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Online auction house liability for the sale of trademark infringing products.

INTRODUCTION
  I. FACTS AND BACKGROUND OF TIFFANY, INC. V. EBAY AND
     LOUIS VUITTON MOET HENNESSY V. EBAY
     A. EBay's Business Model
     B. Tiffany's Quaff el with EBay
     C. LVMH's Troubles with EBay
 II. AVENUES FOR CONTRIBUTORY TRADEMARK LIABILITY
     A. United States Contributory Trademark Liability in the
        Online Context
        1. Contributory Tort Liability in the United States
        2. Contributory Trademark Liability in the United
           States
           a. Inwood Laboratories v. Ives Laboratories: A
              Guide to Contributory Trademark Infringement
           b. Tiffany's Treatment of In wood
               i. Establishing the Supplier's Direct Control
              ii. Requisite Knowledge Required for the
                  "Continued to Supply" Method
     B. French Contributory Trademark Liability in the Online
        Context
        1. Contributory Tort Liability in France
        2. Contributory Trademark Liability in France
III. IMPLICATIONS AND EVALUATION OF THE U.S. AND FRENCH
     DECISIONS
     A. A Specific Knowledge Requirement Protects the Business
        Model of Online Auction Houses
     B. A Specific Knowledge Requirement is Consistent with
        Congressional Policies of the Communications Decency
        Act
CONCLUSION


INTRODUCTION

With the rise of the Internet, trademark owners have seen an increase in online trademark infringement. (1) In particular, trademark owners have found a large amount of trademark infringing products listed for sale on online auction houses' websites. (2) Trademark owners have demanded that these online auction houses help protect their trademarks and prevent the sale of trademark infringing products. (3) Trademark infringement on these websites, however, remains rampant, even with online auction houses' assistance in removing trademark infringing listings. (4) As a result, trademark owners looking for an effective solution to online trademark infringement seek to hold online auction houses liable for contributory trademark infringement. (5)

Two avenues exist by which trademark owners can hold online auction houses liable for contributory trademark infringement: tort negligence law and trademark law. In the United States, these trademark owners must use trademark law to bring a suit of trademark infringement because trademark owners are barred from bringing negligence actions for third party liability under [section] 230 of the Communications Decency Act. (6) However, in France, trademark owners are free to choose to bring suit for contributory trademark infringement under either a theory of tort negligence law or trademark law.

These two approaches were highlighted in two different cases: Tiffany, Inc. v. eBay and Louis Vuitton Moet Hennessy v. eBay. (7) In Tiffany, a United States district court, through its finding that specific knowledge is required for contributory trademark infringement liability, held that the trademark owner ultimately bears the burden of protecting its trademark on online auction houses' websites. (8) However, in LVMH, a French trial court held, under a theory of tort law, that online auction houses are liable to trademark owners if the online auction houses fail to prevent any trademark infringing sale on their websites. (9) Therefore, in France, online auction houses are responsible for protecting the trademark owners' trademarks. (10)

This Comment examines online auction house liability for the sale of trademark infringing products and the methodology used by these courts in making this determination. Part II of this Comment briefly summarizes the key facts from Tiffany and LVMH. Part III outlines contributory trademark jurisprudence in the United States and France and the application of this jurisprudence in Tiffany and LVMH, respectively. Part IV evaluates the implications of the two approaches to determine which approach is more practical and effective. Part V concludes that online auction houses should not be liable for trademark infringement unless they have specific knowledge that a third party is infringing a trademark and fail to act to prevent that party from trademark infringement.

I. FACTS AND BACKGROUND OF TIFFANY, INC. V. EBAY AND LOUIS VUITTON MOET HENNESSY V. EBAY

A. EBay's Business Model

EBay is an online auction house that facilitates transactions between buyers and sellers from all over the world. (11) EBay generates revenue in two ways: by charging sellers a fee to list their products on eBay and by taking a percentage of the item's final sale price. (12) Because eBay's revenue stream ultimately depends on the success of eBay's sellers, eBay works closely with sellers and provides them with marketing materials and methods to increase the number of sales on eBay. (13) EBay has received substantial revenue from the sale of Tiffany & Co. and LVMH merchandise on its website and has actively promoted the sale of Tiffany & Co. and LVMH goods. (14)

Although eBay actively engages its sellers, it merely facilitates transactions between buyers and sellers--eBay never takes possession of any products that are bought or sold on its website. (15) Because eBay never takes possession of the products to verify their authenticity, (16) some products sold on eBay are counterfeit and subsequently infringe trademark owners' trademarks. EBay works to prevent the sale of counterfeit items and has made financial investments in anticounterfeiting initiatives. (17) Examples of eBay's anti-counterfeiting initiatives include eBay's Fraud Engine and its Verified Rights Owner Program (VeRO). (18)

EBay's Fraud Engine searches listings for keywords that identify obvious counterfeiting activity. (19) For example, keywords such as "knock-off," "counterfeit," "replica," and "pirated" are keywords that indicate counterfeit activity. (20) Listings identified by the Fraud Engine containing these keywords are sent to customer service representatives who engage in a three step process: "(1) remove the listing from eBay; (2) send a warning to the seller; (3) place restrictions on the seller's account." (21)

