Learn the Essentials About the Quality Control Exception to the First Sale Doctrine:
Effective Unauthorized Seller Removal and E-Commerce Channel Management
For ultimate brand protection on third-party seller platforms, you need a strong legal basis to effectively shut down unauthorized sellers and protect your brand, reputation, and intellectual property rights. In the United States, the most common claim used to protect brands is trademark infringement under the federal Lanham Act. For a successful trademark infringement claim to be made, the trademark owner must show that (1) they own the valid trademark, (2) the defendant used the trademark in commerce without the trademark owner’s authorization, and (3), the defendant’s unauthorized use of the trademark created a “likelihood of consumer confusion.”
However, as many brand owners who deal with relentless unauthorized sellers usurping their sales are away, often, trademark infringement claims easily overcome by the First Sale Doctrine. This doctrine provides strong protection to unauthorized sellers as it allows the resale of authentic products by anyone who has them in their legal possession.
While this may sound like a closed door for brands seeking to eliminate unauthorized sellers on Amazon (and other e-commerce platforms), there is good news for brands and brand owners – there are two major exceptions to the First Sale Doctrine which would allow you to take your brand protection to a whole new level. Unauthorized sellers are not provided any protections when they sell products that are “Materially Different” from manufacturer’s condition. What does the law consider to be a “material difference?” One way products are legally considered “Materially Different” from manufacturer’s condition is when they are sold without the quality controls and benefits that are provided with products sold through a brand’s authorized distribution channels. Thus, when there are differences in product quality controls between branded items sold by authorized versus unauthorized sellers, the First Sale Doctrine does not apply.
Product Quality Controls are a simple and effective way to protect your brand and trademark rights and stop unauthorized sellers from getting away with stealing your sales, infringing on your rights, and damaging your brand’s reputation. For this exception to the First Sale Doctrine, the trademark owner must show that they have (1) established legitimate quality control procedures, (2) follow these procedures, and (3) that the unauthorized seller does not follow these procedures, which has effectively decreased the value of the trademark and created a likelihood of consumer confusion.
What constitutes as “materially different” can vary, but generally if products from authorized sources comes with certain pre and post-sale benefits or services (such as a the quality controls discussed above and / or a warranty or guarantee), those products sold by unauthorized sellers, without those benefits are considered materially different from manufacturer’s condition.
Because the trademark owner is the sole owner of the trademark, when legitimate quality controls are properly implemented and documented, they have the ability to decide exactly who sells their products, where their products are sold, and the condition the products are sold in. This is because an unauthorized seller does not and cannot offer the quality controls that the trademark owner provides, the First Sale Doctrine does not apply.
How does the quality control exception lead to efficient and effective brand protection? By actively enforcing your intellectual property rights and working with the right law firm to implement and enforce these legal arguments, brands gain the tools needed go after unauthorized sellers who pose a threat to their business interests effectively, but also in line with the law. The lawfirm of Rosenbaum, Famularo & Segall, P.C. prides itself on its dedicated practice of “Brand Protection, the Right Way.”
The quality control exception to the First Sale Doctrine just makes sense. Brand owners should be able to control how their products are sold to protect the value and good will associated with their trademark and brand identity. Consumers appreciate and recognize the difference between a product sold by a reputable seller (who takes the time and care to package, ship and support the products they sell) and an unauthorized who simply “throws an item in the mail” to be delivered. Brand owners and e-commerce channel managers know that the customer experience is ruined when items arrive damaged or defective due to distribution leaks and unauthorized sales. If you would like to know more about how to legally remove unauthorized sellers from your brand’s listing on Amazon or other e-commerce platforms, please call 212-256-1109 or CLICK HERE to contact us today!
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