Last week, a federal appeals court rejected luxury goods retailer Tiffany’s claim that eBay should be liable for trademark violations on its site based on general knowledge that such infringement is happening (but no specific knowledge of a specific infringement). The ruling is a victory for online service providers, eBay sellers, and consumers alike.
As we noted in our amicus brief, Tiffany’s arguments would have resulted in over-policing by intermediaries like eBay. If eBay had to worry about potential trademark lawsuits and liability for every one dollar auction, you can be sure that it would move to reduce risk by blocking even potentially lawful uses of trademarks. What intermediary wants to take a big legal risk for a little customer? That’s the question that translates legal liability for intermediaries into a "clearance culture" that squelches lawful content protected by fair use or other speech-protecting doctrines.
So it’s good that eBay prevailed in last week’s ruling. But the decision highlights a growing problem in trademark enforcement: the lack of avenues for "put back" when a trademark owner makes an improper infringement claim. One key to eBay’s legal success was its rapid notice-and-takedown system, known as VeRO, which has helped the company position itself as a sympathetic actor, responding expeditiously to trademark complaints. Savvy intermediaries are likely to adopt similar processes, if they have not already done so.
Unfortunately, intermediaries have little incentive to give equal respect to users. Unlike in the copyright area, where Congress created a "counternotice" procedure that allows a citizen to get lawful content restored after a bogus takedown notice, trademark law provides no such safeguards. The DMCA’s counternotice process relieves a service provider (e.g., YouTube, MySpace, Blogger, etc) from having to make judgment calls about whether something is or is not infringing. Without a similar simple process for service providers in the trademark realm, the cards are stacked against users. Unless the service provider has a free lawyer, the cost of doing a fair use analysis and defending a lawsuit—even if the service provider knows it will win—is almost certainly more than a service provider is charging any individual customer, or even a whole bunch of customers. Thus, even if a user explains that her use is protected by nominative fair use or other trademark doctrines, service providers have little motivation to put content back up unless and until the trademark owner withdraws its complaint. And that is not likely to happen unless the target can recruit legal representation to help persuade the trademark owner to see reason.
So we are not as optimistic about the impact of this ruling as we'd like to be. The decision was good for consumers and free speech, but we still have a long way to go to protect against trademark misuse.