EBAY YESTERDAY survived a potentially devastating legal challenge to its online auction system after a US judge refused to back a claim by Tiffany that the internet company should be held liable for the sale of counterfeit jewellery on its site.

The decision, after a trial lasting four years, removed the immediate threat that eBay would be forced to make big changes to its highly profitable online auction system to try to prevent the sales of counterfeit goods.

An adverse ruling could have forced the company to take possession of goods on sale in its markets to check them for authenticity, or led to it blocking the sale of high-risk items, such as those bearing luxury jewellery and fashion brands.

While siding with Tiffany, judge Richard Sullivan conceded that the rapid growth of the internet, which had made it easier for buyers and sellers to find each other, had also "given counterfeiters new opportunities to expand their reach".

He added that under current law eBay should not be held liable, and it was up to lawmakers to decide if trademark owners were adequately protected.

The ruling, in a federal court in the southern district of New York, comes shortly after the US internet company lost a similar case in France, where a court sided with luxury goods maker LVMH.

The US case was considered more significant, given the size of the market and the risk of a higher damages award. After the LVMH decision, eBay said anti-counterfeit measures introduced since the case was filed had already dealt with the issues raised by the case.

A lawyer for Tiffany declined to comment, and it was unclear in the immediate aftermath if Tiffany would appeal.

Judge Richard Sullivan, whose decision came after a bench trial that did not involve a jury, ruled that eBay could not be held liable for contributory trademark infringement, as Tiffany had claimed.

To be found liable, eBay would have had to have let specific sellers of counterfeit items continue to transact on its site, even after it knew they were infringing Tiffany's trademark.

The judge said it was up to companies to police their own trademarks. - ( Financial Times Service)