Manufacturers often look to trademark law to stop unauthorized online sales of their products. However, online resellers are typically immune from any liability for selling genuine trademark products. This is due to what is known as the First Sale Doctrine, described below.
Cybersquatting generally refers to “bad faith registration of another’s trademark in a domain name.” It often involves registering a domain name with the intent to either: A) sell the domain back to the owner of the mark, or B) divert customers to a competing website/company.
It is no secret that consumers are spending a lot of money online each year. In fact, e-commerce grew 16 percent in the first half of 2016, while U.S. consumers are projected to spend $385 billion online this year, according to a Nov. 2016 Business Insider article. By 2020, Business Insider’s premium research service projects that number to rise to $632 billion.
Unauthorized sales are causing issues for many companies across numerous industries. In highly competitive spaces, such as the beauty or skin care industries, a common (but much less talked about) issue affecting many of these same companies is traffic diversion.
Now-popular online marketplaces like eBay have made consumer-to-consumer e-commerce possible. Today, it is getting even easier through “flea market” and consignment shop-style apps, which pride themselves on the ease with which people can shop for and sell products.
We have published various posts on our blog about implementing an effective enforcement system to stop unauthorized sales, including our recent post featuring a video about our online seller enforcement program. As mentioned in numerous posts, an ideal enforcement program combines technology, legal and investigation tactics.
Given the focus of our blog and the services that we provide to clients, we are obviously routinely publishing content about the unauthorized sales problem and strategies for overcoming the actions of unauthorized sellers.
Let’s say your company sells products on eBay.com. To monitor your products for sale, you frequently check eBay and notice that there are regularly many products being listed on the website for substantially less than your price.
Minimum advertised price policies, or “MAP” policies, restrict the price at which products can be advertised. In other words, they set the lowest price at which a retailer is allowed to advertise a manufacturer’s products—including for internet sales—regardless of the price at which the products might actually be sold.
In general, a person can sell another’s genuine trademarked goods, under the First Sale Doctrine. However, a failure to abide by or follow a company’s quality controls can give rise to trademark infringement.
E-commerce sales, unsurprisingly, continue to increase. In fact, according to data released by the U.S. Department of Commerce in early 2015, online retail sales in the United States totaled nearly $305 billion (an increase in more than 15 percent since 2013).
Many companies tell authorized retailers or distributors that they will exclusively sell their products through them. Such a company might also have a written policy against product diversion and unauthorized online sales. This looks good for purposes of marketing and trying to convince prospective retailers and distributors to distribute their products.
If a company suspects that an online seller is engaged in the unauthorized re-selling of its products online, it is up to that company to take action and attempt to enforce its policies and procedures — to the extent that it has any.
Unauthorized online sales have become very problematic for many businesses, including those offering high-end luxury products, companies selling beauty and skin care products and also multi-level marketing (or MLM) companies.
Companies from many industries have long been contracting with distributors to sell products on an exclusive basis. As technology has evolved, however, it has become easier for anyone to sell products on the internet, and the diversion of products to unauthorized online sellers poses a serious threat to companies.