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1/30/2006
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EBay Faces Groundbreaking Case In Tiffany Counterfeit Suit

Tiffany & Co. claims the online marketplace has failed to take adequate steps to remove fake Tiffany jewelry from the site. The suit could force a major change of eBay's business model.

EBay Inc. could face a major change of its business model, if it loses a potentially groundbreaking lawsuit by Tiffany & Co., which claims the online marketplace has failed to take adequate steps to remove fake Tiffany jewelry from the site.

The suit, which was filed in the summer of 2004 in a New York state court, could begin by the end of the year, a legal expert said Monday. The case is currently at the discovery stage in which both sides seeks documents and other evidence from the other in an attempt to "discover" pertinent facts.

"If Tiffany wins, this is a ground-breaking case," intellectual property attorney Joseph Berghammer of Banner & Witcoff Ltd., said. "It changes the electronic marketplace. EBay would no longer just provide a tent, it would also have to provide police."

New York-based Tiffany is arguing that EBay in marketing Tiffany jewelry on the site should take more responsibility in authenticating items offered by sellers.

Tiffany has claimed that in 2003 and 2004 it got EBay to remove more than 19,000 auctions selling counterfeit goods. EBay, based in San Jose, Calif., claims it is only a marketplace that brings buyers and sellers together, and can't be responsible for the authenticity of the 78 million items for sale on the site.

Ina Steiner, editor and publisher of AuctionBytes.com, an online newsletter, said it's possible the court may begin to look more closely at EBay, now that it's been operating for a decade and has grown into a multi-billion-dollar business.

"In the early days, courts were lenient as the (business) model worked itself out," Steiner said. "But EBay has become such a market force, and so many consumers make purchases on EBay that the courts may view it differently as time goes on."

Even if the court doesn't side with Tiffany, any perception that EBay is not providing enough consumer protection could spark action by lawmakers.

"It really may come down to lawmakers getting involved if consumers feel they are not being protected in the marketplace. EBay may have regulation thrust upon them."

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