Amazon Seller Suspensions: When the First Sale Doctrine Does Not Apply
by Robert Segall, on June 7, 2017
In this guest post, Robert Segall of Amazon Sellers Lawyer shares information regarding what sellers need to know when it comes to the first sale doctrine.
The first sale doctrine provides that anyone who purchases a branded item has a right to resell that item in an unchanged state. This means that Amazon sellers who do no more than stock, display and resell a genuine article bearing a true mark are generally protected from claims of intellectual property infringement and thus seller suspensions by the essence of the first sale doctrine. Essentially, once a product is legally purchased, the first sale doctrine gives the owner the right to sell that product to whomever they wish.
However, there are two exceptions to the application of the first sale doctrine that Amazon sellers must be aware of: Material Differences and Consumer Confusion.
What is a Material Difference?
A material difference means that there is some sort of noticeable difference between the product sold and the same product in manufacturer's condition. The difference must be to such an extent that it will create “consumer confusion” as to the source or brand of the product. Therefore, an Amazon seller who is selling authentic products that still are somehow materially different from manufacturer’s condition (lack of manufacturer packaging, warranty, etc.) may be liable for intellectual property infringement because their products will not be considered genuine under the law. Multiple intellectual property complaints put Amazon accounts at a high risk of suspension.
The phrase “Material Difference” seems to mean only what the product looks like or other basic characteristics. However, certain product characteristics like quality control standards, money back guarantees and warranties must be offered and implemented by Amazon sellers for products to be considered genuine. For example, at Amazon Sellers Lawyer, our team reaches out to intellectual property rights owners on behalf of our clients almost every day to help them get complaints withdrawn and fight their account suspensions. However, even if the products you are selling are authentic, and even if you make purchases directly from an authorized distributor, product traits like quality control measures and satisfaction guarantees can be considered material differences that void the application of the First Sale Doctrine.
Quality Control Standards
Certain brands or manufacturers establish quality control standards, which their suppliers and distributors are required to maintain if they wish to continue selling the manufacturer’s products. Quality control is a procedure or set of procedures intended to make sure that products will meet the requirements of customers.
Amazon sellers must pay attention when sourcing their products and ensure that the brands they sell do not have quality control standards in place. Why? Because, per federal courts throughout the United States, it is well recognized that goods are “materially different” and thus inauthentic if they fail to meet the trademark holder’s quality control standards.
How are Amazon Sellers Affected?
While this exception to the first sale doctrine is not new law, its application has become more relevant to Amazon sellers as infringement complaints (both valid and baseless) have become a regularity on the Amazon platform. For example, sellers who fail to consider quality control and money back guarantees when sourcing their products may be at a greater risk of losing their business due to infringement complaints in the future.
At Amazon Sellers Lawyer, we have seen what can happen to sellers when they are unaware of the law. One of our clients sells footwear on the Amazon platform, and is quite successful (generating over $200,000 in sales per month). Unfortunately, our client listed a certain brand that, unknown to them, offered a “30-day comfort guarantee” and required adherence to quality control standards for authorized distributors. The brand owner ultimately filed an infringement complaint against our client.
Our client was lucky, and this issue did not ultimately cause them to end up in court defending their business practices. Although our client made a mistake, at Amazon Sellers Lawyer, we explain the law so that it makes sense to everyone. Once our client understood the seriousness of their actions, we were able to meet with the rights owner and reach an agreement and arrange for the removal of our client’s complaint.
Intellectual Property Law Matters
At the end of the day, all Amazon sellers have two things in common: they want to make money, and they want to avoid suspensions. To do both, sellers must remain vigilant and attentive to trends both on the Amazon platform and in regards to relevant laws. Intellectual property issues can be complex, so it is important to make sure that you and your business have at least a basic understanding of the law. Amazon merchants who sell brand name products must comply with the first sale doctrine, which means maintaining manufacturer condition including warranties and guaranties.