(CN) - EBay can't be held liable for trademark infringement when sellers hawk counterfeit Tiffany jewelry, the 2nd Circuit ruled. Though the ruling largely favored the online auction site, it allowed Tiffany to pursue a false advertisement claim.
Tiffany accused eBay of contributory trademark infringement for allowing "hundreds of thousands" of counterfeit silver Tiffany items to be sold on its online auction.
The 2nd Circuit in Manhattan upheld a federal judge's ruling that the task of policing fake goods falls on Tiffany, not eBay.
"To impose liability because eBay cannot guarantee the genuineness of all the purported Tiffany products offered on its Web site would unduly inhibit the lawful resale of genuine Tiffany goods," Circuit Judge Robert Sack wrote.
He added that eBay "promptly removed all listings that Tiffany challenged as counterfeit and took affirmative steps to identify and remove all illegitimate Tiffany goods."
And eBay was not "willfully blind" to the phony jewelry, the court ruled, because it "did not ignore the information it was given about counterfeit sales on its Web site.
But the auction site might be liable for false advertising, the judges said, because it advertised counterfeit goods as Tiffany jewelry.
"The law requires us to hold eBay accountable for the words that it chose insofar as they misled or confused consumers," Sack wrote.
EBay and its supporters in the case, including Yahoo! and the Electronic Frontier Foundation, argued that online advertisers can't be expected to confirm the authenticity of each good they promote. Such an expectation could shut down online advertising altogether, they said.
"We rather doubt that the consequences will be so dire," Sack wrote, suggesting that a disclaimer could work.
"But the law prohibits an advertisement that implies that all of the goods offered on a defendant's Web site are genuine when ... a sizeable proportion of them are not," he wrote.
The court upheld the dismissal of all claims but the false advertising claim, which it remanded to the federal judge.