Blog Ipsa Loquitur

Published on under Legal Theory

Jason Stoddard, co-founder of an audio equipment (think headphones and amplifiers and such) company, wrote an exhaustive accounting of what it’s like to try to run a small business selling physical products. I do desperately hope folks in MBA programs learn about the sorts of hustles that resellers run on suppliers. I’m sure I’d fall prey to stuff like that my first time out.

Stoddard’s piece is centered around what it’s like to deal with as it sells his company’s products. It’s incredibly informative. The part that I found most intriguing was (naturally) about intellectual property disputes on Amazon’s site.

The Amazon Brand Registry. Okay, let’s say you’re selling on Amazon…and one day, you find that you’ve lost the “buy box.” That is, you’re not the first result listed—when someone clicks on “buy,” they’re not buying from you. Worse, your replacement is claiming to sell the exact same product you make…but they are not you. They’re not your brand. Their product might do something similar, but it’s most definitely not you…and you don’t have any authorized distributors.

Impossible? Not at all. It happened to Rina, in her business. Multiple times. […] So, when this happened, she went to Amazon and said, “What the heck? (but spelled with F and U). Amazon eventually replied that she had to get into the brand registry to protect her brand — something they offered to [Stoddard’s company] at the beginning.

One catch: she had to have a registered trademark.

Yes, that’s right: with Amazon, the rules change depending on who you are…and who you are rhymes exactly with “how much you sell.” Well, okay. She went out and got a registered trademark. Her business was already legally sound, as an LLC. She applied for Brand Registry, and got it. Problem over, right?

Wrong. To this day, she has to chase off competitors who glom on to her listings. Big deal, right? She’s the brand owner and registered trademark holder.

Again, wrong. Amazon doesn’t understand—or seem to care—that a manufacturer with a registered trademark and no distributors is the ONLY entity that can list its particular products. It does NOT allow the trademark holder to approve and disapprove resellers of their product.

If you’re thinking to yourself “how has Amazon not been sued into the ground?” you’ve got good company. Well, you’ve got okay company. Well, you’ve got me. Dear Reader, the fact is that if Stoddard is telling Rina’s tale accurately, that’s a huge problem for Amazon. Why’s that?

We Never Go Out of Style

A few years back, Amazon was sued by a hair care products company named Tre Milano for roughly the same kind of behavior that Stoddard describes above. Amazon won, and we’ll get to that in a bit.

Corsica Smith, writing for the Intellectual Property Brief, describes how little legal precedent there is for this sort of thing, and what exactly it is. The big case is Tiffany vs eBay:

Tiffany, a high-quality jeweler, sued eBay, an online auction website, for contributory infringement for selling counterfeit jewelry on its website and not removing listing for counterfeit products fast enough, among other things. The court articulated that a defendant may be secondarily liable for trademark infringement if “the service provider intentionally induce another to infringe a trademark” or “if the provider continues to supply its service to one whom it knows or has reason to know is engaging in trademark infringement.”

The key is that web sites like eBay and Amazon and Craigslist don’t ever take possession of these counterfeit goods. The courts seem to be in the process of settling on a solution: that web sites have to remove listings when they’ve been given notice that the seller is up to no good. Usually, this means that the trademark owner comes by and says “hey, this is fake.”

This should sound familiar; if someone posts a copy of Iron Man to YouTube, Disney would send a DMCA takedown notice to YouTube. YouTube would escape liability for copyright infringement of any sort as long as it acts once it has notice of infringing content. (Also, eBay or Amazon would almost certainly be on notice if a listing was titled something like “Fake Rolex! $uper ¢heap!” In fact, eBay has an automated system that deletes listings like that.)

Amazon took weeks to remove the counterfeit products, called the “Rotating Hot Iron Hair Straightener”, from its web site. In the Tiffany case, eBay removed about 75% of counterfeit listings from its site within four hours. Four hours! The remainder were all gone in less than 24 hours. eBay was apparently much, much better about policing its marketplace than Amazon was in the Tre Milano case.

A Shocking Twist

In the Tre Milano case, the counterfeit notices were useless. Plain and simple. Here’s Judge Rico:

[Amazon’s Copyright Compliance Officer] Garver had received numerous NOCIs from Tre Milano. He noted that “[w]hile a handful of these notices have contained evidence or some explanation of why Tre Milano claimed that a listing was for a counterfeit item, the vast majority have contained nothing but a statement like ‘the item is a counterfeit product that infringes the trademark owner’s rights’ … or ‘the item is an unlawful replica of a product made by the trademark owner’….

“As I have explained to Tre Milano, needs more evidence regarding the alleged infringement before it can assist Tre Milano in carrying out our common goal of preventing the sale of counterfeits.”

Okay. So that “weeks versus hours” thing sounds bad, but then you realize that Amazon was getting no help from the trademark owner, and things kind of click into place. Additionally, of the 159 notices of counterfeits that Tre Milano sent, 41% of the offending products were taken down before the notice even reached Amazon. Amazon might not have lived up to the extreme standard of the eBay case, but they were trying. And Tre Milano’s legal team didn’t seem to be helping their own case by providing one-sentence takedown requests.

Bringing It Home

So, back to Stoddard’s tale of Rina and the Amazon Brand Registry. I’m having a difficult time believing that Amazon is really dropping the ball so completely on his friend. Either Rina has completely fallen through the cracks of Amazon’s legal department, or someone is not telling the whole story to someone else.

Either that, or I’m about to make a killing selling counterfeit blog posts on Amazon. Who’s in? Free two-day shipping!