Brand Enforcement / 03.22.2019

District Court Deals Blow to Unauthorized Resellers, Confirming First Sale Doctrine Not Absolute

By Alex Jones

In ADG Concerns, Inc. v. Tsalevich LLC, the Northern District of California found that the defendant’s unauthorized resale of plaintiff ADG Concerns’ products amounted to trademark infringement and unfair competition. The decision is a win for manufacturers facing the growing problem of unauthorized resellers on sites like Amazon and eBay, and it confirms the First Sale Doctrine is not infallible.

The First Sale Doctrine generally states that buyers of goods may resell those products using the manufacturer’s trademarks, so long as the products sold are genuine. In the age of online sales, resellers rely on this doctrine to resell products without the authorization of the manufacturer and in many instances, in contravention of the manufacturer’s resale policies.

Fortunately, courts have held that the First Sale Doctrine does not apply where the products being sold by the reseller are “materially different” than those sold by the manufacturer. In ADG Concerns, the plaintiff produced evidence that its goods must be handled and sold with certain quality controls that the defendant did not adhere to. The Court found this amounted to a material difference in the products being sold, and as such, the defendant’s sale of plaintiff’s products constituted trademark infringement.

The ADG Concerns decision is important because it limits unauthorized resellers’ reliance on the First Sale Doctrine to justify their conduct. It also serves as a reminder to manufacturers of the importance of implementing quality controls for their products. Quality controls can relate to the inspection of goods upon receipt, how the goods are stored, and how the goods are ultimately shipped to the consumers. Manufacturers should take proactive steps to implement quality controls and require all their resellers to abide by them.

For additional information on the First Sale Doctrine or assistance with combating unauthorized resellers, contact KJK’s Brand Enforcement Group.

 

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