EBay's other anti-counterfeiting initiative is a verified rights owner program called VeRO. (22) The VeRO program allows trademark owners to report potentially trademark infringing seller listings to eBay, and eBay then removes the listing from its website. (23) A trademark owner notifies eBay of the potentially trademark infringing listing by submitting a notice of claimed infringement (NOCI) to eBay. (24) A NOCI indicates that the trademark owner has a good-faith belief that a particular seller's listing infringes on the owner's trademark. (25) A NOCI does not mean that the item actually infringes on the trademark owner's trademark. (26) After receiving a NOCI, eBay promptly removes the challenged listing, notifies the buyers and seller, and refunds any payment if the transaction has already been completed. (27)

B. Tiffany's Quarrel with EBay

Tiffany & Company is an American company that designs, manufactures, and markets high-end jewelry, timepieces, sterling silverware, china, crystal, stationery, fragrances, and accessories under the TIFFANY & CO. trademark. (28) Tiffany's trademark is well-known to consumers and signifies high-end, quality products. (29) Tiffany strives to protect its valuable trademark to maintain its favorable consumer reputation. (30) As a result, Tiffany is concerned with the sale of counterfeit products sold under its trademark. (31)

In 2003, Tiffany wrote a letter to eBay indicating that it was displeased that counterfeit Tiffany merchandise was sold on eBay. (32) In that letter, Tiffany asked eBay to remove trademark infringing listings and to take appropriate measures to prevent counterfeit items from being sold on its website. (33) EBay responded by encouraging Tiffany to continue to use its VeRO program. (34)

In 2004, Tiffany wrote another letter to eBay saying that although it had used the VeRO program to report counterfeit merchandise and eBay had never refused to remove a listing submitted by the NOCI form, the sale of counterfeit goods remained a problem on eBay's website. (35) In the letter, Tiffany made reference to a Buying Program it had implemented to determine the extent of the counterfeit goods being sold on eBay. (36) Tiffany stated that according to the findings of its Buying Program, "73% of the sterling silver Tiffany merchandise on eBay was counterfeit, and that only 5% was genuine." (37) Tiffany subsequently brought suit against eBay alleging eBay was liable for the trademark infringement occurring on its website. (38)

C. LVMH's Troubles with EBay

The Louis Vuitton Moet Hennessy Group (LVMH) is a French company that designs, manufactures, and markets high-end leather merchandise under the LOUIS VUITTON trademark. (39) Similar to Tiffany, LVMH's trademarked products enjoy a favorable consumer Reputation. (40) LVMH strives to protect its valuable trademark from individuals who falsely use the trademark for commercial gain. (41)

In 2006, LVMH brought suit against eBay, alleging that eBay was negligent in permitting its sellers to advertise the sale of trademark infringing products and failing to implement an effective program designed to prevent the sale of counterfeit LVMH products. (42) Specifically, LVMH asserted that for the last seven years it had repeatedly notified eBay that counterfeit products were being sold on eBay's website (43) and that ninety percent of the Louis Vuitton products sold on eBay were counterfeit. (44) To prevent trademark infringement on eBay's website, LVMH argued that eBay should require sellers to guarantee the authenticity of products sold and eBay should terminate the account of any seller caught selling counterfeit products. (45)

II. AVENUES FOR CONTRIBUTORY TRADEMARK LIABILITY

As discussed above, currently two avenues exist for contributory trademark infringement in the online auction house context: tort negligence law and trademark law. This section first examines the availability of both of these remedies in the United States through the lens of Tiffany v. eBay. (46) This section then examines these remedies in France and offers an alternative approach highlighted in LVMH v. eBay.

A. United States Contributory Trademark Liability in the Online Context

1. Contributory Tort Liability in the United States

Contributory tort liability for online infringement is addressed in [section] 230 of the Communications Decency Act ("CDA"), (47) The relevant portion of [section] 230 of the CDA states: "no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." (48) This provision has been interpreted to grant immunity from liability to online service providers for communications made by third parties. (49) The CDA has effectively barred a host of negligence based tort liability suits against online service providers. For example, in Zeran v. America Online, the Fourth Circuit found that the CDA barred the defendant's negligence and defamation suit against America Online for third party postings. (50) Further, in Gentry v. eBay, a California appellate court held that the CDA granted eBay immunity from negligence liability arising out of information posted by a third party. (51) As a result of the CDA, trademark owners are precluded from bringing suit against online auction houses for contributory liability on a negligence theory.

Although the CDA grants immunity to online service providers, the statute also provides that the immunity will have no effect on intellectual property law. (52) At first glance this provision appears to conflict with court decisions that have barred negligence suits with intellectual property underpinnings; however, courts have interpreted this provision to mean the CDA only grants immunity for tort-based negligence claims and does not grant immunity for strict intellectual property suits. For example, in Gucci America, Inc. v. Hall & Associates, Gucci brought suit against Mindspring, an online service provider, alleging trademark infringement. (53) Mindspring asserted that as an online service provider, it was immune from Gucci's trademark suit. (54) However, the court held that the CDA did not grant Mindspring immunity from Gucci's trademark claims (55) and noted that the CDA only grants immunity from tort-based negligence suits. (56)

As a result, the CDA has been used mostly to protect online service providers from various tort liability causes of action. (57)

