By  on August 12, 2008

The bell rang for the appeal round of the legal bout between Tiffany & Co. andeBay Inc.

In a move the luxury jeweler signaled it would make, Tiffany said it is appealing a federal court ruling last month that eBay could not be held liable for trademark infringement of Tiffany merchandise.

Judge Richard Sullivan ruled that the giant online auction house does not have the legal responsibility to prevent the sale of counterfeit goods, and that Tiffany has the burden of policing its trademark.

“Unfortunately, the trial court incorrectly held that trademark holders and not eBay are responsible for policing the eBay site,” said Tiffany general counsel Patrick Dorsey. “In our view, this approach makes no sense as a matter of law or policy. Once eBay has reason to know that a specific brand like Tiffany & Co. is being widely counterfeited and sold, eBay should be compelled to investigate and take action to protect its customers and stop the illegal conduct.”

However, Sullivan found that eBay could not be held liable for trademark infringement based solely on its general knowledge that counterfeit goods might be sold on the site. Tiffany filed the suit in 2004 after it found dozens of fake products bearing its name for sale on eBay.

“Tiffany’s decision to carry the litigation on after the district court’s decision doesn’t do anything to combat counterfeiting,” eBay spokeswoman Catherine England said. “The best way to stop counterfeiting is ongoing collaboration between companies, government agencies and law enforcement.”

EBay has been at the center of two closely watched cases involving counterfeit luxury brands this year. In June, a French court found the Web site guilty of gross misconduct for its part in the sale of counterfeit goods from brands owned by LVMH Moët Hennessy Louis Vuitton. The court ordered eBay to remove all auctions involving LVMH goods and pay compensation totaling 38.9 million euros., or about $58.4 million at current exchange. A court of appeals upheld the decision two weeks later.

The U.S. case is being closely watched by brand owners and others in the intellectual property community because if it is overturned on appeal it has the potential to cause havoc to eBay’s business model and open the popular Internet retailer to litigation from other labels.

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