Tiffany quickly appealed, hoping to convince a judge to impose more stringent policing requirements on the e-commerce giant.

For eBay, litigation over trademark infringement is a cost of doing business. The company has been fighting off lawsuits in jurisdictions in Europe and the United States brought by L'Oreal since 2007.

After yesterday's hearing, Mary Huser, eBay's deputy general counsel, took a shot at Tiffany and praised Sullivan's ruling last year.

"While the decision was a victory for consumer choice, it is a shame that Tiffany continues to waste so much effort pursuing litigation when the company could work with eBay to more effectively fight counterfeits," she said in a statement. "Ultimately, these claims are about distribution and brand owners' attempts to limit eBay as a legitimate channel of distribution of authentic goods."

eBay claims that just 0.15 percent of the goods on its vast marketplace have even the suspicion of being knock-offs.

Web companies like Amazon, Google and Yahoo filed amicus briefs on behalf of eBay. Groups like the International Anti-Counterfeiting Coalition weighed in with support of Tiffany's position.