eBay defeats Tiffany in counterfeit jewelry suit

NEW YORK (Reuters) - EBay Inc on Monday won dismissal of a Tiffany & Co lawsuit accusing the auctioneer of deceiving customers by allowing the sale of counterfeit Tiffany jewelry on its website.

U.S. District Judge Richard Sullivan in Manhattan rejected Tiffany’s allegation that eBay engaged in false advertising, the last remaining claim after a federal appeals court on April 1 dismissed the rest of Tiffany’s trademark infringement case.

The case has been viewed as a challenge in the United States to Internet companies such as eBay, Google Inc and others that host services that other people provide, and do not responsible for users’ trademark violations.

“Tiffany failed to establish that eBay intentionally set out to deceive the public, much less that eBay’s conduct was of an egregious nature sufficient to create a presumption that consumers were being deceived,” the judge wrote.

Mark Aaron, a Tiffany spokesman, declined to comment. Michelle Fang, eBay’s associate general counsel, called the ruling “an unequivocal validation of eBay’s business practices.”

About $3.99 billion, or 46 percent, of eBay’s 2009 revenue came from the United States, a regulatory filing shows.

Tiffany accused eBay of advertising the sale of its goods through ads on its website, and through sponsored links on search engines, which would sometimes link to its own website and exhort readers to “Find Tiffany items at low prices.”

Sullivan agreed with Tiffany that eBay knew “a portion” of the goods being sold were fake.

But he said Tiffany failed to show that eBay’s advertisements misled customers or necessarily implied that all Tiffany products sold on its website were genuine.

“Tiffany has failed to present evidence that rises to the high level of egregious misconduct required to demonstrate that eBay had an intent to deceive customers,” he wrote.

Sullivan also pointed to eBay efforts to fight fraud, which the company has said costs up to $20 million a year.

In its April 1 ruling, the U.S. Second Circuit Court of Appeals had upheld Sullivan’s July 2008 dismissal of most of Tiffany’s lawsuit, saying that “eBay did not itself sell counterfeit Tiffany goods; only the fraudulent vendors did.”

Tiffany is based in New York and eBay in San Jose, California.

The case is Tiffany (NJ) Inc et al v. eBay Inc, U.S. District Court, Southern District of New York, No. 04-04607.

Reporting by Jonathan Stempel in New York. Additional reporting by Dhanya Skariachan in New York and Alexandria Sage in San Francisco. Editing by Derek Caney, Phil Berlowitz, Carol Bishopric and Robert MacMillan