The jury is still out on how tonight's earnings numbers will move eBay (Nasdaq: EBAY ) tomorrow, but at least the verdict is in when it comes to giving the leading online marketplace a good start this week.
A federal judge ruled in favor of eBay in a pivotal case in which Tiffany (NYSE: TIF ) was suing the auction site. The upscale jeweler argued that eBay was responsible for the exchange of counterfeit Tiffany items on the site, but the judicial ruling found that the trademark owner is the one that must police its brands. Tiffany is welcome to go after the sellers of the fake goods, of course, but eBay cannot be held liable for the trademark infringement crime, even if it's profiting from the transaction through its listing fees. The lawsuit had been flapping about in the court system for more than three years.
The favorable ruling for eBay comes as a sharp contrast to the company's defeat in Europe last month, when eBay lost a similar case in France against luxury goods specialist LVMH (OTC BB: LVMH.PK).
When a retailer sells allegedly bogus goods -- like when Coach (NYSE: COH ) went after Target (NYSE: TGT ) two years ago -- it's usually a pretty cut-and-dried decision. If it's counterfeit, it's illegal. An online marketplace complicates matters, though, because eBay is simply serving as the handshake enabler between two parties. The eBay site has safeguards in place to boot fraudulent sellers, but a buyer has to get burned to get to that point.
This is obviously welcome news for eBay, as well as any site like Overstock.com (Nasdaq: OSTK ) or Latin America's MercadoLibre (Nasdaq: MELI ) that dabbles in consumer-to-consumer auctions. Court decisions can be overturned. New cases can take new tactical attacks.
For now, at least, eBay is a winner. Now let's see if tonight's quarterly numbers keep it that way.
If "buy it now" doesn't work, try "read it now":