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Enforcing Trademarks in Online Marketplaces

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This article was originally published on LinkedIn.

It may not be as straightforward as you’d think

Many business owners choose to sell products primarily, or even exclusively, in online marketplaces such as Amazon or Alibaba. Indeed, given the current quarantines, physical distancing, and temporary closures of businesses due to the COVID-19 pandemic, having an online presence may be crucial to the survival of a retailer.

Undeniably, there are significant advantages for selling through an online marketplace, especially for smaller businesses. For example, Amazon provides enormous visibility, templates for product pages, and logistical services, such as warehousing products, fulfilling orders, and processing payments from consumers. Accordingly, a business can offer, sell, and deliver its products to customers with relative ease.

But what happens if products appear on an online marketplace that infringe the trademarks of the business owner? The trademark owner might prefer to enforce their rights against the online marketplace itself. There are several reasons for this.

First, it may be more likely that the online marketplace would be subject to a lawsuit in the United States. Amazon and Alibaba, for example, are based in the U.S. or have a significant physical presence within the U.S., making it likely that such entities could be sued in the United States. The sellers, by contrast, may not have any domestic presence. While such foreign sellers may be subject to an exclusion order from the International Trade Commission, those sellers perhaps could not be easily sued in U.S. courts.

The biggest reason, though, for enforcing trademark rights against the online marketplace may be to avoid removing one seller from the online marketplace only to have another seller pop up in its place. In that situation, it would be more efficient to enforce the trademark rights with the entity that provided the marketplace for infringing use.

This article explores the methods of trademarks in online marketplaces. In short, the best approach may be to inform the online marketplace about the infringement by way of a letter or the like, demand that the online marketplace investigate the matter and take proper remedial action, and then monitor the online marketplace to confirm that it is taking the demanded actions. If the online marketplace does not meet the demands, it might be liable for trademark infringement along with the third-party seller. This is explained in more detail in the remainder of this article.

What is a trademark and what is trademark infringement?

A trademark is often a brand name by itself (e.g. STALK MARKET) or a logo that includes the brand name along with design elements, such as:

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These are what most people think of as trademarks. But trademarks can also be colors, sounds, packaging design, or product design, among other things. So, a trademark is some word, symbol, or other device that identifies one business’s products and distinguishes them from the products of another business.

Determining infringement of a trademark is a complex topic and depends on particular circumstances. In simple terms, though, it means that another trademark, when used in connection with a product, is so similar to your trademark, as it is used with your product, that consumers would likely be confused, mistaken, or deceived. So, the other trademark and product does not need to be identical to your trademark and product. Instead, they just need to be confusingly similar.

Also, someone could be infringing your trademark themselves, and this is known as direct infringement. Or someone could be encouraging or assisting another to directly infringe your trademark. This is known as contributory infringement. That distinction between direct and contributory infringement is important for this discussion.

A direct infringement theory may not apply to an online marketplace:

Typically, a person is liable for direct trademark infringement if that person uses in commerce a confusingly similar trademark. So, you might expect that, if a confusingly similar trademark is being used to sell a similar product on Amazon, for example, then Amazon would be liable for trademark infringement. It turns out, though, that the answer may be more complicated. Indeed, the operator of the online marketplace might not be liable at all unless particular steps are taken by the trademark owner.

This is because, contrary to the everyday meaning of the term “sell,” the operators of the online marketplaces often do not sell many of the products that are purchased by consumers through those marketplaces.

The reason for that is the online marketplaces often do not take title to the products. In other words, they have not purchased the products from a manufacturer or distributor to be resold, meaning that they do not own the products that are eventually sold to a consumer. This is true even if the online marketplace fulfills orders by warehousing the products and then boxing and shipping the products to consumers who have ordered them. Again, the online marketplace, does not have title to the products—it does not actually own the products. Instead, the online marketplace is viewed as a transactional intermediary between the seller and the consumer.

Also, while the online marketplace may provide a template for pages that display products to consumers, the content for those pages is provided by the third-party seller. That content usually includes the price of the product, information describing the product, and pictures and videos of the product.

As a result, the online marketplace may not have “sold” the product in the legal sense of that word. If so, then the online marketplace might not be liable for direct infringement of your trademark. (We will get to contributory infringement below.) Of course, if the product is actually sold by the online marketplace, then the online marketplace could be liable for direct trademark infringement. This could arise when the product is, for example, indicated as being “sold by Amazon.com.” Such products, however, are few on Amazon and may be nonexistent on Alibaba.

If not for direct infringement, the online marketplace could be liable for contributory infringement:

As noted above, contributory infringement is when someone encourages or assists another to directly infringe a trademark. Accordingly, contributory infringement requires that someone actually be directly infringing the trademark, too.

In the Ninth Circuit, to succeed on a claim of contributory trademark infringement, a plaintiff has to establish that the defendant continued to provide services to a third party (that is, not the plaintiff or the defendant) who the defendant knew or had reason to know was engaging in trademark infringement. (The “Ninth Circuit” is the U.S. Court of Appeals for the Ninth Circuit, the federal regional court of appeals that covers nine western states, including California, Oregon, and Washington). Where the defendant provides services rather than a physical product, the plaintiff also must establish that the defendant had direct control and monitoring of the instrumentality used by the third party to infringe the plaintiff’s trademark.

In the context of an online marketplace, this might mean that the owner of the intellectual property would need to show that the operator of the online marketplace was informed about the infringement yet failed to take remedial action. For example, the owner of the intellectual property may send a demand letter to the online marketplace, specifically identifying the listing or conduct that infringes. Depending on the circumstances, adequate remedial measures taken by the online marketplace might include notifying the infringing seller of the allegations, removing the infringing listing in response to the demands of the IP owner, terminating the infringer’s account with the online marketplace, or simply making a full, good-faith investigation of the allegations. If the online marketplace fails to make an adequate investigation or take appropriate remedial steps, that may be grounds for contributory liability.

Accordingly, the online marketplace must be aware of the infringement (likely with some level of detail) and fail to fully investigate the allegations or adequately curb the infringement.

Conclusion regarding trademark infringement in online marketplaces:

Accordingly, if the online marketplace is the actual seller of the product (e.g., “sold by Amazon.com”), then the online marketplace could be liable directly for the trademark infringement. Otherwise, the owner of the trademark rights may need to take additional action and establish that the online marketplace is contributorily liable for the trademark infringement. This is often done by sending a demand letter to the online marketplace that identifies the listing or conduct that infringes and demanding that the online marketplace take adequate measures in response to the demand letter.

Finally, the discussion above, while lengthy, is a simplification of the issues and relies on generalities. Also, legal standards often evolve and sometimes even reverse course. Accordingly, this article is not a replacement for competent legal advice. Please consult an experienced intellectual property attorney about your particular circumstances.