Tiffany sued eBay four years ago, saying that a majority of items listed as "genuine Tiffany products" on eBay's site were indeed fakes.
The New York based federal judge ruled that eBay couldn't be liable for trademark infringement "based solely on their generalized knowledge that trademark infringement might be occurring on their websites."
"This is one of the first cases to address the liability of a user-generated content site for trademark violations," First Amendment Attorney Lawrence G. Walters of the Weston, Garrou, Walters and Mooney law group told AVN Online. "The ruling is instructive in a broad set of circumstances, but unlike copyright infringement, federal trademark law does not recognize any particular protection for sites that permit third parties to contribute content.
"This has been a source of concern for user-generated content sites that may not be aware of the scope of their trademark infringement liability, because users often include references to protected marks in the material they upload," Walters added.
Nichola Sharpe, a spokeswoman for eBay, said the ruling "confirms that eBay acted reasonably and has adequate procedures in place to effectively address counterfeiting."
"To saddle eBay with the obligation of reviewing every ad for potential trademark violations would dramatically increase the cost of doing business on the site, and goes further than is necessary, under current trademark law," Walters said. "Since there is no established immunity or safe harbor for trademark claims in these circumstances, claims like this will be determined on a case-by-case basis, and governed by the unique facts of each circumstance."
Mark Aaron, a spokesman for Tiffany, said the company was "shocked and deeply dismayed" by the decision.
"User-generated content sites should not assume that they are completely in the clear when it comes to trademark claims," Walters said, adding that it's important to remember is the fact that this is a trial court decision, and likely to be appealed to the Second Circuit Court of Appeals, which could reverse or change the decision. It is also possible that other courts, in different areas of the country, could rule differently even when confronted with the same facts."
Tiffany lawyer James Swire said the jeweler might appeal.
eBay says it spends tens of millions of dollars each year to combat counterfeiting, and in 2007, 50,000 sellers were thrown out over counterfeits, with 40,000 previously suspended sellers blocked from returning.