eBay’s business model could fundamentally change if the counterfeit case against it is found in favor of jeweler Tiffany & Co.

From the Wall Street Journal:

A legal showdown between jeweler Tiffany & Co. and eBay Inc. over counterfeit items has the potential to significantly change the way the online auction Web site does business, legal experts say.

After a bench trial in November, a federal judge in New York is now considering whether the San Jose, Calif., online auction Web site should be required to vet its millions of listings each day for counterfeit goods instead of relying on trademark holders to flag auctions of potentially inauthentic merchandise.

“I think this may be one of those cases that sets precedent,” said Peter D. Vogl, an intellectual property lawyer at Jones Day in New York.

 Tiffany is arguing that eBay is responsible to ensure that counterfeit goods are taken down. eBay’s position is that it does not have the expertise to determine whether a product is counterfeit.

Tiffany argues that eBay knew it had a problem with counterfeit items being listed on its Web site and did little to clean it up. Instead, eBay insisted the obligation rested with the New York jeweler to identify and alert it to auctions of counterfeit Tiffany silver jewelry.

eBay spends $10 million a year to combat counterfeit goods in its auction.  Tiffany spends $14 million on its anti-counterfeiting activities.