2. Contributory Trademark Liability in the United States

a. In wood Laboratories v. Ives Laboratories: A Guide to Contributory Trademark Infringement

The CDA's preclusion of a tort remedy for online third party actions leaves trademark law as the only option to impose contributory liability. An individual can be liable for trademark infringement even though the individual did not directly infringe on another's trademark. (58) In Inwood Laboratories v. Ives Laboratories, Ives manufactured and marketed a prescription drug in colored capsules under a registered trademark. (59) When Ives' patent expired, Inwood and other generic drug manufacturers began manufacturing the drug and copied the appearance of Ives' capsules. (60) Retail pharmacists dispensed the generic drugs under the Ives's trademark. (61) Ives brought suit for contributory trademark infringement, alleging that Inwood and other generic drug manufacturers contributed to the pharmacists' mislabeling through the use of their look-alike capsules. (62)

The Court, in establishing the test for contributory trademark liability, held that an individual can only be liable for contributory trademark infringement if the individual either intentionally induces a third party to infringe the trademark or continues to supply its products to a third party whom it knew or had reason to know engaged in trademark infringement. (63) In Inwood, the Court found that Ives failed to present sufficient evidence to establish a claim for contributory trademark infringement. (64)

The test for contributory trademark liability established by the Supreme Court in Inwood left uncertainty in two areas: (1) whether the test applied in the context of service providers and (2) what level of knowledge was required in the "continues to supply" prong of the test, Subsequent case law has already addressed the product/service distinction. The test outlined in Inwood has been applied in those circumstances where the individual supplies a service to a third party infringer. (65) However, when imposing contributory trademark liability for service providers, courts consider whether the individual has direct control over the third party's method of infringement. (66) For example, in Fonovisa, Inc. v. Cherry Auction, Inc., the Ninth Circuit held that a swap meet operator who provided rental services to trademark infringers could be liable for contributory trademark infringement because the operator supervised the premises where the infringing products were sold. (67) Consequently, service providers can be liable for contributory trademark infringement.

The level of knowledge required to impose liability on an individual who continues to supply its product to a third party whom the individual knows or has reason to know is engaging in trademark infringement still remains at issue. No court, other than the district court in Tiffany, has explicitly adopted a knowledge standard for the contributory trademark infringement test. A portion of the confusion in the knowledge standard results from an inconsistency between subsequent case law and the Restatement (Third) of Unfair Competition. (68)

Case law subsequent to Inwood seems to suggest that the Inwood test has a specific knowledge requirement. For example, in Perfect 10, Inc. v. Visa International Service Ass'n, the Ninth Circuit focused its analysis on individual infringers rather than generalized group infringers. (69) Further, in Sony Corp. of America v. Universal City Studios, Inc., the Court noted that if it applied the Inwood test for contributory liability to Sony, the Court would find that Sony was not liable even though Sony had some generalized knowledge that someone somewhere might use Sony's product to infringe on protected works. (70) The Sony Court asserted that this generalized knowledge was not enough to find that Sony continued to supply its product to known third party infringers. (71) The Court's focus on individual infringers is consistent with a requirement of specific, rather than general, knowledge.

However, [section] 27 of the Restatement (Third) of Unfair Competition imposes liability for contributory trademark infringement when the "infringing conduct can be reasonably anticipated." (72) The "reasonably anticipate" knowledge standard is most consistent with a generalized knowledge requirement. A generalized knowledge requirement imposes liability for contributory trademark infringement if the individual can reasonably anticipate that its products or services would be used by third parties to infringe on trademarks. No court has explicitly adopted the "reasonably anticipate" standard from the Restatement (Third) of Unfair Competition. However, it appears that a "reasonably anticipate" standard was used by the District Court of Massachusetts in Coca-Cola Co. v. Snow Crest Beverages, Inc. (73) There, the court held the "test [for contributory liability] is whether wrongdoing by the purchaser 'might well have been anticipated by the defendant.'" (74)

b. Tiffany's Treatment of Inwood

In Tiffany, Tiffany brought suit under the Inwood test of contributory trademark infringement. (75) Tiffany alleged that eBay supplied a service, use of its electronic marketplace, to the alleged third party infringers after eBay knew third parties were infringing Tiffany's trademark. (76)

i. Establishing the Supplier's Direct Control

The Inwood test first requires that a service provider have direct control over a third party's method of infringement. (77) An individual is deemed to have direct control over a third party's method of infringement if that individual controls the third-party within the chain of distribution. (78) In Tiffany, the district court concluded that eBay had direct control over the third parties' means of infringement because (1) "eBay actively facilitate^] transactions between [buyers and sellers]," (2) "eBay has actively promoted the sale of Tiffany jewelry items," (3) "eBay profiled] from the listing of items and successful completion of sales," and (4) "eBay maintained] significant control of the listings on its website" by removing listings for items that were in violation of eBay's terms of use. (79)

Once direct control is established, the plaintiff must prove that the defendant either "intentionally induce[d] another to infringe the trademark or ... continue[d] to supply its products to one whom it knows or has reason to know is engaging in trademark infringement." (80) In Tiffany, Tiffany did not allege intentional inducement; therefore, in this case, eBay could only be liable for contributory trademark infringement under the "continued to supply" method. (81)

ii. Requisite Knowledge Required for the "Continued to Supply" Method

The primary focus of the Tiffany court's examination of contributory trademark liability was the level of knowledge required before an individual is deemed to be contributorily liable for continuing to supply its products or service to an infringing third party. (82) Specifically, the Tiffany court considered whether the Inwood test required specific or general knowledge of trademark infringement. (83)

