This article is written by Dhruv Shah, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from lawSikho.com.
I ordered a Puma T-shirt from eBay but received one with the name ‘Coma’ on it.
Exactly the condition of an Indian middle-class child who has to explain receiving fake goods after such an expensive online purchase to his parents. Complaints against many E-Commerce platforms have multiplied recently. Most complaints are about invalid discounts, sellers cancelling the order, fake products, non-delivery or delayed delivery, and several other irregularities. The situation is so terrible that many big brands including Canon, Lenovo, and Dell, had to warn their consumers not to buy from online websites such as Snapdeal and Flipkart.
Counterfeit goods flowing in the market under the nose of the authorities has already been a successful scam in small cities but this disease has now covered the whole country by being sold on online platforms. If you thought Palika bazaar in Delhi and Chor Bazaar in Mumbai are the only places that sell such counterfeit goods on a big scale, then we need to broaden our perspective because this has now become a global threat that has spread. This is due to online platforms which are open to sell anything without verifying the sellers or the authenticity of the goods.
Tiffany Inc Vs eBay Inc case
Background of the case:
The origins of the case in question, Tiffany vs eBay, lie in the purview of trademark infringement. Let us take into account the history of both the companies and how this case came to be setting a precedent when it came to disputes regarding online product selling platforms.
eBay used to advertise the availability of Tiffany jewelry on its website. After a complaint by Tiffany, eBay discontinued placing the ads. Based on a suspicion of an investigation as to the authenticity of goods that were being sold on eBay via third-party sellers bearing the name of Tiffany, it was determined that almost 70% of “Tiffany” items purchased on eBay were counterfeit. This led to Tiffany filing a lawsuit against eBay in 2004 in the U.S. District Court claiming the goods sold under the name of Tiffany were counterfeit in nature leading to trademark infringement, unfair competition, contributory trademark dilution, and false advertising claims.
Also, the advertisements made by eBay regarding Tiffany goods lead to infringement of their registered trademark. A federal judge in New York and then a U.S. appeals court ruled that eBay was not liable for trademark infringement by allowing fake Tiffany goods to be sold on the website by individuals.
With this we can determine that there were two main issues present in this case:
- eBay allowed the sale of counterfeit Tiffany merchandise on its selling platform through third-party sellers.
- eBay, despite possessing the knowledge that counterfeit goods were being sold on its platform, kept on advertising that Tiffany jewelry was available on its website through unverified sellers.
The law in question is the infringement of the trademark. Tiffany has accused eBay of:
- Direct Trademark Infringement under 15 U.S. Code § 1125.
- Contributory Trademark Infringement where although the liability for contributory infringement is not expressly imposed by the Lanham Act, was recognized in the landmark case of Inwood Laboratories v. Ives Laboratories.
- False advertising is a violation of Section 43(a) of the Lanham Act.
Tiffany alleges that eBay infringed its trademark in violation of section 32 of the Lanham Act. Under section 32, “the owner of a mark registered with the Patent and Trademark Office can bring a civil action against a person alleged to have used the mark without the owner’s consent.”
The Second Circuit held that such advertisements could comprise false advertising.
- They implied the genuineness of all Tiffany goods on eBay’s site, and
- Consumers were likely to be misled by such advertisements. An advertisement is unlawful, noted the Court, when it implies that all of the goods advertised for sale are authenticated when in fact a lot of them are not.
Tiffany also argued that eBay was acting willfully blind and on purpose avoided knowing the truth about the sale of counterfeit goods on its site. Also, to establish liability for a false advertising claim, a plaintiff must prove that a false or misleading statement was made in commercial advertising that creates a likelihood of harm to the plaintiff.
The crucial question we should be asking would be :
‘Is Defendant liable for direct infringement of Plaintiff’s mark through the counterfeiting vendors who are using its website?’
The answer to that is No.
The Court of Appeals for the Second Circuit reaffirmed the trial court’s ruling concerning trademark infringement and trademark dilution. Defendant’s knowledge that counterfeit jewelry of Plaintiff was being offered through its website was not a basis for a claim of direct trademark infringement against Defendant, especially since it removed all such listings that Tiffany’s challenged as counterfeit and took many steps to identify and remove such counterfeit goods.
To impose liability because Defendant could not guarantee the genuineness of all of the products offered on its website would have unduly inhibited the lawful resale of genuine goods. Where Tiffany identified specific infringers, eBay promptly took down the counterfeit merchandise, usually within hours of the notification, and it took steps to cancel transactions involving counterfeit merchandise or provide refunds to buyers. This shows they were not only aware of the issues but were also taking steps to ensure remedy to those companies and consumers affected.
