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Should eBay be liable for trademark infringement when its vendors offer counterfeit goods for sale? Famous jeweler Tiffany & Co. has been arguing since 2004 that it should.
The case finally reached the Supreme Court, which rejected Tiffany & Co.'s appear on Monday. That leaves a lower court ruling, which went in eBay's favor, as the final word on the matter in the United States.
The eBay case had been closely watched, of course, because it posed an existential threat to companies like eBay in its home market. Had the Supreme Court decided to hear Tiffany & Co.'s appeal, and reversed the lower court ruling, eBays of all shapes and sizes would have faced potentially unfathomable liabilities.
For its part, Tiffany & Co. has consistently argued that eBay hasn't done enough to police its auctions. The jeweler believes that, as a result, it and other luxury brands lose tens of billions of dollars annually. eBay's defense: it spends millions of dollars every year trying to stem counterfeit sales in its marketplace, but it has no way of preventing every single counterfeit sale. eBay itself, of course, doesn't physically offer the counterfeit products for sale, which was noted by the appeals court that initially rejected Tiffany & Co.'s claims. The same court also wisely noted that it's in eBay's interest to crack down on counterfeit sales. After all, most eBay buyers aren't going to be happy when they receive an inferior knock-off.
Unfortunately, the decision here only covers one market -- the United States. Globally, other luxury brands have achieved greater success with their legal strategies. In 2008, for instance, eBay was ordered to pay €38 million to Louis Vuitton in France. It was also ordered to stop facilitating the sale of all Louis Vuitton products in the country, leading the company to argue that the lawsuit and ruling was about protecting Louis Vuitton's control over a market more than it was about counterfeit goods.
In many ways, there are parallels here to the situation with digital piracy of content. Much like record labels and movie studios, luxury brands are fighting battles they can't win. Targeting large online marketplaces like eBay is a lot like suing deceased grandmothers: you aren't solving the real problem. Hopefully the Supreme Court's rejection of Tiffany & Co.'s appeal will end some of the nonsense, in one country at least.