eBay’s victory in the district court is affirmed, except for a remand on false advertising: the rare case in which false advertising law is apparently more expansive than trademark law, since eBay’s advertising doesn’t subject it to contributory trademark infringement liability. The relevant facts: “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 eBay had generalized knowledge that many Tiffany-marked items sold on its site were counterfeit.
Since there was legitimate Tiffany merchandise available, the trial court concluded that eBay’s ads weren’t literally false. It then found them not misleading because (1) the ads were legitimate nominative use, (2) eBay addressed every case in which it had specific knowledge of infringement, and (3) any falsity was the fault of third parties, not of eBay.
The court agreed that there was no literal falsity, but disagreed that the record established that eBay should win. Initially, the court refused to reject or endorse the nominative fair use doctrine, though it did state as a fundamental principle of trademark law that one who has legitimate goods to sell can identify them by their trademarks. The problem, the court of appeals reasoned, was that the district court’s rationales were unconnected to the question of whether consumers were likely to be misled or confused.
The court of appeals began with an example clearly demonstrating that non-infringing comparative advertising can still be false advertising: an ad stating that “In a blind taste test, 9 out of 10 New Yorkers said they preferred Brand X Coffee to Brand Y Coffee.” The problem with this example, I think, is that it involves comparative advertising—the alleged deception is with a non-trademark claim (preference) rather than a trademark claim (confusion over source). When the issue is whether a seller can participate in the secondary market for the trademarked goods, we may need what Mark McKenna calls channeling doctrines (Dastar, for example) to prevent trademark owners from getting more than what trademark gives them. If eBay’s ads aren’t infringing, then I’m not sure we should be able to call them false when the alleged falsity is the very same reason they were alleged to infringe. But I’m not 100% sure on this.
The court of appeals then went on to reject the other, much weaker, arguments—eBay’s lack of knowledge is relevant to contributory infringement, but not to whether consumers were misled, since false advertising is a strict liability cause of action. The same is true of the fact that the third parties were the wrongdoers. (A principle to which the Burger King court should have paid more attention.) Bottom line: “It is true that eBay did not itself sell counterfeit Tiffany goods; only the fraudulent vendors did, and that is in part why we conclude that eBay did not infringe Tiffany's mark. But eBay did affirmatively advertise the goods sold through its site as Tiffany merchandise. The law requires us to hold eBay accountable for the words that it chose insofar as they misled or confused consumers.”
eBay and amici asserted concerns for marketplaces in which intermediaries can’t confirm authenticity. The court of appeals wasn’t too worried: “An online advertiser such as eBay need not cease its advertisements for a kind of goods only because it knows that not all of those goods are authentic. A disclaimer might suffice. But the law prohibits an advertisement that implies that all of the goods offered on a defendant’s website are genuine when in fact, as here, a sizeable proportion of them are not.” Oh, Second Circuit, you and your back and forth on disclaimers!
Query: if the only claim left is implied falsity, shouldn’t Tiffany have been required to submit consumer survey evidence, or equivalent reception evidence? How could it survive summary judgment without same? I don’t recall the briefs discussing such evidence, though it’s been a while since I read them. Without that, this could be a short remand.
If not, I shudder to think of the battles over proper survey questions. How do you ask consumers whether they expect everything sold on eBay to be authentic without decisively skewing the answers? And in any event, is an eBay ad likely to affect consumer perception about authenticity? What is the proper control—an eBay ad for the site generally? I expect preconceptions about eBay’s trustworthiness are a heck of a lot more important than any “buy Tiffany for Mother’s Day at eBay” campaign ever could have been.