but only after it passed through many other judges . . . eBay is an “online marketplace”; eBay never has control or custody of the goods. When they get letter that there is counterfeit content on the site, asking them to take down, eBay is very respectful of rights-holders. It has set up notice/takedown system (adopted from copyright system). eBay has been sued by various users because it has taken down content.
eBay says that it depends on people coming back, they want to work with you. They will refund money if you say goods were counterfeit.
To tell if things are genuine or not, you need expert analysis. eBay doesn’t have resources to do this for everything. eBay went further, it has a number of technological filters in place: certain words make the listing hit the filter (“knock-off” etc.).
It is difficult because there is a legitimate secondary market for used Tiffany jewelry. Issue is that Tiffany was seen as trying to shut down this secondary market.
Tiffany was never able to articulate a blanket rule for takedowns. eBay would take down some, the others needed expert analysis.
Tenents of trademark law says that the TM owner has the burden of policing its mark! Here, Tiffany was trying to push this burden on eBay.
The legal question is: (from the U.S. Supreme Court standard in Inwood Labs. v. Ives Labs., 456 U.S. 844, 854 (1982)) Did eBay “know or have reason to know” someone was infringing the mark and then continued to provide them service?
That kind of generalized knowledge … specific knowledge. Law doesn’t require them to take down for general knowledge, only specific knowledge. and that is what eBay did.
The whole thing is about good faith cooperation. Statement eBay released after said that it wished Tiffany had spent all the effort they had used on lawsuit in collaborating with eBay.
[11:34] Gioconda Comments: to say that the brand owners have to bear the cost, especially if you are a smaller brand would be overly burdensome, bad standard.
eBay gets a direct benefit from each sale, some ADMITTEDLY counterfeit. May millions of dollars have been generated.
[11:36] Third Speaker, William Engles, Jr. (CFO, Portero, Inc.):
Portero is a competitor to eBay. But started as an eBay seller, launched independednt site in 2007. Dedicated exclusively to luxury market.
They physically take possession of every item and then authenticate it before listing. It is not a neutral platform, buyer doesn’t know who seller is, they deal with Portero. Partnership approach with the luxury brands — want to work with them, thinks thriving secondary market is very good for luxury brands.
Bigger problem is that buyers think they are getting real thing and they are duped. Also, where the money goes when you buy counterfeit can be a problem.
Comments about eBay from experience selling on the site. He comments that brands do not want to see a secondary market for their goods. He thinks the eBay program was too much in favor of the rights holder, and also it is ineffective. There is still tons of counterfeits stuff there, even with all the Tiffany resources they have put into stopping it.
He concludes by saying the third parties should vouch for the items as being genuine.
[11:44] Fourth Speaker, Frederick Felman:
Some people think counterfeiting is a victimless crime, which it isn’t.
You have to have some sympathy for eBay. From the beginning of the takedown program, it was done by Fax, done by un-automated method. It is hard to imagine how hard this was to do. For sellers, it is hard to establish a reputable identity on the site. So, the smaller guys don’t suffer as many numbers as Tiffanys did.
Suggestions…
(1) Establish strong brand rights
(2) Work with intermediaries to enforce. Establish a benchmark to know where success is.
(3) Sources; Monitoring
(4) Make sure you are consistently buying these goods, so that you can show in court you have done it in a regular, scientific way. Need some evidence. (Note, using law enforcement to go after these guys is ineffective. You have to help yourself.)
(5) look at other competitors who may be suffering the same problem, what are they doing?
(6) evaluate the success of what you are doing, change it up.
[11:54] Singer Responds:
There is only so much computing power in 2004, so adding more rules to the filter might crash the system. Now, eBay willing to work with brands.
[11:56] Scafidi mentions some people are out there looking for counterfeits.
Felman Responds: eBay does not want to be perceived as being the place to go for counterfeits. It has its own brand to protect.
Gioconda responds: If you open a marketplace, do you have to have a fraud engine? This is the fuzzy line rule that keeps coming up. This is about the economics. Burden-shifting/cost-shifting. Affluent companies vs. small companies, who has the 10 Million dollars to fight the counterfeit lawsuit? Solution needs to have a fairness component and a consumer-protection component.
Audience member question: What technology really could be used to reduce the incidence of the problem, without going to court?
Singer responds: some of the measures eBay has in place are: you can’t register the same day and list tons of Tiffany items for sale.
Felman responds: it isn’t just technological measures. But the solutions can help you find recidivists. What we have seen from eBay is that they use solutions to reduce the amount of time it takes to take down things. [eBay created the Verified Rights Owner (VeRO) Program]
Gioconda responds: Technology and law walk in each others shadow. In effect, law is about economics and using force to apply rules. If you don’t have the force, it is ineffective, for example in China.
Audience member asks:
Have you seen eBay moving toward some sort of fingerprinting system to authenticate merchandise?
Gioconda responds: That is the first thing I suggest the client do, to try to find a way to somehow mark the product electronically.
Singer responds: Tiffany used to refuse to authenticate — the only way to do it was to buy direct from Tiffany store. they were trying to shut down the secondary market.
Felman responds: You have a visual and non-visual elements. Definitely want to mark it somehow.
There is also weird stuff going on with online sellers, for example print cartridges, they sell you the first product authentic, but then when you reorder and you have established trust, they substitute a counterfeit.
Audience Member asks: does eBay or other marketplaces have the resources to align themselves with the other side. Reverse take-down procedure?
Singer responds: The policy decision has been made that they will err on the side of the rights-holder.
Audience Member comments: Default rules could be set as the most onerous standard, which could dry up competition. Some people could claim that it is a factor to consider when changing the rules.
Gioconda responds: Yes. When you consider the DMCA, it is bright line. But not yet for the Lanham Act. If we suppose that at some point Congress will attempt to make a bright line, what would it be? He thinks it would be good. Unless you do those prescribed things, you wont get protection. Court system is expensive. Bright line rules are better.
He doesn’t think it would dramatically shift the marketplace; the big players are already doing it. Real question is: will the technology be developed to control this, and will the companies adopt it?
Felman responds: Also thinks that bright line tests are good. One discussed in ICANN right now having to do with cyber-squatting. Because there is success in DMCA, and other statutes, a notice/takedown regime should be applied here. (see report of ICANN Policy Conference)
Audience Member asks: Since there is not broad use of watermarking on these items online, with no proof, in a take-down situation is the individual seller out of luck?
Felman responds: The person making the call usually has great expertise with the products. The cases of infringement have been very specific — Very clear and based on the law what they are claiming infringement for. He doesn’t see much false positives.
Ehrman: eBay states that they will take down the listing as first step. They then suggest the seller work with the complainant.
Gioconda responds: He spends a lot of time hearing from angry customers of his clients who got counterfeit goods. The client’s customers have to be happy, that is part of his job.
Scafidi adds: Another possibility is that it actually adds to the value of the product that it has value in the secondary market.
Audience Member asks: Is there any data as to how many take-down notices were actually erroneous?
Singer responds: eBay’s response was that the focus was first on getting the listings taken down. eBay has no way of knowing if the notice is abusive.
Felman responds: Many of the systems out there allow you to enforce, but not retract. He says his company’s system allows both.
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[12:30] Lunch Break
