The other side of IP complaints against Amazon sellers

 

Many brands are clueless about the damage they do with IP complaints and fake claims

The number of account suspensions for alleged intellectual property (IP) violations on Amazon continues to skyrocket. There are several reasons this is so. But perhaps one of the most disturbing of these is a complete lack of understanding by brands that they are destroying small businesses. Last week, a lawyer called me. He wanted to discuss a pending lawsuit between a past client I worked with and a brand that helped get them suspended from Amazon. As we discussed the issues in the case, I found myself being sucked into a vortex of nonsense.

The lawyer laughed. “It’s insane,” he said. “What makes a seller think they can win this kind of lawsuit against a brand?” This attorney truly believes what he was saying. His client agrees. And in my opinion, they couldn’t be more wrong.

Anatomy of a lawsuit

For the purposes of this blog, let’s call my past client Acme. Acme was a pretty good-sized seller. In addition, he had quite a few IP complaints in his scorecard, mostly for trademark infringement. In my view, these IP complaints were likely all false and an attempt by the brand owner to control distribution. My client did not sell fake goods, nor did he list on the wrong ASIN. He had high-quality sourcing.

My client listed a product we shall call Supplement. He purchased Supplement from a large distributor. The product was real, with a perfect chain of custody.

One day, the maker of Supplement received a phone call or email to their customer care department. In this communication, a buyer stated they received an expired unit of Supplement that they purchased from someone on Amazon. This buyer did not give the name of the Amazon seller who sold the expired product to them.

The maker of Supplement had brand registry. They logged into their brand registry account and promptly reported every single seller of Supplement for IP infringement/counterfeit. My client was one of those sellers, and his account was deactivated by Amazon.

The seller fights back

Ultimately, Acme was reactivated. The company is now actively selling on Amazon. But they lost significant sales on Amazon during their suspension. Acme decided to sue the brand owner of Supplement for:

• Tortious interference. Essentially, this claim asserts that the brand owner wrongly and intentionally interfered in the business relationship between Amazon and Acme.
• Slander. By stating that Acme was selling counterfeit merchandise, the brand owner slandered the company as a lawbreaker and someone whom nobody should engage in business with.

Here’s where the lawyer’s dismissive comments enter the picture. The attorney for Supplement brand said the entire lawsuit was ridiculous on its face and would never result in an award for Acme.

During our conversation, I pushed back.

“You do realize counterfeiting merchandise is a crime,” I said. “If Supplement had filed an IP claim for trademark or copyright infringement, that claim wouldn’t have been true, either. But calling the product counterfeit raises this to an entirely new level. It was unethical, wrong and puts Acme at risk.”

The lawyer disagreed and then blamed Amazon, rather than his client.

“Supplement had no idea that something like this could happen,” he claimed. “They were just trying to stop the problem.”

Amazon’s culpability

And there, my friend, is where Amazon’s blame lies in all this. Because the platform must enforce IP complaints, it has erred on the side of ease for brands. Simply report a problem, and the listing is closed.

Unfortunately, many brand owners don’t seem to comprehend the seriousness of making false reports. And these reports are made – in abundance – every day:

• Brands trying to control distribution lie about IP violations
• Brands concerned about product quality report all sellers on a listing instead of pinpointing bad actors
• Brands rely on lawyers or services to report “bad actor” sellers on their listings, which often results in authorized sellers being reported as well
• Brands don’t recognize storefront names of their authorized sellers and report them
• Brands don’t bother conducting test buys and just call everything “counterfeit”

At the same time, many brand owners honestly don’t understand how enforcement works at Amazon. They likely believe – like Supplement – that their report will only result in a single ASIN being blocked in a seller’s account. They don’t realize that false reports could result in account suspension, permanent closure, destruction of inventory and permanent holding of funds by Amazon.

Should brands have control over their products on Amazon? Brands definitely have cause for concern when their products are counterfeited, sold past expiration dates, sold in terrible condition, bundled in strange combinations, etc. All of these circumstances damage brand equity and dilute value.

But at the same time, making false claims of criminal behavior is problematic. And at least a few companies like Acme are going to see if they can help the IP pendulum swing the other way.