DOW JONES NEWSWIRES

EBay Inc. (EBAY) expressed disappointment that retailer Steven Madden Ltd. (SHOO) didn't first report the potential sale of counterfeit items on the auction Web site before filing "unnecessary litigation" against the company.

The lawsuit, filed in U.S. District Court in Manhattan, alleges eBay has failed to remove from its site all watches with the "Steven Madden" mark as those watches are unlicensed and counterfeit. The company has never sold or licensed the sale of watches.

But eBay Deputy General Counsel Mary Huser said Steve Madden didn't report potential suspect items through its anti-counterfeiting program. She also highlighted recent rulings in the U.S. and Europe which didn't hold eBay liable for the sale of counterfeit items and the company's own removal of items for purchase when found to be counterfeit.

EBay shares were recently up 4 cents at $18.97 while Steve Madden added 1.1% to $28.24.

-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354; kevin.kingsbury@dowjones.com