March 4, 2020

Amazon Seller Suspensions: When and How to Apply the First Sale Doctrine

Amazon First Sale Doctrine

The first sale doctrine says that every buyer should have the right to resell an item as long as it remains the same. That’s why it’s okay for these sellers to display and resell items that are branded. They won’t be filed and get suspended for this. Thus, once products are legally purchased, the site’s first sale doctrine allows a buyer to go sell the product again.

However, everyone must know that the First Sale Doctrine applies only in the United States and cannot be used in Europe.

Nevertheless, there are still exclusions to this rule. For instance, sellers from Amazon must be informed of Material Differences and Consumer Confusion.

Material Differences: what does this term mean?

This term shows that there’s an obvious alteration between the original item the seller bought and the same item he/she has actually sold by reselling. The item a merchandiser resells should be sold in the same state as the original for it to be legitimate. The change should be noticed to a degree that it’ll cause a “Consumer Confusion” as regards the item’s origin.

Amazon merchandisers reselling genuine items that are quite different from the original can be subject to intellectual property infringement. These resold products are no longer be considered authentic by law. Thus, complaints concerning this issue will risk Amazon accounts of suspension.

Note that this law isn’t only limited to external properties of an item, but it also extends to the quality control measures, money-back guarantees, and warranties. These properties should be provided as well as strictly adhered to by Amazon resellers for the items to be deemed real and authentic.

For example, an Amazon seller attorney tries to have conversations with intellectual property right owners on their clients’ behalf for the purpose of withdrawing complaints as well as stopping account suspension.

Nonetheless, even if such items their customers are displaying are genuine, or even if they bought them directly from a licensed distributor, ignoring guarantees for customer satisfaction will still make the First Sale Doctrine useless.

Why quality control measures are important

Most brands and manufacturers implement quality control measures to keep their products’ consistency. They require both their distributors and suppliers to follow and maintain these measures should they desire to keep on dealing with their products.

Quality control ensures that every item made will satisfy every customer it reaches.

Amazon sellers must carefully check and see to it that the brands that they resell don’t have strict quality control measures. Note that every federal court in the US considers goods as “materially different” if they do not meet the brand owner's quality control standards.

The effect of the First Sale Doctrine on Amazon sellers

These doctrine exceptions of the first sale have become more prevalent in the Amazon platform as increasing infringement complaints continue. It is with the great possibility that sellers who fail to meet customer satisfaction through quality control and money-back guarantees lose their businesses.

What happens if complaints are overlooked?

Normally, when Amazon sellers get complaints concerning intellectual property, the right thing to do is to contact the complainant and ask them on the basis of their complaint.

The process typically involves the letter and email exchange between the rights owner and the seller. Once a rights owner allows the situation to reach the court, the accused must be notified by the forthcoming lawsuit.

If the accused party disregards the notice, the rights owner will have the upper hand by taking advantage of a “default judgment”. And if the accused party fails to act on the case, the court will favor the complainant by default judgment.

Here, the Amazon seller is to be subject to default judgment if they ignore the complaint, especially when it reaches the court. Note that an issue that is sent to the court does not stop at the consequence of being suspended alone.

Moreover, courts actually can apply what they call as personal jurisdiction over the Amazon Sellers whom they suspect are practicing intellectual property infringement. Such personal jurisdiction is the court’s power over persons who are part of a lawsuit and it is applied when both parties involved live in various states. This jurisdiction continues to exist if the defendants insist on selling illegitimate products online.

Therefore, the rights owner can actually force the seller to be present at court right in their state should the seller fail to respond properly to their notices.

What about the trademark law for Amazon Sellers in the U.S.?

A trademark basically is a logo or word that distinguishes a brand. So, when you see the Adidas sign or the Nike check on a pair of shoes, then you’ll know what kind of items they sell and the quality they maintain.

A reseller can be accused of infringing when they leave their consumers confused about what item they are buying leading to an Amazon trademark complaint.

Applying for a trademark is actually simple and easy. You can fill out forms online at USPTO.gov. This stands for the United States Patent and Trademark Office. It takes only a short period of time to fill up the forms and it will not cost you a lot.

If a problem arises on the part of the seller, they will be given a notice. This process will probably take 6 months to a year for a trademark to be approved.

Copyright law refers to pictures, images, and words. So, when a seller displays a digital content of a product on Amazon, they are protected by the copyright act. Amazon gives their sellers an unending license to be part of product listings, so they are not breaking any copyright law against copyright owners or copyright holders.

However, if a seller steals a copy of a copyrighted work from a different website and begins to create a listing, then that is a violation of the copyright law.

Copyright is an innovation, once you create your own verbiage, you absolutely own it- even with distributed copies. Whether you file with the copyright office or not, if you own it and use it, you are safe even if you are not able to administer it in court.

Patent law, however, is more complicated. This law has two different types: Utility and Design. A utility patent protects how a product works while a design patent protects how the product looks. Both of these laws are applicable for twenty years and expire after.

What about online retail arbitrage?

It is a marketing strategy that many Amazon sellers use. This happens when the seller displays a product for sale but in reality, they don’t really physically possess the item.

The process involves listing products in Amazon for sale, and the moment a client buys an item, the seller immediately sends the necessary details to an outside website. The outside website actually is the primary seller of the product and Is also the one who is ultimately responsible for arranging the shipment for the customer.

In fact, Amazon suspension attorneys have seen a valuable increase in Amazon Seller suspension cases due to some sellers’ association with retail arbitrage.

What is Amazon’s policy concerning online arbitrage?

Despite the fact that several Amazon Sellers easily escape with online arbitrage, in the end, these Amazon sellers will lose their fortunes in time. There are many sellers who were already suspended due to resistance in abiding the policy of Amazon. So, what does this policy really say?

Below are actions not allowed on Amazon when selling items through their site:

  • Purchasing items from a different online retailer and letting them ship the order directly to the customer.
  • Shipping items along with invoices, packing slips, and information of a different seller.

Failing or resisting to follow these requirements will lead to suspension or worse- not being permitted to further sell anymore.

Amazon made it very clear on their website that online retail arbitrage is prohibited, yet numerous Amazon sellers still practice it. A number of sellers are uninformed regarding this policy but Amazon has been starting to implement this policy strictly.

Even with this information, some sellers are simply ignorant and are ready to harvest the consequences of their actions for the high-profit margins they gain through online arbitrage.

How are the First Sale Doctrine and online retail arbitrage connected?

Amazon has been starting to deal with those who are purposefully violating their policy concerning retail arbitrage online, and several well-known brands are following this process also.

Some lawyers of Amazon sellers have been asserting that the First Sale Doctrine should not be applied to sellers who are persistently involving themselves in retail arbitrage online.

Why? For the fact that a seller involved in this illegal activity has not even taken hold of any of the items, they’re displaying for sale.

Therefore, without a first sale that is legal, the doctrine doesn’t really apply to sellers that are simply dropshipping items using a different website.

Conclusion

In reality, most Amazon sellers just really are looking to make more money and avoid account suspensions from happening. Thus, sellers should be updated with Amazon’s platform and laws and licensing agreements. Intellectual property concerns can be complicated. Therefore, it is essential to know the fundamentals relating to the relevant business laws.

Brand name sellers in Amazon should comply with first sale doctrine exceptions to avoid unwanted trouble.

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