Tiffany, a luxury goods retailer, is appealing the verdict in its case against eBay.com, an online marketplace, for, inter alia, contributory trademark infringement.

Tiffany alleges that eBay facilitated and allowed the sale of counterfeit Tiffany jewellery and, as relief, seeks an order requiring eBay not to post more than five items of Tiffany merchandise from any one seller.  Tiffany bases its claim and justifies the relief requested on the ground that it is generalised knowledge that listings for multiple items of Tiffany jewellery are, in fact, advertisements for counterfeit Tiffany jewellery.   By failing to prevent the posting of these listings, Tiffany alleges that eBay continues to “supply its product to one whom it knows or has reason to know is engaging in trademark infringement,” thereby satisfying the “second prong” of the contributory negligence test as defined by the United States Supreme Court in Inwood Laboratories. 

While the case made and the relief sought by Tiffany is, prima facie, innocuous, careful analysis of its arguments reveals an attempt to shift the balance between copyright holder and user rights dramatically in favour of the holder.  Indeed, if Tiffany’s attempt to broaden the definition of what constitutes “knowledge or reason to know” of copyright infringement to encompass generalised knowledge that some infringement takes place succeeds on appeal, it will lower the standard required to establish knowledge of infringement and, in doing so, shift the burden of stopping copyright infringement from the copyright holder to the copyright user.  

At trial, Tiffany’s contributory trademark infringement claim was denied and Inwood’s specific knowledge requirement reaffirmed on numerous grounds specific to the case.  These remain relevant and correctly decided.  However, it is the trial court’s key policy observation that should guide the appeal court in its consideration of the wider copyright holder v. user issues this case presents. 

Indeed, in its ruling the trialcourt affirmed that while a copyright holder could control the sale of its products through the use of distribution channels and internal corporate policies regarding bulk sales, under the doctrine of normative fair use it cannot restrict the development of a legitimate secondary market in its products on the grounds of generalised knowledge that some sales are illegitimate.

“Were Tiffany to prevail on its argument that generalized statements of infringement were sufficient to impute knowledge to eBay of any and all infringing acts,” the trialcourt opined, “Tiffany’s rights in its mark would dramatically expand.’  Moreover, because a ruling in Tiffany’s favour would lower the bar for proving copyright infringement from proving each specific case to proving one or a few specific cases, the burden of upholding copyright holder rights would shift to users who chose to legitimately deal or trade in the items at issue.

Thus, if Tiffany prevails on appeal, all copyright holders will be granted a powerful new tool to quash competition and maintain high prices by curtailing aftermarket sales of their products and offloading the costs of copyright enforcement to users.

For these reasons, the trial court’s decision should be affirmed on appeal.