D. Expansion of Inwood Standard to “Non-Product” Cases: The “Direct Control and Monitoring” Test: 2. Internet Activity: (e) Online Marketplace Websites
The online marketplace eBay successfully defended against a claim for contributory liability in Tiffany v. eBay, 576 F.Supp.2d 463, 507 (S.D.N.Y 2008), affirmed in part and remanded in part, 600 F.3d 93 (2d Cir. 2010), cert denied, 131 S.Ct. 647 (2010). In that case, the court held that the plaintiff trademark holders should bear the burden of policing their own trademarks in the online marketplace website, where the website owner, upon notice, had taken appropriate steps to remove potentially infringing listings. Tiffany, supra at 470 and see discussion supra.
In Tiffany, Tiffany, the luxury jeweler, sued eBay, asserting contributory liability for trademark infringement arising out of the sale of counterfeit Tiffany silver jewelry on its website. Tiffany, supra at 469. Tiffany alleged that hundreds of thousands of counterfeit silver jewelry items had been offered for sale on eBay’s website, and that eBay “facilitated and allowed these items to be sold” there. Id.
Among the issues before the Tiffany court was whether to extend the Inwood test to eBay, a defendant who was not a manufacturer or distributor of a product. Tiffany, supra at 503-507. (Note that on appeal, the Second Circuit refrained from deciding the question because eBay there dropped its argument that it should not be subject to Inwood. 600 F.3d at 105-106.) Drawing on Hard Rock Café and Fonovisa, as well as other Southern District cases that applied the Inwood test to venues that provide a service, the court concluded that Inwood should be applied beyond the “product” context in this case as well. See Tiffany, supra at 503 – 506 and cases cited therein. In doing so, it expressly adopted the Ninth Circuit’s reasoning in Lockheed Martin, supra. Tiffany, supra at 506-507. Following Lockheed Martin, the court stated that it would “look to the extent of the control exercised by eBay over its sellers’ means of infringement.” Tiffany, supra at 506. See also Sellify v. Amazon, 2010 WL 4455830 *4 (S.D.N.Y.), where, citing the Second Circuit in Tiffany and the Ninth Circuit in Lockheed, the court extended Inwood to the defendant online sales company Amazon, but declined to find contributory liability because there was no evidence that Amazon had particularized knowledge of or direct control over disparaging online advertisements posted by one its Associates and linking to it website.
eBay argued that it lacked the requisite control because it was “more like an online classified ads service than an online flea market.” Tiffany, supra at 506. It pointed out that it never took physical possession of the items sold on its website and therefore could not inspect or authenticate those items. Id.
The court disagreed, acknowledging that while eBay did not itself sell or possess the items on its website, it nevertheless retained significant control over the transactions on its website. Tiffany, supra at 506. Moreover, the premise for eBay’s liability was the same as that for the flea market operator in Fonovisa who “was supplying the necessary marketplace for the sale of counterfeit goods in substantial quantities,” Tiffany, supra, at 504, citing Fonovisa. Similarly, the Tiffany court noted “[b]y providing the software to set up the listings and store listing information on its servers, eBay supplie[d] the necessary marketplace for the sale of counterfeit goods.” Tiffany, supra at 506. Indeed, the court found further “eBay [took] an active role in supplying customers – namely, registered buyers – to registered sellers, and actively facilitate[d] transactions between them. Id.
The court found that eBay exercised significant control in other ways as well: It actively promoted the sale of Tiffany jewelry items through its advertising; it worked directly with its sellers to help them grow their jewelry businesses, and finally it maintained significant control over the listings on its website, the court noted. Tiffany, supra at 506. eBay’s argument that it should be treated like an online ad service was further undercut by the existence on its website of such a service, maintained “separate and apart” from its other listings. Tiffany, supra at 507.
The Tiffany court therefore concluded that eBay should be treated the same way as the flea markets in Hard Rock Café and Fonovisa, and was subject to the Inwood standard for contributory liability. Tiffany, supra at 507. Ultimately, however, eBay was not held contributorily liable for the sale of counterfeit Tiffany jewelry on its website, as the court determined that Tiffany must bear responsibility for policing its own trademarks there, as discussed in detail in Sections II.B.3.(a) and II.B.3. (c).
On appeal, eBay dropped its argument that it was not subject to Inwood, and the Second Circuit therefore “assume[d] without deciding that Inwood’s test for contributory trademark infringement govern[ed].” 600 F.3d at 105-106. The Second Circuit’s decision upholding the district court is discussed in more detail in Sections II.B.3. (a) and II.B. 3. (c).