Trademark Bullying by Big Corporations
By: Nicole Kulaga, Paralegal, AmazonSellerslawyer.com
Larger Corporations take extraordinary measures to protect their intellectual property rights, some of these efforts being unethical and illegal. The Patent and Trademark Office defines a trademark bully as “a trademark owner that uses its trademark rights to harass and intimidate another business beyond what the law might be reasonably interpreted to allow.” These “bullies” take their preventative measures far beyond the threat of litigation. They will file suit against anyone they deem to be their competition, of whether or not their allegations hold merit. Litigation requires a devotion of time, money, and effort; and many competitors do not have the resources to fight. However, these corporations can afford the financial sacrifice and time spent. Companies are threatening litigation not just for actual infringement, but in situations where logos may be vaguely similar. Companies are also filing suit when they discover a smaller company is selling their product, but at a lower cost. The re-seller is selling an authentic product, but the company does not care. They want them removed, and they will attempt to eliminate their competition at any cost whether or not they are actually committing trademark infringement. This is trademark bullying, it is unethical, and it is happening every day.
What is a trademark and how are companies abusing its power?
A trademark is “a mark used to indicate the maker, owner or seller of an article of merchandise, and includes, among other things, any name of a person, or corporation, or any letter, word, device, emblem, figure, seal, stamp, diagram, brand, wrapper, ticket, stopper, label, or other mark, lawfully adopted by him, and usually affixed to an article of merchandise to denote that the same was imported, manufactured, produced, sold, compounded, bottled, packed or otherwise prepared by him; and also a signature or mark, used or commonly placed by a painter, sculptor or other artist, upon a painting, drawing, engraving, statute or other work of art, to indicate that the same was designed or executed by him.” NYS CLS § 33.01.
Larger companies can afford to obtain the legal protection needed to ensure their competition does not steal their logos. Their trademarks are protected, and they have a system in place to assure that there are not any companies that could possibly infringe on that right. Teams are set in place to search for infringement on websites, online platforms, and stores alike. Some companies sell popular items that are easy to counterfeit or copy. They know it is not possible to detect all infringing parties, so they will choose their battles wisely. Say for example, a corporation discovers there are three companies that may be infringing on their rights. They will most likely attack the smallest company first. They will either file suit, or threaten to file suit, which may be enough to scare a small business with few resources from ever selling that product again. If these claims where legitimate, then there is no bullying; the point of obtaining a trademark is to protect your exclusive rights to your mark. Unfortunately, many of these allegations are merit-less and are an abuse of power. The smaller company suffers because they cannot afford to defend themselves in court against the larger corporation. However, some companies will refuse to lie over and admit defeat. In fact, trademark bullying has been used as a defense in recent Intellectual Property litigation. Essentially, companies are left with the choice to accept defeat from illegitimate, overreaching, complaints and suffer the financial burden of ceasing to sell the alleged product, or take the financial sacrifice and litigate in order to defend these matters in court.
How can a company defend themselves against Trademark Bullying?
A company who wishes to fight against trademark bullying will first need to establish that they did not infringe on anyone’s intellectual property rights. If they are selling the same product, but at a lower cost, they will need to provide sufficiently detailed invoices that prove they are selling an authentic product. Companies do not like unauthorized re sellers because they will often sell the product at an undesirable low cost. However, unless the company is a party to a Minimum Advertising Price (MAP) agreement, these companies have done nothing legally wrong as they were not obligated to sell at a higher price and the products themselves are authentic. In such a case, any threat of litigation alleging IP infringement is trademark bullying. This is because resale of certain products is protected by 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.” See, Dan-Foam A/S v. Brand Named Beds, LLC, 500 F.Supp.2d 296, 317 (S.D.N.Y. 2007). A company will then need to ensure that they do not fall under the exceptions to this doctrine.
The first exception is that there must be a material difference between an unauthorized good and an authorized good that are being sold under the same trademark. This difference cannot create “confusion over the source of the product and result in loss of [the trademark owner’s] good will.” Original Appalachian Artworks, Inc. v. Granada Electronics, Inc., 816 F.2d 68, 73 (2d Cir. N.Y. 1987).
The second exception is the “quality control” exception. This exception follows the logic that, “[o]ne of the most valuable and important protections afforded” to a trademark holder under federal law “is the right to control the quality of the goods manufactured and sold under the holder’s trademark.” El Greco Leather Prods. Co. v. Shoe World, Inc., 806 F.2d 392, 395 (2nd Cir. 1986).
However, many companies have made these arguments to the larger companies to no avail. The letters and emails defending their company were left without a response. Large corporations want the smaller business to seize the sale of the alleged product; they are not interested in reasoning with the company. Unfortunately for many of the small companies, they will need to hire an attorney before they receive a response. The letters and emails are taken more seriously when they are addressed from an attorney. The small company in this situation has every right to be selling the certain product and should not be punished for doing so.
The attorney will need to remind the company that it is their burden to prove trademark infringement. In order to be successful, the plaintiff must show that use of a mark has created a likelihood of confusion, mistake or deception about the origin of the defendant’s goods or services; otherwise there was no trademark infringement. The resale of authentic products does not confuse customers about the origin of an authentic product, and therefore is not an infringement. Where customers received the product they expected, there is no damage to the goodwill or reputation of a trademark owner’s mark.
What are the consequences of Trademark Bullying?
First and foremost, if a company is filing suit for trademark infringement that goes beyond their scope of protection, the defendant will be able to use trademark bullying as a defense. This defense, provided with evidence of the authenticity of a product will likely end in summary judgment in favor of a defendant. This is because the plaintiff had the burden of proof that an infringement occurred and the defendant has already proven the authenticity of the product. Furthermore, a defendant may also allege defamation, Sherman Act violations, antitrust and monopolistic conduct, and unfair business practices due to these allegations depending on the severity of the trademark bullying. Smaller businesses, while they do not have the same power as a large multi-million dollar corporation, can choose to fight back in court. Where the small business suffered, they may have lost business, their reputation, and money due to trademark bullying. They are entitled to compensation, and most importantly, they are entitled to sell their product despite the overreaching tactics of trademark bullies.