EBay asserted that Inwood only required specific knowledge, meaning that eBay would only be liable for contributory trademark infringement if it continued to supply its service to known infringing third parties. (84) EBay argued that in this situation it could not be liable under a contributory trademark infringement theory because it always removed listings identified by Tiffany as being potentially infringing. (85) EBay contended that because it always removed the listings, eBay did not continue to supply its service to known trademark infringers. (86) EBay advocated that "courts have routinely declined to impose liability where a defendant, once it possesses sufficient knowledge [of trademark infringement by a third party,] takes 'appropriate steps' to cut off the supply of its product or service to the infringer." (87)

Conversely, Tiffany contended that Inwood only required general knowledge of trademark infringement and that it was sufficient that eBay knew individuals were using its website to infringe on Tiffany's trademark. (88) Tiffany argued that its demand letters, Buying Program, and NOCIs were enough to give eBay "knowledge" of infringement for contributory trademark liability purposes, (89) Essentially, Tiffany concluded that the court should adopt the "reasonably anticipate" standard as laid out in the Restatement (Third) of Unfair Competition. (90) The district court disagreed with Tiffany's argument and found that although Tiffany proved eBay had generalized knowledge of third party infringement, this generalized knowledge was not enough to meet the specific knowledge requirement of the "know or reason to know" standard. (91)

The district court correctly concluded that the Inwood test required specific knowledge. First, the district court noted that Inwood itself seemed to tacitly approve the use of specific rather than general knowledge. (92) In Inwood, Justice White, in his concurrence, expressed concern that the Inwood test would impose liability on an individual merely because the individual could anticipate that some illegal use would occur to some unspecified extent by some unknown third party. (93) The majority responded to this concern by noting that had the Second Circuit relied on this generalized knowledge of infringement for the basis of its finding of contributory trademark infringement, the Second Circuit would have applied an incorrect standard. (94) Based on this exchange, it appears as though the Inwood court implicitly concluded that its test for contributory trademark infringement requires actual, specific knowledge instead of generalized knowledge. Relying on this exchange, the district court properly found that the Inwood test required specific knowledge and that the generalized knowledge offered by Tiffany was not enough. (95)

Additionally, the Tiffany court's specific knowledge requirement is consistent with brick-and-mortar contributory trademark infringement case law. For example, in Fonovisa, Inc. v. Cherry Auction, Inc., the Ninth Circuit found a swap meet owner liable for contributory trademark infringement because the owner continued to lease its premises to individuals whom the owner knew to be infringing trademarks. (96) The situation in Fonovisa differs from the situation in Tiffany because in Fonovisa the County Sheriff's Department notified Cherry Auction of the ongoing sale of counterfeit items and asked for vendor identifying information; however, Cherry Auction ignored the Sheriff's Department request. (97) The Fonovisa court held that a swap meet owner could not "disregard its vendors' blatant trademark infringements with impunity," and therefore, the Ninth Circuit found Cherry Auction liable. (98) In Tiffany, by contrast, eBay did not ignore blatant trademark infringement. (99) EBay used its Fraud Engine to combat blatant trademark infringement and its VeRO program to manage less obvious trademark infringement. (100) Unlike Cherry Auction, eBay promptly removed any listing identified as infringing. (101) In this case, the district court's requirement of specific knowledge for liability for trademark infringement is consistent with Fonovisa because in Fonovisa, the Ninth Circuit found Cherry Auction liable after Cherry Auction ignored notifications about trademark infringement and thus continued to supply its service to known infringers.

Further, the Tiffany court's requirement of specific knowledge is consistent with the general view that "plaintiffs bear a high burden in establishing 'knowledge' of contributory infringement," (102) Trademark owners have a high burden in establishing knowledge for contributory trademark infringement purposes because trademark law permits a broad range of non-infringing uses of words that are identical or similar to trademarks. (103) This high burden to establish knowledge is consistent with a specific rather than general knowledge requirement. For example, if general knowledge was the requirement, then plaintiffs would not bear a "high burden" in establishing knowledge because knowledge could be easily established through blanket demand letters or mere assertions of infringement. However, courts have already held that these general notifications are not enough, (104) Therefore, the high burden to establish knowledge for contributory trademark infringement purposes is most consistent with the district court's finding that liability can be established only through specific knowledge.

