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Stop Price Gouging Using Trademark Law? 3M Says Yes and Court Agrees



In early April, 3M filed a lawsuit against Performance Supply LLC of New Jersey for violating trademark law because they were reselling N95 masks they had purchased from 3M at more than a 500% markup (3M Co. v. Performance Supply LLC, SDNY No. 1:20-cv-0249, 04/10/20.)

Normally, when someone buys products from a manufacturer, they can resell them without trademark issues under the “first-sale doctrine.” Imagine buying a pair of Nikes at a store not owned by Nike, and then Nike suing the store. What? No store would be in business except those that exclusively sold their own products!

In this case, 3M does not allege that Performance Supply was using 3M’s marks on Performance Supply’s masks. 3M’s problem lies in Performance Supply’s behavior. Performance Supply provided a quote to New York City that had the 3M trademarks used prominently throughout, referred to 3M’s headquarters in Minnesota instead of Performance Supply’s headquarters in New Jersey, and even stated that the offer acceptance was at 3M’s discretion. 3M had no knowledge of the quote.

Why sue under trademark law? 3M believes that this price gouging damages 3M’s marks and company reputation because it implies that 3M agrees with the prices. They allege that Performance Supply deliberately misled NYC by using 3M’s marks in the quote, referring to 3M’s address, and making the statement about 3M’s discretion on the sale. 3M, the largest producer of N95 masks, stated that they have not and do not intend to raise the prices of their masks during the pandemic, and definitely not by 500%.

On April 24, US District Court Judge Preska granted a temporary restraining order against Performance Supply. Judge Preska also ordered Performance Supply to explain by April 30 why the injunction should not become a longer-term injunction, and ordered them to appear before her on May 4th. 3M has filed similar suits in California, Florida, and Wisconsin, and has moved for an injunction in California. The NY ruling may influence those cases, with no rulings made yet.

These cases have specific circumstances related to bad acts in bad times. Trademark owners will not be suing resellers at random, so resellers will more than likely not run the risk of trademark infringement suits because of this case. However, if you own marks and resellers use your marks and your reputation to make sales by behaving badly, you may be able to stop them.

As with many situations in the law, outcomes will depend on the particular facts and circumstances of the case. If you have concerns about trademarks, one of our experienced trademark attorneys can help you navigate the complexities.

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