By Cliff Ennico
Two e-mails I received this week deal with a recent phenomenon in e-commerce – the so-called “private labeling” of merchandise on Amazon, eBay and other online venues.
Here’s how it works: a seller buys merchandise in bulk from a manufacturer (usually in China or elsewhere in Asia). The merchandise is not trademarked or branded in any way. The seller then places its own trademark or brand on the merchandise and sells it online. Sometimes the seller makes changes to the merchandise, but most often it merely puts it in its own packaging.
“Private labeling” is nothing new. Go to your neighborhood CVS or Walgreens pharmacy and head for the mouthwash aisle. You will see Listerine® and other popular brands, and right next to them will be CVS’ or Walgreens’ own brand, for a lot less money. Guess what? The “generic” brand is exactly the same as Listerine®, although it bears the “private label” of CVS or Walgreen.
“Private labeling” with the manufacturer’s consent is okay, but it seems some sellers on eBay and Amazon are taking matters way out of hand. If merchandise is trademarked or branded by the manufacturer or somebody else, you cannot “private label” it unless you get their written permission. Slapping your name on somebody else’s stuff without their permission is trademark infringement, and it’s illegal.
The first e-mail I received from an overseas manufacturer complaining that a number of Amazon sellers were selling his merchandise in the United States without permission. The manufacturer had not registered its trademark in this country, and was concerned that one of the resellers might do so, thereby denying his company the right to use its own marks. The manufacturer was also concerned that its consumer warranties do not extend to sales outside of its home country, and that U.S. customers might be misled into thinking they have the same protections as authorized buyers.
First of all, this manufacturer needs to find out how the U.S. seller is getting hold of his (presumably genuine) merchandise. I’m assuming the seller is engaging in “retail arbitrage” – buying the merchandise in bulk overseas, shipping it here, and then selling it at a higher price – as many eBay and Amazon sellers do.
As interpreted by the U.S. Supreme Court, the “first sale” doctrine in trademark law says you can do anything you like with merchandise once you buy and pay for it. If the overseas purchases were legal, the reseller (I’m sad to say) has every right to sell the merchandise in the U.S. What this manufacturer needs to do is hire a U.S. trademark lawyer and register its trademarks here as quickly as possible to protect its brand image. Then, contact the sellers, explain that you will not extend your warranties and other customer benefits to their U.S. customers, and require them to disclose that fact in their online listings.
If, on the other hand, the seller is counterfeiting the overseas manufacturer’s merchandise (making it here or in China and then slapping their own name on it), that’s a whole different story. My first call here would be to the nearest Federal Bureau of Investigation (FBI) office.
The second e-mail deals with almost exactly the opposite situation. The manufacturer in this case has learned that sellers on Amazon are selling their own, or somebody else’s merchandise, under the manufacturer’s trademark without permission. The merchandise is not counterfeit, but resembles merchandise offered by the manufacturer.
Using someone else’s trademark on your own or a third party’s merchandise is trademark infringement, pure and simple. If the merchandise is of a type not offered by the manufacturer (for example, using a software company’s trademark on cheap toilet paper), it is “trademark dilution”, also illegal. This manufacturer needs to hire a lawyer and send some nasty “cease and desist letters” to these people.
Both of these manufacturers should contact eBay and Amazon and notify them of the trademark infringement happening on their sites, but I wouldn’t hold my breath waiting for them to take action. These platforms are notoriously reluctant to get involved in disputes between sellers, and the federal courts have consistently said they are not accountable for what sellers do on their sites as long as they don’t actively promote such activities.
Sadly, there is no legal recourse for manufacturers whose products are being improperly “private labeled” but to hire attorneys and spend tons of money trying to get justice.
Taking generic, unbranded merchandise and putting your own trademark or brand on it is perfectly legal as long as the manufacturer permits it. If you are not certain about that, you should contact the manufacturer and get their written permission to “private label” their merchandise.
If the merchandise is sold under a registered trademark (look for the “R in a circle” symbol next to the product name, or look it up on www.uspto.gov), you DO NOT have permission to “private label” that merchandise under your own name, or use that trademark to sell somebody else’s merchandise. Doing so is illegal. End of story, world without end, amen. Cliff Ennico (email@example.com) is a syndicated columnist, author and host of the PBS television series ‘Money Hunt’. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com. COPYRIGHT 2016 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Follow him at @cliffennico.