Overall, the district court concluded that eBay was not liable for contributory trademark infringement because Tiffany failed to prove that eBay continued to supply its services to known infringers. (105) This finding indicated that Tiffany, not eBay, bears the principal responsibility in protecting Tiffany's trademarks. (106) Tiffany has since appealed the district court's decision. (107) Tiffany's appeal is currently pending in the United States Court of Appeals for the Second Circuit. (108)

B. French Contributory Trademark Liability in the Online Context

1. Contributory Tort Liability in France

Differing from American law, a trademark owner in France is permitted to bring suit against an online service provider for third party trademark infringement under a tort law theory, (109) If the trademark owner elects to bring suit under a tort law theory, the plaintiff needs to prove that the individual, in this case eBay, was negligent because it failed to prevent trademark infringement on its website. (110)

In this case, LVMH opted to bring suit against eBay under a theory of tort law. (111) Most likely LVMH opted to pursue this route because negligence is easier to establish than contributory trademark infringement. Specifically, LVMH alleged that eBay was negligent in permitting third parties to advertise counterfeit products and failing to implement a program that effectively prevented the sale of counterfeit LVMH products. (112)

In France, the first step in determining whether an individual can be liable for contributory trademark infringement on a negligence theory is to establish whether the online service provider is a host or a broker. (113) The distinction is important because a host is protected from tort liability, whereas a broker has no limited liability protection. (114) A broker has no protection against liability because, under French law, a broker has a duty to ensure that its business does not generate counterfeit sales. (115) A broker is further distinguished from a host because, unlike a host, a broker serves as an active intermediary between buyers and sellers. (116) In this case, the LVMH court concluded that eBay was a broker because eBay played an active role in the sale of its products. (117) EBay's status as a broker meant that eBay was not protected against liability from LVMH's claims. (118)

After finding an individual has a duty to prevent trademark infringement, the court next analyzes whether that individual violated its duty by failing to prevent illicit sales. (119) In this case, the LVMH court concluded that eBay had violated its duty in preventing illicit sales because it had failed to set up effective and appropriate measures to combat trademark infringement. (120) Specifically, the LVMH court found eBay's anti-counterfeit measures inadequate because eBay did not require sellers to authenticate their merchandise nor did eBay permanently terminate the infringing seller accounts. (121)

As a result, the court found that eBay was liable to LVMH for failing to protect LVMH's trademark from infringement. (122) Since the issuance of this court decision, eBay has appealed in France. (123) EBay's French appeal is currently pending. (124)

2. Contributory Trademark Liability in France

Similar to American law, to be liable for contributory trademark infringement in France, the plaintiff must prove the individual had actual or constructive knowledge that third parties were using its product or service to infringe on trademarks and after being put on notice, the individual continued to supply its products or service to these known infringers. (125) As a result, proving contributory trademark infringement in France is just as difficult as proving it in the United States. However, because contributory trademark liability under a negligence theory is easier to establish than under a trademark theory, (126) it would make sense that most trademark owners in France would opt to bring suit against online auction houses under a tort theory of liability.

III. IMPLICATIONS AND EVALUATION OF THE U.S. AND FRENCH DECISIONS

Although the decisions were decided under different legal regimes, trademark and tort law, the basic underpinnings of these decisions are the same--liability for trademark infringement occurring in online auction houses. On one side, the U.S. Tiffany decision stands for the proposition that as long as an online auction house has no specific knowledge of trademark infringement, the trademark owner must bear the ultimate burden of protecting its trademark. (127) Conversely, the French LVMH decision signifies that an online auction house must bear the burden of protecting trademark owners from any counterfeit sale. (128)

This section examines what ultimately should be the appropriate standard for online auction house liability. This section then concludes that online auction houses should not be liable for contributory trademark infringement unless they have specific knowledge of instances of trademark infringement and fail to act. Negligence and a generalized knowledge requirement are inappropriate theories of liability for contributory trademark infringement because trademark owners should bear the burden of protecting their trademarks. An important element of owning a trademark is working to protect it from those who want to diminish its value. Online auction houses should not be responsible for protecting trademark owners' trademarks when the prohibited conduct is not specifically known.

A. A Specific Knowledge Requirement Protects the Business Model of Online Auction Houses

EBay should not be responsible for third party trademark infringement because historically it has been the trademark owners who bear the burden of protecting their trademarks, and eBay has a countervailing goodwill incentive that essentially negates any financial gain eBay may derive from the sale of trademark infringing goods. If eBay were required to prevent all illicit sales, then eBay would need to guarantee the authenticity of all items sold on its website. This requirement would mean that eBay would have to physically handle and inspect at least enough items to guarantee quality control and at most every item sold. (129) EBay is not in a position to physically inspect items that are sold on its website and a requirement for them to do so would substantially limit, if not destroy, its online auction house.

Although proponents of Tiffany and LVMH argue that eBay should be liable for contributory trademark infringement because eBay makes a profit from the sale of trademark infringing goods, (130) these advocates must remember that eBay's financial incentive in the sales of trademark infringing goods is essentially negated by its countervailing goodwill incentive. EBay wants to prevent trademark infringement from occurring on its website because if a consumer, who is intending to buy a genuine product, buys a counterfeit product on eBay, that consumer is going to have an unfavorable opinion of eBay and will probably not purchase another product from eBay.

Finally, and most importantly, the trademark owner has always had a responsibility to protect its own trademark, (131) EBay should not have an affirmative duty to seek out trademark infringers. If the trademark owner wants to protect its trademark, it should be the one to affirmatively seek out the infringing individuals. Although proponents of Tiffany and LVMH's viewpoint argue that eBay should be liable and forced to protect trademark owners' trademarks because trademark infringement is a byproduct of eBay's business model, these supporters forget that part of owning a trademark includes the burden of protecting that trademark from trademark infringers. Contributory trademark infringement should be reserved for instances where an individual continues to supply its service to a third party after the individual has specific knowledge that the third party is infringing a trademark. Contributory trademark infringement should not be used where an individual only has general knowledge of trademark infringement but does not know specifically who is infringing the trademark owner's trademark.

