Secondary Market Sales of Yankees’ Tickets Not Deceptive Practices

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

Purchasers of New York Yankees tickets failed to state a deceptive practices claim under New York General Business Law against online ticket marketer StubHub; its parent, eBay; and the New York Yankees for StubHub’s failure to identify the individual seller and face value of tickets, the federal district court in New York City has ruled.

The putative class representative alleged that the Yankees’ website directed purchasers to the retailers’ website and that StubHub deceptively failed to identify the seller and the face value of the tickets.

Standing to Sue

Since none of the members of the proposed class purchased tickets through an eBay auction, the sole basis for the purchaser’s standing to sue eBay was the company’s parent/subsidiary relationship with StubHub. However, a parent corporation is not liable for the actions of its subsidiary absent facts sufficient to pierce the corporate veil, the court stated. In this instance, the purchaser did not plead facts that would justify piercing the corporate veil.

Deceptive Practices

To state a claim for deceptive practices under New York General Business Law §349, the purchaser needed to show the defendants engaged in a deceptive act that was directed at consumers, was misleading to reasonable consumers, and caused an injury.

The purchaser argued that—because the Yankees’ website links to StubHub and StubHub sellers are anonymous—the “least sophisticated consumer” would likely believe that he or she is purchasing tickets directly from the Yankees and StubHub’s practice of not printing the face value of a ticket reinforces the misconception that the tickets were purchased from the Yankees.

The court pointed out (1) that the applicable legal standard is whether a reasonable consumer—not the “least sophisticated consumer”—would be misled by the defendants’ actions and (2) that the link on the Yankees’ site led to an entirely new website with a different URL and offers of tickets to non-Yankee events. The tickets printed from the linked website included a StubHub customer number and StubHub confirmation number.

In addition, the purchaser pleaded no facts establishing that the alleged deceptive acts caused any injury. The purchaser claimed two injuries:

(1) lack of information about pricing, and

(2) that consumers were “forced” to pay higher ticket prices because of the failure to include face value of the tickets.

Lack of information is not an injury, but the factual underpinning of the deceptive practices claim, the court held. As to higher prices, the purchaser was willing to pay $33 per ticket to see the Yankees. There was no claim that she would not have made the purchase had she known that the face value of the tickets was $20 apiece.

Because the purchaser could not show that a reasonable person would believe that the tickets were being sold by the Yankees or a measurable injury, the court dismissed the claim.

Liability for Third-Party Sales

A contrary ruling would make the Yankees liable for every sale of tickets by a third party, according to the court.

There was no evidence that declining to inform consumers of the face value of the tickets caused consumers to overpay or that any deceptive conduct was undertaken by any of the parties. Consumers could always compare the ticket price to prices listed on the Yankees' website.

The decision is Weinstein v. eBay, Inc., CCH State Unfair Trade Practices Law ¶32,295.

Further information about CCH State Unfair Trade Practices Law appears here.

eBay's Advertising of Tiffany Jewelry Not Proven Misleading

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

The famous jeweler Tiffany failed to establish that online marketplace eBay engaged in misleading advertising under the Lanham Act in connection with the sale of counterfeit “Tiffany” jewelry on its site, the federal district court in New York City has ruled.

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.”

Prior Decisions

Following trial in 2008, the court rejected Tiffany’s false advertising claims (CCH Advertising Law Guide ¶63,019). The court found that eBay’s advertising was not literally false and or likely to mislead consumers because authentic items were offered for sale, and inauthentic items were only listed on eBay due to the illicit acts of third parties.

On appeal, the U.S. Court of Appeals in New York City agreed that eBay’s ads were not literally false but ordered the trial court to take a fresh look at whether eBay’s advertising was likely to mislead or confuse consumers, in light of evidence that eBay knew that “Tiffany” products advertised and sold on eBay often were counterfeit (CCH Advertising Law Guide ¶63,792).

Likelihood of Confusion

On remand, the trial court noted that Tiffany had not produced extrinsic evidence of deception such as a consumer survey typically required to prove that a substantial portion of consumers in fact were misled by advertising.

Instead, Tiffany relied on (1) declarations of three eBay customers who believed that they bought counterfeit Tiffany goods on eBay, (2) testimony from a Tiffany employee that Tiffany had received numerous emails complaining of counterfeit Tiffany goods on eBay, and (3) 125 emails sent by customers to eBay complaining of counterfeit Tiffany goods.

Because none of the complaining customers referred to any eBay advertisements, the court held that no extrinsic evidence indicated that the ads were misleading or confusing.

Intent to Deceive

An exception to the extrinsic evidence rule exists, according to the court. When an advertiser has intentionally set out to deceive the public, and the conduct is of an egregious nature, a presumption arises that consumers are, in fact, being deceived.

