Evidence That eBay’s Ads Misled Consumers Merits Another Look

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

In light of evidence that online marketplace eBay knew that “Tiffany” products advertised and sold on eBay often were counterfeit, the U.S. Court of Appeals in New York ordered a trial court to take a fresh look at whether eBay’s advertising was likely to mislead or confuse consumers in violation of the Lanham Act.

The court remanded the case to the federal district court in New York City, which had held that the evidence at trial did not support Tiffany’s claims that eBay’s advertising violated the Lanham Act (CCH Advertising Law Guide ¶63,019).

Advertising of "Tiffany" Goods

eBay advertised the sale of Tiffany goods on its website in various ways. Among other things, eBay provided hyperlinks to “Tiffany,” “Tiffany & Co. under $150,” “Tiffany & Co.,” “Tiffany Rings,” and “Tiffany & Co. under $50.” eBay also purchased advertising space on search engines, in some instances providing a link to eBay's site and exhorting the reader to “Find tiffany items at low prices.”

Yet the trial court found, and eBay does not deny, that “eBay certainly had generalized knowledge that Tiffany products sold on eBay were often counterfeit,” the appellate court observed.

eBay did not infringe or dilute Tiffany’s trademarks, and the advertising was not literally false because some genuine Tiffany merchandise was offered for sale on eBay. However, the reasons given for rejecting the claim that the advertising was misleading were inadequate, the court held.

Fair Use

Even if eBay’s use of Tiffany's mark was a nominative fair use, it did not follow that eBay did not use the mark in a misleading advertisement, the court reasoned. The mere fact that the incorporation of another’s brand in an advertisement may be a permissible fair use under trademark law did not preclude a claim that the advertisement was false or misleading.

Knowledge

eBay could not rely on its lack of knowledge as to which particular listings on its website offered counterfeit Tiffany goods. This fact, while relevant to the question of contributory trademark infringement, shed little light on whether the advertisements were misleading insofar as they implied the genuineness of Tiffany goods on eBay's site, the court said.

Sellers’ Fraud

Finally, the court was unconvinced by the theory that eBay's advertisements were misleading only because the sellers of counterfeits made them so by offering inauthentic Tiffany goods. This consideration was relevant to Tiffany's direct infringement claim, but less relevant, if relevant at all, to the question of whether the advertising was likely to mislead or confuse consumers.

It was true that eBay did not itself sell counterfeit Tiffany goods. Only the fraudulent vendors did, and that in part was why eBay did not infringe Tiffany's mark.

But eBay did affirmatively advertise the goods sold through its site as Tiffany merchandise. The law required that eBay be held accountable for the words that it chose insofar as they misled or confused consumers, the court concluded.

The April 1 opinion in Tiffany (NJ) Inc. v. eBay Inc. will be reported in CCH Advertising Law Guide.