Simply put, a trademark owner should be responsible for protecting its trademark and online auction houses should not be liable for contributory trademark infringement unless they have specific knowledge of instances of trademark infringement and fail to act. Instead of pointing fingers, online auction houses and trademark owners need to collaborate to protect trademarks. Working together to prevent the sale of trademark infringing goods helps both the trademark owner and the online auction house maintain their business reputations.

B. A Specific Knowledge Requirement is Consistent with Congressional Policies of the Communications Decency Act

Congress enacted the Communications Decency Act to protect Internet service providers, such as eBay and other online auction houses, from tort liability. (132) Although the immunity conferred in the Act does not apply to intellectual property law, (133) the congressional policies regarding Internet usage are relevant in this situation. Congress recognized the importance of the Internet, noting that it is the policy of the United States to promote Internet development and preserve the Internet's competitive free market. (134)

A specific knowledge requirement coincides with Congress's policies regarding the Internet because it encourages business growth in the Internet marketplace. Liability imposed under a specific knowledge standard does not significantly interfere with an online auction house's ability to operate because an online auction house is not required to affirmatively seek out all trademark infringers on its website. Rather, an online auction house is only required to stop supplying its services, use of its marketplace, to third party infringers after being notified of the infringement through an anti-counterfeiting initiative or the trademark owner. Because liability is only imposed through specific knowledge of trademark infringement, an online auction house does not need to put additional restrictions on users' ability to buy and sell products in order for the auction house to protect itself from contributory liability. Fewer restrictions promote e-commerce growth and development. Consequently, the specific knowledge requirement coincides with Congress's policies regarding Internet growth and development.

Conversely, a generalized knowledge requirement for contributory trademark liability frustrates congressional policies regarding the Internet. A generalized knowledge requirement frustrates these polices because an online auction house, in order to protect itself from liability for unknown trademark infringement, would need to significantly restrict user ability to buy and sell products over the Internet. The restrictions necessary to protect an online auction house from liability would impede the auction house's ability to operate and the development of e-commerce.

A specific knowledge requirement promotes congressional policies regarding the Internet because it does not significantly interfere with online auction houses' ability to operate or hinder e-commerce development.

Conclusion

The contributory liability of online auction houses for trademark infringement will remain an important issue as we move further into an e-commerce society. The recent U.S. and French court decisions show the disparity in the world view on the role online auction houses will play in the future. Of the two decisions, the United States opinion recognizes that online auction houses cannot be liable for contributory trademark infringement when they have no specific knowledge of that infringement. A decision holding eBay liable for contributory trademark infringement would have hindered the operational capacity of all online auction houses and impacted the evolution of e-commerce. Conversely, by holding online auction houses liable for trademark infringement occurring on their websites, the French court failed to recognize that as an e-commerce facilitator, eBay is not in a position to completely prevent trademark infringement on its website. This view hinders the growth of trade via online auction houses.

Online auction houses should not be liable for trademark infringement unless they have specific knowledge that a third party is infringing a trademark and fail to act to prevent that party from trademark infringement. Trademark owners should not be able to bring suit for trademark infringement under a tort theory of liability because negligence has a lesser knowledge standard. A generalized knowledge standard is inappropriate for trademark liability because trademark owners should bear the burden of protecting their trademarks. Further, an important element of owning a trademark is working to protect the trademark from those who want to diminish its value. Although it is important that online-auction houses do not allow third parties to infringe on trademarks, it should not be their responsibility to protect trademark owners' trademarks when the prohibited conduct is not specifically known.

********** (1.) See, e.g., Tiffany, Inc. v. eBay, Inc., 576 f. Supp. 2d 463, 469 (S.D.N.Y. 2008); Tribunal do Commerce de Paris [TCP] [Commercial Court of Paris] June 30, 2008, No. 2006077799 R.G., 7. available at http://wcb20.nixonpeabody.eom/np20/np20wiki/PDF%20Library/Ebay1.pdf.

(2.) Tiffany, 576 F. Supp. 2d at 469, 481; Tribunal de Commerce dc Paris [TCP] [Commercial Court of Paris] June 30,2008, No. 2006077799 R.G., 7.

(3.) Tiffany, 576 F. Supp. 2d at 469; Tribunal dc Commerce de Paris [TCP] [Commercial Court of Paris] June 30,2008, No. 2006077799 R.G., 7.

(4.) Id.

(5.) Tiffany, 576 f. Supp. 2d at 469; Tribunal de Commerce de Paris [Commercial Court of Paris] June 30,2008, No. 2006077799 r.g.,2.

(6.) Communication Decency Act, 47 U.S.C. S 230 (2006); Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997).

(7.) See generally Tiffany, 576 f. Supp. 2d 463; Tribunal de Commerce de Paris [TCP] [Commercial Court of Paris] June 30,2008, No. 2006077799 R.G., 1.

(8.) Tiffany, 576 F. Supp. 2d at 470.

(9.) Tribunal dc Commerce dc Paris [TCP] [Commercial Court of Paris] June 30, 2008, No.F2006077799 R.G.,12.

(10.) See id.

(11.) Tiffany, 576 F. Supp. 2d at 474.

(12.) Id.