Tiffany contended that eBay’s intent to deceive was proven at trial by the fact that eBay continued advertising the availability of Tiffany products on its website after it had been notified that a sizable portion of the products were counterfeit. The court held that Tiffany waived this argument by failing to raise it before, during, or after trial, or on appeal.

eBay’s conduct could not be found egregious because there was no proof that eBay was aware those consumers were being misled by its advertisements, the court concluded. In addition, eBay took substantial steps to prevent and detect the sale of counterfeit goods on its website.

The opinion in Tiffany (NJ) Inc. v. eBay, Inc., filed September 13, 2010, will be reported at CCH Advertising Law Guide ¶63,967.

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.

eBay Insufficiently Pled RICO Pattern, Enterprise Against Advertising Affiliates

This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

Online auction company eBay Inc. failed to sufficiently plead an enterprise and a pattern of racketeering against advertising affiliates that allegedly engaged in a “cookie stuffing scheme” to collect unearned advertising fees from the auctioneer, the federal district court in San Jose, California has ruled.

eBay claimed that Digital Point Solutions, Inc. and other advertising affiliates had engaged in mail and wire fraud by surreptitiously placing, on the computers of third-party users, software that would cause the users’ web browsers to visit eBay’s website, where “cookies” would be placed on their computers.

The “cookies” identified the defending affiliates as the referring advertisers, eBay explained, and therefore permitted the affiliates to collect commissions on auction transactions that were subsequently made by the affected users, even though the users had not clicked on an affiliate’s ad.

Enterprise

According to eBay, Digital Point Solutions was the RICO enterprise through which the other defendants had associated for the common purpose of defrauding eBay of commission fees. eBay failed, however, to state clearly whether one defendant had associated with Digital Point Solutions at all relevant times or had done so during the certain periods only.

Although eBay surmised that this defendant may have functioned as a separate association-in-fact enterprise for certain time periods, the assertion was not articulated in sufficient detail, as required by the heightened pleading standards for fraud in the Federal Rules of Civil Procedure, the court held.

Pattern of Racketeering

eBay failed to sufficiently plead a pattern of racketeering activity, according to the court. Because the auctioneer failed to identify specific incidents of suspected “cookie-stuffing” activity, its claim was dismissed for failure to plead fraud with particularity, as required by the Federal Rules of Civil Procedure.

The February 24 decision is eBay Inc. v. Digital Point Solutions, Inc., CCH RICO Business Disputes Guide ¶11,627.

eBay's Advertising of Tiffany Jewelry Not Proven False

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

Famous jeweler Tiffany failed to establish that online marketplace eBay engaged in false advertising under the Lanham Act in connection with the sale of counterfeit jewelry on its site, the federal district court in New York City has ruled.

eBay allegedly engaged in false advertising by (1) referring to Tiffany merchandise in promotional features on the eBay home page and Jewelry & Watches page and (2) purchasing “Tiffany” as a keyword to indicate the availability of Tiffany merchandise on eBay via “sponsored links” on Internet search engines such as Yahoo! and Google.

Literal Falsity

Because authentic Tiffany merchandise was sold on eBay’s website, Tiffany failed to prove that eBay’s challenged advertising was literally false, the court said. Tiffany argued that while the advertising might be literally true, it was nevertheless likely to mislead or confuse consumers into believing that any given piece of silver jewelry labeled “Tiffany” was genuine when, in fact, a consumer was more likely to receive counterfeit silver jewelry than authentic silver jewelry.

Fair Use

Tiffany’s false advertising claims focused on the same practices as Tiffany’s direct trademark infringement claims and were unsuccessful for the same reasons, according to the court. eBay’s use of the term “Tiffany” in advertising was a protected, nominative fair use. To the extent that Tiffany argued that eBay’s advertising was impliedly false, that argument rested on Tiffany’s assertion that eBay knew that jewelry sold on its website was counterfeit.

While eBay certainly had generalized knowledge that Tiffany products sold on eBay were often counterfeit, Tiffany did not prove that eBay had specific knowledge as to the illicit nature of individual listings. To the extent that the advertising was false, the falsity was the responsibility of third party sellers, not eBay.

Misleading Customers

In short, Tiffany failed to establish that eBay’s ads were likely to mislead consumers because authentic items were offered for sale, and inauthentic items were only listed on eBay due to the illicit acts of third parties. It could not be said that eBay was misleading customers when eBay was diligently removing listings from the website that were purportedly counterfeit, according to the court.

The July 14 decision in Tiffany (NJ) Inc. v. eBay, Inc. will be published at CCH Advertising Law Guide ¶63,019.