The court further noted that eBay had invested millions of dollars to identify and remove counterfeit listings. For these reasons, eBay could not have been said to have been willfully blind, and thus not secondarily liable. eBay as an e-commerce website does not directly participate in the transactions and never physically possesses any goods listed on its site; it simply “provides a platform for the sale of goods and support for the transaction that occurs between the seller and buyer.
A buyer sees a listing and places an order on the website which informs the seller who upon receipt of payment dispatches the goods. This is how any transaction takes place generally on any e-commerce website. Here the platform has no way of determining whether the products are genuine or not unless they are sold by the official licensee. This may lead to counterfeit goods being sold which have already been the case in Flipkart and Myntra when it comes to India.
Unlike many eBay buyers, eBay is well aware that many individuals misuse its platform to sell counterfeit products. eBay spends over $20 million annually to ensure that such incidences of counterfeit goods are as less as possible. eBay has its own Fraud Engine which costs almost 5 million dollars annually to maintain. In addition to this, it has introduced the Verified Rights Owner (VeRO) Program. In the end, the consumer also has the option to report any misleading goods or sellers that they may have experienced in their transactions.
All of the above steps taken by the platform are futuristic and not employed by many similar e-commerce websites. This shows that not only eBay is conscious of such issues but has also been ahead when it comes to resolving and ensuring it does not happen again. Keeping this analysis in mind we can say that eBay has not been willfully blind as contended by Tiffany. They do not ignore such vast issues and they do not encourage or participate in procuring or selling counterfeit or fake goods in any category on its platform.
In 2008, the trial court ruled against Tiffany on all claims and the company appealed its decision. When it came to the Court of Appeals, the Second Circuit affirmed the lower court’s decision in April 2010, which did not find eBay liable for contributory trademark infringement for the sale of counterfeit Tiffany goods by third-party sellers on its website. Regarding the claim of trademark infringement made by Tiffany, the court found eBay’s use of the Tiffany marks on its website was protected under the nominative fair use doctrine.
In case of allegations by Tiffany over ebay deliberately turning a blind eye towards all the counterfeit listings, the court was provided with information that eBay had relentlessly taken steps based on information provided by Tiffany to guarantee removal of such counterfeit listings from its platform. The court found that eBay had been constantly taking necessary measures to exempt it from a finding of contributory trademark infringement. Specifically, it found that eBay had undertaken initiatives of anti-fraud measures and that eBay invested millions of dollars and manpower to identify and eradicate counterfeit goods. Moreover, the court contended that when it came to the knowledge of eBay it eliminated that listing and also suspended such bogus sellers who repeatedly engaged in the counterfeit activity. Accordingly, the court found that eBay could not be held liable for contributory trademark infringement.
Global Perspective(The case of India):
Time to focus on the Indian scenario when it comes to e-commerce platforms and counterfeit goods. The Indian e-commerce industry has seen various examples in the past of people being duped out of their money or e-commerce platforms retailing in fake goods.in December 2019, a whole fake JioMart eCommerce platform was established. A Chinese e-commerce platform named Club Factory, now banned, was once a center for selling counterfeit products. Even big e-commerce names like Flipkart, Amazon, and IndiaMART have received notices from the Drug Controller General of India (DCGI) regarding such goods.
In a blog post which can be found here, Flipkart has given steps to ensure consumers do not fall prey to such counterfeit goods or sellers. Amazon on the other hand has introduced ‘Amazon Project Zero’, introducing tools such as automated protections, self-service counterfeit removal, and product serialization. More information can be found here. This shows that although small steps are being taken by some platforms there is an urgent need for an Anti-Fraud Ecommerce Policy in the country.
The Second Circuit did suggest that a small step of adding a disclaimer on the advertisements might help to avoid misleading advertisements. Disclaimers are a highly debated issue in trademark law, with many courts finding that they increase confusion as or more often than they decrease it. The Second Circuit’s decision represents a significant victory for eBay and other online marketplace Websites. It appears that so long as such Web sites have reasonable anti-counterfeiting measures in place and take action concerning specific instances of infringement brought to their attention, courts will not hold such sites accountable for contributory trademark infringement.
Elders always say to not complain but to find a solution and tackle the problem at hand. In this case, e-commerce platforms should disclose the details of sellers and product details on the listings page, and in the absence of such info, the eCommerce platforms may be liable for the sale of counterfeit items.
The sellers may also be obligated to separately provide an undertaking in writing that can be found in the listings that the goods sold by them are genuine, which must be accessible to the consumers on the websites. E-commerce and the seller should be held jointly liable for the sale of counterfeit products. This will ensure that consumers do not receive fake products and the brand image in question is preserved. After all, consumers want to drink Bisleri, not Bisleri.
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