Brands Take Their Frustrations with Marketplaces to the Courts
By Denise Mosteller & Jeremiah A. Pastrick
For those of you engaged in a constant struggle to uncover and address counterfeit goods on Amazon, as well as other online marketplaces, the avoidance of liability by the owners of the channels themselves can be endlessly frustrating. Thus far, marketplace operators have been almost entirely immune from responsibility for not only advertisements and transactions that transpire on their platforms (e.g. eBay) but also, in set-ups like Amazon, for the goods themselves, which marketplace operators take possession of, store, ship and collect fees or commissions on these activities. Despite this engagement in essential elements of these online transactions, marketplace operators have taken a position that they are not “selling” goods placed on their platforms (and in their warehouses) by third parties and are, instead, simply passive providers of a virtual “town square” where buyers and sellers come together to do business with one another.
The mindset of these virtual marketplace owners and the legal insulation that it has created thus far recalls a corollary from the analog days of yore – flea markets, which were often hotbeds of counterfeiting in a pre-internet economy and whose owners typically avoided liability for what transpired on their premises through burden-shifting lease agreements (today’s seller agreements) and through a head-in-the-sand mentality toward the economic activity that their forums were enabling. Bringing some of the most prolific “real world” markets to heel and curtailing the counterfeiting activity that transpired there was achieved, in part, by some intrepid crusaders who fought to impose third-party (vicarious) liability on flea market owners, which brought their heads out of the sand and reformed their attitudes around their ability to control the activity that took place under the roofs that they owned.
In contrast to flea markets, however, online marketplaces are not simply fringe economic players. They are an enormous, ever-increasing hub of today’s consumer activity. The legitimate goods that are sold online certainly far outnumber the fake, faulty and diverted and that fact has created a situation in which virtual marketplaces are often a brand’s best friend and its worst enemy. For a few brands, despite the revenue earned via marketplace channels, the lack of cooperation that brands often encounter in policing online markets has tipped the friend/foe balance between brands and marketplaces into an adversarial situation.
This article will provide an overview of a few cases currently percolating through the court system which are intended to recalibrate the relationship between brand-owners and operators of virtual marketplaces.
Oberdorf v. Amazon
This is a products liability case involving a retractable dog leash that snapped, recoiled and, consequently, blinded the leash holder (Heather Oberdorf) in one eye. The leash in question was sold to Mrs. Oberdorf by a third-party Amazon seller – The Furry Gang. In contrast to an intellectual property claim such as trademark or patent infringement, Mrs. Oberdorf’s case was rooted in strict products liability. At trial, Mrs. Oberdorf lost her case on the familiar grounds Amazon advances that it is not a “seller”. However, Mrs. Oberdorf appealed that initial ruling and the appellate court came to a different conclusion stating “Pennsylvania products liability law specifically limits strict products liability to “sellers” of products. Amazon relies on this limitation as its defense, claiming that it is not a “seller” because it merely provides an online marketplace for products sold by third-party vendors. We disagree.”
This ruling was handed down on July 3, 2019. Again, while not directly a counterfeiting or infringement case the rationale here clearly affirms what many consumers and brand owners already know all-too-well – that Amazon is deeply connected to the products that are sold on its marketplace and, correspondingly, should also be held accountable for those products.
Williams-Sonoma v. Amazon
Closer to concerns about intellectual property misuse and infringement in particular, a case filed against Amazon by Williams-Sonoma is proceeding in California and is aimed at addressing Amazon’s culpability for sales of unauthorized products on the Amazon marketplace that “cultivate an incorrect impression that sales on Amazon.com are authorized by Williams-Sonoma and that a reasonably prudent consumer is likely to be confused”. Currently, the case is mired in the typical back and forth procedural activity that one would expect to accompany a case like this. But, the initial running, along with a few commentaries, can be read below.
Williams-Sonoma v. Amazon Mtn to Dismiss
Patagonia v. Kimberly McHugh
Finally, traveling even further into the thicket of problems that may sound familiar to many brands, Patagonia has recently filed a lawsuit against a 3rd party Amazon seller for selling, what appears to be, genuine Patagonia products in a manner that makes the seller appear like an authorized Patagonia seller when, in fact, she is not. The Defendant in this case, Ms. McHugh, operated a storefront on Amazon selling a wide range of Patagonia products at prices that undercut Patagonia’s MAP pricing for authorized resellers. Ms. McHugh also used a variety of Patagonia IP – including trademarks and copyrights – as part of her Amazon storefront. In its complaint against Ms. McHugh, Patagonia makes direct allegations about her unauthorized use of Patagonia IP as well as “implying she is a ready source of inventory” – all of which created a potentially confusing message to consumers. Additionally, Patagonia alleged that Ms. McHugh’s conduct was harmful to its business reputation and contractual relationships with authorized vendors. Currently, this matter appears to be headed toward a swift victory for Patagonia in large part to due to Ms. McHugh’s failure to respond to Patagonia’s complaint. Patagonia moved for a default judgment against Ms. McHugh in late 2019. However, this case serves a potential template for actions against unauthorized vendors in terms of: (1) the types of internal policies and procedures that set a strong case against unauthorized sellers; (2) the claims available against such sellers; and (3) the types of information and evidence gathering that are advisable in advance of filing such claims.
As part of its commitment to keeping its members informed and up-to-date on compelling IP-related matters, AKTI’s Anti-Counterfeiting Committee will continue to monitor these cases closely and provide updates and new information here. Should you have further questions or commentary on these, or any other issues related to anti-counterfeiting and IP protection, AKTI’s Anti-Counterfeiting Committee members are available for guidance and assistance. Please email the Executive Director or call (307) 587-8296.