ABSTRACT

The Southern District of New York ruled against Tiffany on its final remaining claim for false advertising in its long-running litigation against eBay over the sale of counterfeit Tiffany products on eBay’s website. Tiffany alleged that eBay’s advertisement of Tiffany products available on its website constituted false advertising under the Lanham Act because eBay knew that a large portion of those products were counterfeit. The court rejected Tiffany’s claim, finding that it had failed to present any evidence showing that eBay’s advertisements were likely to mislead or confuse consumers.

CASE SUMMARY

FACTS

Prior to 2003, eBay, Inc. (“eBay”) actively promoted the availability of Tiffany (NJ) Inc. (“Tiffany”) jewelry on its website, including through sponsored-link advertisements on various search engines. One sponsored-link advertisement that appeared on a search engine read “Tiffany on eBay. Find Tiffany items at low prices.” In 2003, Tiffany complained to eBay about its sponsored-link advertisements and, shortly thereafter, eBay ceased placing the ads.

In 2004, Tiffany sued eBay for the sale of counterfeit Tiffany jewelry, asserting direct and contributory trademark infringement, unfair competition, contributory trademark dilution, and false-advertising claims.

In 2008, the Southern District of New York ruled in favor of eBay on all claims. The decision was affirmed by the Second Circuit in April 2010, except for Tiffany’s false-advertising claim, which was remanded for further consideration.

ANALYSIS

To prove a claim for false advertising under Section 43(a)(1)(B) of the Lanham Act, the advertisement must be either (1) literally false, or (2) likely to mislead or confuse consumers. If the advertisement is literally false, the court may issue an injunction without considering extrinsic evidence regarding the advertisement’s impact on the consuming public. If the advertisement is not literally false, however, the plaintiff must prove through extrinsic evidence that the advertisement is likely to mislead or confuse consumers and that “a statistically significant part of the commercial audience holds the false belief allegedly communicated by the challenged advertisement.”

The Second Circuit had upheld the district court’s ruling that eBay’s “Tiffany on eBay” advertisement was not literally false, but disagreed with the district court’s reasoning as to why the advertisement was not likely to mislead or confuse consumers. In its 2008 decision, the district court had rejected Tiffany’s false-advertising claim because it found that (1) eBay’s advertisements were making a nominative fair use of Tiffany’s mark, (2) eBay did not know which particular listings on its website offered counterfeit Tiffany goods, and (3) if eBay’s advertisements were misleading, that was only because the sellers of counterfeits made them so by offering inauthentic Tiffany goods. The Second Circuit found that none of these rationales answered the question of whether Tiffany’s extrinsic evidence indicated that the challenged advertisements were misleading or confusing, and remanded the case to the district court for the limited purpose of deciding whether the extrinsic evidence presented by Tiffany was sufficient to prove that eBay’s advertisement was likely to mislead or confuse consumers.

In support of its claim, Tiffany presented (1) three declarations from consumers who believed they had purchased counterfeit Tiffany products on eBay’s website, (2) testimony from a Tiffany employee about the numerous emails the company had received from consumers complaining about the counterfeit products they had purchased on eBay’s website, and (3) 125 emails sent by customers to eBay complaining of counterfeit Tiffany products. None of this evidence, however, indicated how the public perceived eBay’s advertisements. In fact, Tiffany’s evidence made no reference to eBay’s ads whatsoever. The court thus concluded that Tiffany had failed to substantiate its claim that consumers were likely to be misled or confused by eBay’s advertisements.

After conceding that the evidentiary record could not support an empirical finding that consumers had been or were likely to be misled or confused, Tiffany next argued that eBay had nevertheless engaged in false advertising because (1) its advertisements necessarily implied that all Tiffany products sold on eBay’s website were genuine, and/or (2) eBay ran its advertisements with an intent to deceive the public about the authenticity of Tiffany products offered on its website. Considering the first argument, the court reasoned that “the false by necessary implication doctrine is simply a means of analyzing whether an advertisement is literally false.” As such, because the court and the Second Circuit had already ruled that eBay’s advertisement was not literally false, Tiffany could not succeed on its claim for implied falsity.

The court also rejected Tiffany’s argument that eBay had intentionally sought to deceive the public about the authenticity of Tiffany products offered on its website for two primary reasons. First, the court concluded that Tiffany had waived the argument by failing to raise it before, during, or after trial or on appeal. Second, Tiffany failed to present evidence that “rises to the high level” of “egregious misconduct” required to prove that eBay had an intent to deceive. Indeed, although eBay was aware that a portion of Tiffany products sold on its website were counterfeit, nothing in the record indicated that eBay intentionally sought to deceive consumers. To the contrary, eBay had undertaken steps to detect and prevent the sale of counterfeit products, including through a fraud engine that sought out counterfeiters and a trust and safety department to combat infringements.

CONCLUSION

This case highlights the importance of extrinsic evidence in proving false-advertising claims where the advertised claim is not literally false. The case also offers further insight into how that evidence may be scrutinized by the court in assessing the misleading nature of an advertised claim.