By Rachel Meltz
Associated Press
Tuesday, July 15, 2008; D02

NEW YORK -- EBay scored an important victory in court yesterday, as a federal judge said companies such as the jeweler Tiffany, not auction platforms like eBay, are responsible for policing their trademarks online.

Tiffany sued eBay in 2004, arguing that most items listed as genuine Tiffany products on eBay's sites were fake.

But U.S. District Judge Richard J. Sullivan in New York ruled that eBay can't be liable for trademark infringement "based solely on their generalized knowledge that trademark infringement might be occurring on their Web sites."

The judge said that when Tiffany notified eBay of suspected counterfeits, eBay "immediately removed those listings." The online auction company refused to go further, by preemptively taking down suspicious listings for Tiffany jewelry, and the judge said eBay didn't have to.

EBay spokeswoman Nichola Sharpe said the ruling "confirms that eBay acted reasonably and has adequate procedures in place to effectively address counterfeiting."

Mark Aaron, a spokesman for Tiffany, said the company was "shocked and deeply dismayed" by the decision. Tiffany lawyer James Swire said the jeweler might appeal.

EBay recently lost a different case stemming from counterfeit luxury goods. Last month, a French court ordered eBay to pay more than $61 million to LVMH Moet Hennessy Louis Vuitton, which complained it was hurt by the sale of perfume and knockoff bags and clothes online. EBay is appealing that ruling.

EBay says it spends tens of millions of dollars each year to combat counterfeiting. It runs a program that lets companies review listings and inform eBay of those they believe are for fake goods; eBay removes flagged items. EBay also suspends and blocks users who have been found selling fake goods or are suspected of doing so.

EBay says that in 2007, 50,000 sellers were thrown out over counterfeits, with 40,000 previously suspended sellers blocked from returning.

Anthony Lo Cicero, a New York lawyer who specializes in trademark and patent law, called the decision "tremendously important" for eBay and commerce on the Internet.

"Brand owners have to be vigilant," he said. "That's the message."

If the case had gone the other way, it could have made it much harder for people to legitimately buy and sell used but trademarked goods, said Wendy Seltzer, a fellow at Harvard University's Berkman Center for Internet and Society.

"If eBay had to preemptively examine the trademark status of every item that were posted -- is it genuine, is it counterfeit? -- it would be much more expensive to put a listing on eBay because it would be much more expensive for eBay to process and host this listing," she said.

Separately, the judge ruled eBay could use Tiffany's name in its ads, both on its home page and in sponsored links eBay buys through the search engines run by Yahoo and Google. That had been an unsettled legal question for search engines, which have faced lawsuits over the use of trademarked terms in paid search listings.