A federal appeals court ruling earlier this month has laid down the law for how far e-commerce businesses must go to enforce trademark protections—and the victory goes to the e-commerce shops.

The closely watched ruling, Tiffany v. eBay, is the first to address trademark law in the world of virtual retailers. Tiffany & Co., the iconic maker of luxury jewelry, accused online auction house eBay of contributing to trademark infringement by turning a blind eye to scads of online sellers peddling counterfeit Tiffany goods. Specifically, Tiffany said, it had eBay terminate more than 19,000 auctions in 2003 and 2004 that were selling bogus Tiffany products.

Jaclyn Jaeger is a freelance contributor to Compliance Week after working for the company for 15 years. She writes on a wide variety of topics, including ethics and compliance, risk management, legal,...