(13.) Id. at 475.

(14.) Id. at 506; Tribunal dc Commerce de Paris [Commercial Court of Paris] June 30, 2008, No. 2006077799 R.G., 8.

(15.) Tiffany, 576 F. Supp. 2d at 475.

(16.) Id. at 476.

(17.) Id.

(18.) Id. at 477-78.

(19.) Id. at 477.

(20.) Id.

(21.) Id.

(22.) Id. at 478.

(23.) Id.

(24.) Id.

(25.) Id.

(26.) Id. at 517.

(27.) Id. at 478-79.

(28.) Tiffany & Co. Company Profile, http://invesior.iiffany.com (last visited Sept. 30, 2009).

(29.) Tiffany, 576 F. Supp. 2d at 471-72.

(30.) Id.

(31.) Id. at 481.

(32.) Id.

(33.) Id. at 481-82.

(34.) Id. at 482.

(35.) Id.

(36.) Id.

(37.) Id. However, the district court found that the Buying Program had little probative value because "the Buying Program provided limited evidence as to the total percentage of counterfeit goods available on eBay at any given time." Id. at 486, Additionally, the Buying Program showed that authentic items were sold on eBay. Id. at 485. Moreover, the district court noted that when Tiffany conducted its buying program, it could not determine whether twenty-two percent of the items were genuine or counterfeit. Id.

(38.) Id. at 470.

(39.) Tribunal dc Commerce dc Paris [TCP] [Commercial Court of Paris] June 30,2008, No. 2006077799 R.O., 9.

(40.) Id.

(41.) Id. at 7.

(42.) Id. at 10.

(43.) Id. at 7.

(44.) Id. at 8 (noting that LVMH declined lo participate in eBay's anti-counterfeiting program, VeRO).

(45.) Id. at 7.

(46.) See Tiffany, Inc. v. eBay, Inc., 576 f. Supp. 2d 463 (S.D.N.Y. 2008).

(47.) Communications Decency Act, 47 U.S.C. 5 230.

(48.) 47 U.S.C. S 230(c)(1).

(49.) Zeran v. Am. Online, Inc., 129 F.3d 327, 330-31 (4th Cir. 1997); see also Universal Commc'n Sys., Inc. v. Lycos, Inc., 478 F.3d 413,418-19 (1st Cir. 2007); Green v. Am. Online, Inc., 318 F.3d 465,471 (3d Cir. 2003); Gentry v. eBay, 121 Cal. Rptr. 2d 703, 715 n.7 (Cal. Ct. App. 2002) (noting that online auction houses are considered interactive computer service providers).

(50.) Zeran, 129 f.3d at 332.

(51.) Gentry, 121 Cal. Rptr. 2d at 718-19.

(52.) 47 U.S.C. S 230(c)(2).

(53.) Gucci Am., Inc. v. Hall & Assocs., 135 F. Supp. 2d 409,411 (S.D.N.Y. 2001).

(54.) Id.

(55.) Id. at 413.

(56.) Id at 415.

(57.) See, e.g., Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997).

(58.) Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 853-54 (1982).

(59.) Id. at 846-47.

(60.) Id. at 847.

(61.) Id. at 849-50.

(62.) Id. at 850.

(63.) Id. at 853-54.

(64.) Id. at 855, 858.

(65.) Tiffany, Inc. v. eBay, Inc., 576 F. Supp. 2d 463, 504 (S.D.N.Y 2008); see also Hard Rock Cafe" Licensing Corp. v. Concession Servs., 955 F.2d 1143,1150 (7th Cir. 1992) (holding flea market operator could be liable for contributory trademark infringement because it supervised the premises where trademark infringing products were sold).

(66.) Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999).

(67.) Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259,265 (9th Cir. 1996).

(68.) Compare Sony Corp, of Am. v. Universal City Studios, Inc., 464 U.S. 417,439 n.19 (1984), and Perfect 10, Inc. v. Visa lnt'1 Serv. Ass'n, 494 F.3d 788, 807 (9th Cir. 2007), with Restatement (Third) of Unfair Competition s 27 (1995).

(69.) Perfect 10, Inc. v. Visa Int'l Serv. Ass'n, 494 F.3d 788,807 (9th Cir. 2007) (the court noted that "a defendant must have ... continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied.") (citing Inwood Labs,, Inc. v. Ives Labs., Inc.,456 U.S. 844,855 (1982)) (emphasis added).

(70.) Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417,439 n.19 (1984).

(71.) Id.

(72.) Restatement (Third) of Unfair Competition [section] 27 (1995),

(73.) Coca-Cola Co. v. Snow Crest Beverages, Inc., 64 F. Supp. 980,989 (D. Mass. 1946).

(74.) Id. (quoting Reid, Murdoch, & Co. v. H.P. Coffee Co., 48 F.2d 817, 819 (8th Cir. 1931)).

(75.) Tiffany, Inc. v. eBay, Inc., 576 F. Supp. 2d 463,470 (S.D.N.Y. 2008).

(76.) Id.

(77.) Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 853-54 (1982); Lockheed Martin Corp. v. Network Solutions, 194 F.3d 980, 984 (9th Cir. 1999).

(78.) See Inwood, 456 U.S. at 853; Lockheed, 194 F.3d at 984.

