Unauthorized online resellers are a growing brand protection problem for a manufacturers, particularly as consumers continue to do more and more of their shopping on sites like Amazon and eBay. Unauthorized resellers purchase products in bulk from third-party sellers (generally at discounted prices) and then resell them without the manufacturer’s authorization or consent. These resellers harm a company’s brand, and they often violate a company’s resale policies, such as its minimum advertised price (MAP) policy.
Unauthorized resellers can be stopped – learn more in Part 1 and Part 2 of this series – but one major problem in doing so is simply identifying the reseller. Resellers hide behind fictitious names, DBAs (“doing business as”) or Amazon storefronts.
Yet manufacturers are not out luck. Here are three ways to discover these resellers’ identities.
Internet Searches This may be obvious, but the first step in identifying resellers is to perform a simple Google search on the reseller’s name and/or storefront. Sometimes the reseller name will be linked to a certain company or is connected to that reseller’s own website. This makes identifying the reseller easy. Manufacturers can also work with an attorney to conduct public records searches, which pull data from all Secretary of States’ websites and reveal any fictitious or trade name registrations. Spending time scouring the Internet can often be the most effective and efficient way to identify a reseller; however, it is far from a foolproof method.
Test Buys When Internet searches fail, the next step is to perform a test buy from that reseller. By purchasing a product from the reseller, manufacturers can secure a return address for the company. This provides a valid address in order to begin the enforcement or take-down process against that reseller, such as a cease-and-desist letter. This method has limitations. For example, this is ineffective for resellers on Amazon whose sales are “fulfilled by Amazon.”
DMCA Subpoenas The final step in identifying a reseller is issuing a subpoena under the Digital Millennium Copyright Act (DMCA). Under Section 512(h) of the DMCA, a copyright holder “may request the clerk of any United States District Court to issue a subpoena to a service provider for identification of an alleged infringer.” This approach can be used when an unauthorized reseller is using a company’s images to sell products on Amazon or eBay. In this scenario, a DMCA subpoena can be issued to obtain the reseller’s information. The main drawback of this method is that it can take time.
If you need assistance with identifying unauthorized resellers or general questions related to unauthorized resellers, please contact KJK’s Brand Protection team:
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In Part 1 of this series, we looked at the importance of registering and protecting your trademarks as a means of warding off unauthorized resellers of your products. While trademark infringement claims are an important tool in fighting unauthorized resellers, entering into and executing strategic, enforceable contracts with your true authorized sellers are also key to stopping unauthorized resellers.
Authorized reseller contracts are so important because:
- They ensure sales policy compliance. These contracts ensure that resellers comply with a company’s sales policies, such as minimum advertised price (MAP) policies. This contractually binds these resellers and establishes a breach of contract claim against any reseller that departs from the contractual terms.
- They help cut off supply to unauthorized resellers. A well-drafted reseller contract can actually be used to stop unauthorized resellers. Generally, unauthorized resellers purchase products for resale through a company’s network of authorized resellers. In order to cut off supply to unauthorized resellers, the reseller contracts should include a provision that prohibits authorized resellers from making bulk sales to buyers whom they suspect are unauthorized resellers. Not only does this limit supply, but also, once a business identifies an unauthorized reseller, it can issue a cease-and-desist letter to that unauthorized reseller putting it on notice of the reseller’s restrictions against bulk sales. After notice is given, any further bulk purchases will give rise to a claim for tortious interference with a contract.
In effect, reseller contracts bind true resellers to certain selling policies, help limit the supply of products available to unauthorized resellers, and can set up claims for tortious interference against unauthorized resellers.
Finally, reseller contracts are only effective if they are enforced. Therefore, it is crucial for businesses to ensure that each authorized seller agrees to and executes a reseller contract. Companies must then routinely monitor the conduct of their resellers and take action when necessary.