, accusing the auction giant of profiting from the sale of thousands of counterfeit items on its site. But the high-end jewelry maker and seller may have a hard time getting eBay to take responsibility for fakes on its site.
Tiffany filed suit in U.S. District Court in Manhattan on Friday and then announced the suit Monday afternoon. The jeweler is asking the court for an injunction and monetary damages against eBay. In recent trading on Tuesday, the jeweler's shares were off 91 cents, or 2.4%, to $37.03. eBay shares, meanwhile, were up 67 cents, or 0.8%, to $86.48.
Tiffany's chances of prevailing could be slim. eBay has successfully fended off similar suits in the past by claiming that its site is only a venue. eBay's argument centers on the fact that the company generally does not list items on its site; instead the merchandise available on eBay is generally provided by other businesses and individual sellers.
Additionally, eBay has set up a system that allows copyright and trademark holders to challenge listings on its site. Through this Verified Rights Owner program, or VeRO, eBay will remove infringing or counterfeit listings when notified by rights holders.
However, Tiffany argues that eBay's VeRO is ineffective at best, and a burden on rights holders, such as itself, at worst.
eBay shut down some 19,000 auctions at Tiffany's behest last year alone, said James Swire, an attorney with Dorsey & Whitney, who represents the jeweler. Tiffany's now has two people devoted solely to policing eBay's auctions for counterfeit merchandise, Swire said.
The vast majority of Tiffany-related items on eBay are fake, Swire said. In a study earlier this year, Tiffany purchased 186 items advertised using its trademark, according to the lawsuit. Of those, 73% were fakes, while only 5% were genuine articles, according to the suit. (Swire said the remaining 22% fell into a gray area: The sellers didn't actually claim the items were made by Tiffany, but used Tiffany's name to promote them, saying, for example, that they were "inspired by" Tiffany.)
Tiffany is worried that such auctions defraud buyers and damage its brand, Swire said. In contrast, eBay has promoted such auctions and profits from them, he charged.
eBay charges a fee for each item listed on its site and a transaction fee for each item sold through it. So, the company benefits when counterfeit items are sold on its site, Tiffany argues.
Meanwhile, eBay has promote Tiffany-related listings on its home page, Tiffany said in its suit. The auction company has also bought search terms on
that advertise its Tiffany listings to visitors searching for Tiffany items, the company said in the suit.
"Tiffany is being damaged, and they're making megabucks," Swire said. "They're asking us to devote full-time employees to stop the volume of counterfeit stuff on eBay. At some point the burden shifts. "We think it shifted long ago."
eBay representatives did not return calls seeking comment.
eBay has had a fairly successful track record at fending off charges that it should be responsible for the activities of its users.
A California state court ruled in 2001, for instance, that eBay could not be held liable for the sale of fake sports merchandise on its site. In 2002, a German court ruled that eBay wasn't responsible for the sale of counterfeit Rolexes on its site.
But neither case may have a bearing on the current dispute. In the sports memorabilia case, eBay was sued by buyers who had purchased the fake goods, not by rights holders. And eBay warned last month that a recent decision by Germany's Federal Supreme Court may re-open the debate over its liability in the Rolex case.