Unauthorized and unofficial sales of products on 3rd party websites like amazon is affecting so many businesses. It’s eroding their brand and affects sales to distributors and wholesalers. But it can be stopped. Below, we’ve recommended 3 step program that’ll help address these sellers:
- 1. First, a company’s policies, procedures & agreements should be revised such that it: i) supports legal actions against these sellers, & ii) differentiates its items from those sold by unauthorized sellers.
- 2. Second, a graduated enforcement system should be implemented. The purpose of this is to remove unauthorized sellers through the use of monitoring technology, and enforcement tactics.
- 3. Finally, we recommend the implementation of a communications strategy that:
1) shows to authorized sellers that they’ve got their back; and
2) show that items sold by unauthorized sellers cannot be relied on and that they do not come with certain benefits or are not made with state of the art facilities.
Building a Foundation for Legal Claims Against 3rd Party Unauthorized Sellers
The first step for companies is to work with legal counsel to review existing distributor procedures, agreements and practices. The aim is to offer the best support possible for the enforcement program, discussed in step 2.
There’s something we call the First Sale Doctrine, once the company sells an item, the buyer can resell the product without infringing the producer’s mark. Nevertheless, the 1st Sale Doctrine is not applicable when a reseller sells a trademarked product that is materially different from the company’s goods.
Case law has set up a few necessary principles relating to material differences. They include: 1) the threshold of materiality is considered “low”; 2) a single material difference is enough reason to give rise to a trademark infringement claim; and 3) material differences do not have to be ‘visible’.
Courts have also held that the quality of products can be altered by trademark owners. Hence, unauthorized sellers who do not work with the quality controls of the company can also be held for trademark infringement (only if the company is actually enforcing them). Quality controls include: tracking codes, packaging, pre-sale consultations and others.
A lot of companies out there already have strong agreements, procedures and policies. They just need to modify them to get the protection against unauthorized sellers.
The Graduated Unauthorized Seller Enforcement System
As soon as a firm puts its procedures, policies and agreements in place, the next step is to roll out a graduated enforcement system which is aimed at effectively and efficiently minimizing the volume of unauthorized 3rd party sellers.
First, you have to start by finding all unauthorized sellers.
Usually, a cease and desist letter is just perfect for most unauthorized sellers. Nevertheless, a more aggressive approach might be needed for sellers offering a considerable amount of products.
After reviewing the data from the initial report, it is now up to the company to pick who to target through the enforcement system. If the 3rd party website supports private messaging of their online sellers, then this can be done at a very a low cost.
Sending the largest sellers a well written and aggressive letter from a law firm usually works. It can include a detailed explanation of the seller’s fraudulent actions and why the First Sale Doctrine doesn’t apply to them.
The company can also decide to send additional eC&Ds to low volume sellers.
Once these letters are sent, you need to keep an eye on the sellers to find out those that did not comply. Then, you can employ the services of online investigators who identify these sellers.
The moment their identities are known, the law firm can draft and send out actual cease and desist letters to these sellers addresses, saying that:
- 1) we know who you are and where you live.
- 2) we can come after you legally.
All these can be done every month, and any new seller that pops up will be added to the list. If need be, for any unauthorized seller found online after the previous month, the lawyers can use additional legal procedures to put more pressure on these sellers.
It all depends on the situation; it can be done by freezing online sellers’ PayPal accounts; sending draft complaints to the sellers; negotiating with the sellers and filing lawsuits; or creating and executing settlement agreements.
Communications Strategy
For quite a number of companies, depending on their distributor network and model, it can be helpful to communicate to the authorized distributors the advantages of the enforcement program. It is necessary to let the distributors know that the company has a harsh enforcement program. The company can show them the data reflecting the number of unauthorized sellers removed from any 3rd part website. Hence, proving to them that they are safe from unauthorized sellers.
Work with us
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