By  on November 14, 2007

The long anticipated trial between Tiffany & Co. and eBay kicked off Tuesday in Manhattan federal court with the case centering on online duties and responsibilities in regard to intellectual property structures.

At issue in the lawsuit is whether eBay is liable for the sale of counterfeit merchandise through its Web site. In the lawsuit, initially filed in 2004, Tiffany charged eBay with direct and contributory trademark infringement as well as other claims.

"Potentially this case has a wide-ranging impact; it may define what duties an online seller has to a trademark owner with regards to policing counterfeits," said Scott Christie, partner, McCarter & English, and a former federal prosecutor of computer crime who is not involved in the case.

"We've never seen a case like this before. We have seen vicarious liability for landlords in the past, which is the premise here, that eBay is the landlord for all these auctions," said Susan Scafidi, law professor at Fordham University, who is also observing the case.

Vicarious liability has been used with some success in prosecuting building landlords from New York's Chinatown in cases involving the sale of counterfeit goods. The approach has also been applied in markets in China to hold landlords responsible.

The approach is analogous to the copyright cases that have arisen around the duties of YouTube and Google to police proprietary videos posted on their sites, Christie said. So far, the body of case law has said the sites don't have to take affirmative action to determine the source of videos, but the companies should remove the videos if notified of a copyright violation. Google has been more aggressive in removing videos lately, he said.

If Tiffany prevails in the lawsuit, eBay could be held responsible for counterfeit items being sold through its Web site. EBay has argued that it has done a lot to work with brand owners, primarily through its Verified Rights Owner Program, which allows brand owners to report and knock down auctions that are reportedly selling counterfeits.

Brand owners have argued that they bear the burden under the VERO system to find the Web sites, and that eBay is shirking the full extent of its responsibilities.

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