IS IT EVEN POSSIBLE TO REMOVE UNAUTHORIZED SELLERS?

Unauthorized Sellers can feel like real slippery fish. You use your best nets, your sharpest hooks, and yet you just can’t catch or keep up with this (for lack of a better term) invasive species. But it isn’t time to throw in your rod and reel yet! We might be making light with the reference, but know that we aren’t trying to play down a very real and very difficult predicament most product-based brands ultimately find themselves in.

Like any professional fishermen would tell you, patience is key and so is doing your research. We’ve digested this complicated problem down to three main topics (First Sale Doctrine, Seller Databases, and Enforcement)—the associated hurdles to overcome and how to start getting better fishing (and catching) equipment. 🎣

WHAT IS FIRST SALE DOCTRINE?

The First Sale Doctrine, in simple terms, gives the right of reselling to any person who is selling legitimately purchased products (whether authorized by the brand or not). This is kind of the yard sale idea – as long as you bought it, it’s yours and you can sell it for whatever you want/whenever you want/however you want. That’s fine when it’s your Aunty Edna’s collection of souvenir spoons but becomes a big problem when applied to eCommerce resellers who undermine MAP Policies and erode brand trust.

This part of copyright and trademark law was created long before the rise of e-commerce and marketplaces like Amazon. Complications arise for many brand protection strategies that do not understand this legal doctrine and put in the legal leg work to combat it. Over the last 10-15 years, the courts have established several notable exceptions to the first-sale doctrine that give more power to brands to protect distribution. In order to effectively remove sellers, the Brand must create a legal foundation consisting of clearly written resale policies and procedures that help establish Material Differences between the authorized product and unauthorized products.

What is Material Difference?

The Material Difference exception is one of the biggest legal pathways brands can pursue to protect against unauthorized sellers causing price erosion. A Material Difference means that there is some sort of noticeable variation between the product sold to a consumer by a reseller, and the same product when it was sent out by the manufacturer.

The difference must be to such an extent that it will create “consumer confusion” as to the source or brand of the product. These differences can be physical (lack of manufacturer packaging) or non-physical (warranty, quality control standards, customer service support). Therefore, an Amazon merchant can sell products that are authentic but still materially different from the products sold by the manufacturer and may be liable for intellectual property infringement because their products will not be considered genuine under the law.

How to Create Material Difference?

Combatting the first sale doctrine through Material Difference is done by creating legal policies and procedures that clearly outline the criteria and expectations around quality control standards, customer support, product recall procedures, and applicability of consumer warranties. Additionally, these documents must be posted and accessible to the public. We suggest creating a separate page on your website that you can direct sellers to in your later enforcement letters. We do know that this process can sound daunting, but if you’re afraid your team doesn’t have the know-how (or time) our legal partners are here to help if you need it. You can always schedule a call.

Once you have the legal foundation laid, you can move on to hurdles two and three: Seller Data and Enforcement.

CONTACTING UNAUTHORIZED SELLERS: SELLER DATA

We’ll start with the bad news (but you should know by now we’ll have good news after)—While there are many ways to contact a seller and notify them of their infringement, most are ineffective at actually getting the seller off of a listing. On Amazon’s marketplace, for instance, this can be done through the automated messaging system. In our extensive experience handling seller removal, this is an extremely ineffective way of communicating with sellers. Why?

• Beginning in late 2019, Amazon updated its messaging algorithms to block direct seller messages if you have not purchased a product directly from the seller(s).
• In addition, Amazon began filtering out messages containing cease and desist language.
• In the unlikely event you are able to get a message through to 3rd party sellers, many sellers have learned to ignore these messages because they are aware of the First Sales Doctrine and believe there is no escalation that can be done.

The good news is Amazon began posting seller contact information beginning September 2020 on the seller’s profile page, which means you can take communications off of Amazon and direct to the seller. This is a much better route to take to contact sellers, but we do want to note—while Amazon started providing this in this effort to become more transparent, they also let sellers know two months before publishing, which led to many sellers altering their data to P.O. Box addresses or using false information.

So while this has been a positive change for brands combatting unauthorized sellers, getting accurate information can still be a challenge for some sellers.

If you find this becomes a stumbling block, know that there are resources out there to help. We have built our database of close to 500,000 Amazon sellers over the last several years through in-depth investigations and by having our legal counsel subpoena Amazon on behalf of brands. This has allowed us to create historical records of sellers and compare changes in contact information over time (i.e. we can go back to when they listed their real contact location 😉). This database has been built into our Seller Insight platform to give enforcement teams easy access to the most accurate data.

This investigative (and data accumulation) process is crucial because just as the legal process builds into the investigation process, investigations build directly into the effectiveness of the enforcement which is hurdle three.

ENFORCING BRAND PROTECTION

Currently, the most popular enforcement strategy, which we mentioned above, is focused on automated messaging (probably because it is easier). However, we have found direct mail to be much more effective. The key to this strategy is having the true addresses of sellers, and consistently mailing them notices of their violation. Escalation in this type of enforcement notices typically follow these steps:

1. The first notice is less threatening but clearly communicates to sellers that they are not allowed to sell on the platform.
   • Starting softly with an inviting approach opens an opportunity for dialog with sellers that can lead to valuable information for a brand, ie: Where did they get your product? How much of it do they have? Would they actually be a good seller partner now that they know your seller policies?
2. A second notice focuses on educating sellers as to why they are not protected by the First Sale Doctrine and are infringing on trademark law.
   • It details clear examples of the Material Differences established and directs them to view the resale policies posted on the brand’s website. The notice also communicates that non-compliance escalates the issue and that they could face legal action should they continue to ignore your messages. We find most sellers will concede at this point because nobody wants a lawsuit—most resellers recognize it is easier for them to move on to selling a different brand’s products.
   • They have 2 weeks from the original notice to respond before this second notice is sent.
3. Three strikes and they’re out—this is the last notice informing the seller that non-compliance at this stage constitutes willful trademark infringement, and additional legal action is imminent should they continue to sell.
   • Following this final notice from your company, we suggest having legal counsel directly send follow-up legal notices to show that you are serious about your previous claims. We find there are very few instances where it makes sense to bring a lawsuit against an infringing seller, but the goal is to have implemented the right legal strategies and steps to make a successful case should it be necessary.
4. The steps outlined above have proved highly effective in getting thousands of sellers to remove their listings, however, one last common step is negotiating with sellers concerning the removal of their products.
   • Reasonable negotiation is the most effective strategy for sellers who respond to your notices but may have a lot to lose with just totally removing their inventory. This often takes the form of a product buy-back agreement or granting a specific sell-through period on the marketplace in exchange for them agreeing to not sell your products in the future.

And now you have caught your fish.

It is completely possible to remove unauthorized resellers, but patience and consistency are key to any brand protection strategy. The number one takeaway we want you to get here is that investing in a legal foundation is paramount—a Map Policy alone won’t protect you nor will sending automated messages with no judicial teeth (to combat the First Sale Doctrine you have to have Material Difference established). If it feels like all of this has you drinking through a fire hydrant and you need a helping hand in creating a working legal foundation (along with access to a database of contact information that will actual get you results), as always, we’ve got your back.