(79.) Tiffany, 576 F. Supp. 2d at 506-07.

(80.) Inwood, 456 U.S. at 853-54; Lockheed, 194 F.3d at 984.

(81.) Tiffany, 576 F. Supp. 2d at 502.

(82.) See, e.g., id at 502-03.

(83.) Id. at 507-18.

(84.) Id. at 508.

(85.) See id at 516.

(86.) See id

(87.) Id. (oiling Procter & Gamble v. Haugen, 317 F.3d 1121,1129-30 (10th Cir. 2003)).

(88.) Tiffany, 576 F. Supp. 2d at 508.

(89.) Id.

(90.) Id at 502. See also RESTATEMENT (THIRD) OF UNFAIR COMPETITION 5 27 (1995).

(91.) Tiffany, 576 F. Supp. 2d at 508.

(92.) Id.

(93.) Inwood Labs,, Inc. v. Ives Labs., Inc., 456 U.S. 844,861 (While, J. concurring).

(94.) Id at 854 n.13 (majority opinion).

(95.) See Tiffany, 576 F. Supp. 2d at 509-11,

(96.) Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259,265 (9th Cir. 1996).

(97.) See id. at 261.

(98.) Id. at 265.

(99.) See Tiffany, 576 F. Supp. 2d at 475-79.

(100.) Id. at 477-79.

(101.) Id. at 478-79.

(102.) Gucci Am., Inc. v. Hall & Assocs., 135 F. Supp. 2d 409,420 (S.D.N.Y. 2001).

(103.) Lockheed Martin Corp. v. Network Solutions, 985 F. Supp. 949, 965 (CD. Cal. 1997). The Lockheed court found a trademark owner's blanket demand letter is insufficient to impute knowledge of infringement for contributory trademark infringement purposes. Id. at 967. See also Gucci Am., 135 F. Supp. 2d at 420.

(104.) Lockheed, 985 F. Supp. at 965; Gucci, 135 F. Supp. 2d at 420.

(105.) Tiffany, 576 F. Supp. 2d at 469-70.

(106.) Id. at 518.

(107.) R. Bruce Rich & Mark J. Fiorcweil, EBay Prevails in Suit Over Listings of Claimed Counterfeit Tiffany Jewelry, METROPOLITAN CORP. COUNS., Sept. 2008, at 27.

(108.) Tiffany Inc. v. eBay, Inc., No. 08-3947-CV (2d Cir. filed Aug. 11,2008).

(109.) See Asim Singh, United Slates: EBay Court Decisions in France And USA, Mondaq Bus. Briefing, Sept. 11, 2008, available at http://www.mondaq.com/article.asp?articleid=64686.

(110.) See id.

(111.) Tribunal dc Commerce de Paris [TCP] [Commercial Court of Paris] June 30, 2008, No. 2006077799 R.G., 8.

(112.) Id. at 10.

(113.) Id. at 10-11.

(114.) Id.

(115.) Id. at 11.

(116.) Id.

(117.) Id.

(118.) Id.

(119.) Id. at 11-12.

(120.) Id. at 12.

(121.) Id.

(122.) Id.

(123.) Rich & Fiorcweil, supra note 107, at 27.

(124.) Id

(125.) See Singh, supra note 109.

(126.) See id.; Tribunal tie Commerce de Paris [TCP] [Commercial Court of Paris] June 30, 2008, No. 2006077799 R.G., 8.

(127.) Tiffany, Inc. v. eBay, Inc., 576 F. Supp. 2d 463,527 (S.D.N.Y. 2008).

(128.) Tribunal de Commerce de Paris [TCP] [Commercial Court of Paris] June 30,2008, No. 2006077799 R.G., 12.

(129.) Further, even if eBay were in a position to inspect the items, it would not be able to conclusively guarantee their authenticity. When Tiffany conducted its Buying Program it could not determine if twenty-two percent of the items were genuine or counterfeit. Tiffany, 576 F. Supp. 2d at 485. If Tiffany cannot determine if a Tiffany item is genuine, eBay certainly will not be able to make that conclusion.

(130.) EBay profits on every completed sale. Tiffany and LVMH assert that because they have identified that almost three-fourths of completed sales on eBay infringe on their trademarks, eBay profits from significant counterfeit sales. See Tiffany, 576 F. Supp. 2d at 482 (noting Tiffany's Buying Program revealed that 73% of Tiffany items sold on eBay were counterfeit); Tribunal dc Commerce de Paris [TCP] [Commercial Court of Paris] June 30, 2008, No. 2006077799 R.G., 8 (noting that LVMH contends that 90% of LVMH products sold on eBay are counterfeit).

(131.) 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition [section] 11:91 (4th ed. 2009).

(132.) See generally 47 U .S.C. [section] 230 (2006).

(133.) 47 U.S.C. [section] 230(e)(2).

(134.) 47 U.S.C. [section] 230(b)(1)-(2).

Allison N. Ziegler, J.D. Candidate 2010, Marquette University Law School. The author would like to thank Professors Kali Murray, Irene Calboli, and Bruce Boyden and the editors and staff of the Marquette Intellectual Property Law Review for their guidance and assistance in publishing this Comment. The author would also like to thank her fiance, Kyle Flanagan, and her family for their continuous love, support, and encouragement during the writing of this Comment and law school.
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