A longer version of this blog post originally appeared as an article in Retail TouchPoints: Policing Your Brand on Online Marketplaces: an Intellectual Property Guide for Retailers. Further duplication is not permitted.
Retailers often face brand policing challenges on online resale platforms such as Wayfair, Overstock.com, and eBay. Resellers account for a significant portion of retail sales on these websites. Resellers tend to be small to midsize entities but are nevertheless able to reach a large number of US consumers. It’s thus unsurprising that problems arise daily, often relating to brand owners’ dissatisfaction with the third-party resellers and their sales practices.
How can trademark and copyright laws help?
The situation may arise, for example, where a product receives poor reviews, but the reviews are a result of the third-party seller’s actions rather than the product itself, e.g., a product may arrive not as described in the reseller’s listing. One approach to try to curtail poor product reviews stemming from a reseller’s conduct and misrepresentations is to bring a false advertising claim against the third-party reseller based on the untrue or misleading product description statements.
Another example of a problem in this space is price gouging that can lead to overall consumer dissatisfaction. The ultimate harm stems from a perceived association between the brand owner and the third-party seller. In this scenario, a brand owner may have a claim against the third-party reseller for false association. The theory is that the third-party seller is holding itself out as an agent of or authorized distributor for the brand owner or has otherwise been approved by the brand owner.
Fake third-party reviews are another challenge. If a brand owner is a victim of this practice, a contributory false advertising claim might be brought against the party purchasing fake reviews. The theory is that the fake review purchaser is causing the online platform to falsely advertise the quality of the brand owner’s product.
“Listing sabotage” is also a recurring issue. Some online platforms maintain product listings that third-party sellers may use for a given product. Because these listings are commonly maintained, images and descriptions relating to the product may be added by third parties. In some instances, competitors for a given product have uploaded misleading or incorrect images for a product listing. This results in consumer confusion, decreased sales, dissatisfied customers, and reputational harm to the brand owner in the form of bad reviews. In some instances, copyright law may be leveraged to combat these anticompetitive practices.
Grey market products present a challenge on online platforms. Grey market products are not fake, but rather are travelling outside the approved distribution channels. When these products are offered for sale by third-party resellers, the pricing may undercut the brand owner’s pricing for the given distribution channel. Brand owners often attempt to deal with grey market products by refusing warranty on such products, but this does not mitigate reputational harm or address the underlying problem. In this instance, the brand owner may be able to argue that the lack of a warranty on grey market goods is a material difference from the normal product and, therefore, a trademark infringement claim may be asserted.
Lack of quality control is yet another challenge relating to online platforms. When a brand owner wants to prevent an unauthorized reseller on an online platform, the brand owner may consider whether there are any types of established quality controls for the product at issue and whether a third-party reseller is abiding by those quality controls. If a reseller is not, the brand may suffer. As such, the brand owner may allege that the reseller’s product is materially different from the brand’s own product and, therefore, the first sale doctrine does not apply. On that basis, the brand owner may allege trademark infringement.
Finally, while it may be hard to believe, brand owners are often recipients of false trademark infringement claims (or false IP claims in general) on online platforms every day. There are instances where a brand owner is lawfully selling its own products on an online platform but receives a false trademark (or other IP) infringement complaint. Bringing a declaratory judgment claim against the party alleging the infringement claim might help. Another approach is to bring a defamation claim against the alleging party.
In short, while sale of branded products on online marketplaces present challenges, trademark and copyright law may be used to attempt to curtail anticompetitive behaviors on the platforms. Accordingly, retailers are advised to take steps to adequately protect their intellectual property—such as registering their trademarks and copyrights to help facilitate swift action against third-party resellers, among other benefits—and continuously monitor online marketplaces for the practices described above.