Creating a Legal Framework for Distribution Enforcement on Amazon with Howard Ullman

If you own or have the rights to a brand, it is likely going to be sold on Amazon. During this webinar for brand owners, you’ll learn the key elements to creating a legal framework that will help you enforce distribution and pricing on the Amazon platform and beyond.

Join me as I host Howard Ullman, an attorney with Orrick and author of MyDistributionLaw.com, as we discuss intellectual property, distribution, MAP enforcement and more to help you protect your brand and pricing on Amazon.

Webinar Transcript

Shannon: All right. Welcome to the webinar. I’m Shannon Roddy, the founder of Marketplace Seller Courses, online courses, resources and tools designed to help brand owners start and grow their businesses on Amazon and I have with me special guest today Howard Ullman, an attorney with Orrick who focuses on distribution law, including intellectual property, distribution and pricing policies, IP licensing, distribution structures, distributor and supplier terminations, minimum advertising price programs and market definition.

He also handles cases for businesses facing litigation, business works and commercial litigation and he is also an expert at making French press coffee. Howard, thank you so much for joining me today.

Howard: Yeah. Hi Shannon. Thanks. Thanks for having me. Happy to be here.

Shannon: I assume that making French press coffee helps as an attorney. It must come in handy for those extra hours that you have to put in.

Howard: It does indeed. The caffeine is an essential part of the job.

Shannon: Good to hear. Well, today I’m really excited because I think this is going to be so helpful for so many listeners, especially emerging brand owners who are getting launched, understanding the legal framework for creating distribution enforcement specifically around Amazon because it has such an impact on so many businesses. Again, over 55 percent of all product searches start on Amazon.

So a product being sold on Amazon is pretty much inevitable at this stage of the game. So the goal is to cover at high level some of the things that brand owners need to be aware of and some of the things that they can use to their advantage in order to control some distribution as well as pricing, not only on Amazon but also just in the digital space in the current age.

So with that, let’s go ahead and get started. Why don’t you – I’m just going to let you kick this off. You’ve set a pretty detailed outline of what we’re going to cover. So I think it’s best to just hand it over to you and let you start us off in terms of what it looks like to control some of the distribution enforcement and pricing on the internet and on Amazon specifically.

Howard: Yeah, great, and though I do have an outline, you know, we can obviously make this hopefully a conversation. So jump in whenever you would like.

I would just like to say at the beginning, I just have to give a little disclaimer which is while I talk about these issues a lot, the groups and so forth, what I’m about to say is not – it’s self legal advice. So everybody’s situation is unique and so before you go ahead and do anything, you will probably want to consult with your own counsel.

But that said, we can talk about some general points which I think are likely to be helpful and it seems to me that we can think about this in terms of what manufacturers or suppliers, online suppliers, want to do and want to control in the age of internet distribution generally and Amazon in particular.

So I came up with a list of four, five things I guess, which we can talk about further as we go along. But often suppliers want to control who gets to sell their product to end consumers in the market. So that’s one thing. They want to control – at least they want to control at what prices those products are ultimately sold or they want to control at what prices those products are advertised to consumers.

I think in addition to those things, they want to prevent the sale of unauthorized – the sale of their product by unauthorized distributors online and depending on what kind of IP they own, they want to prevent the unauthorized use of bad IP such as trademarks, copyrighted material and patents, if applicable.

So some of and actually quite a lot of that can be accomplished and structured appropriately and there are some exceptions under the Antitrust Law and under various versions of what we call the First Sale Doctrine, which applies in different areas of law.

So – but those are the general issues I see people wanting to address or struggling with and I think that’s a good overview and then we can talk about – drill down into each of those areas and talk about what you can and cannot do and how to do it.

Controlling Your Distribution Chain

Shannon: Yeah, absolutely. You talked about the basics of controlling distribution chain and what we typically refer to that is having a clean line of distribution, meaning you know who you’re selling your product to and you have stipulated in the best ways possible where people can and cannot sell products.

The biggest challenge that sellers face, particularly brand owners on Amazon, is they sell to resellers. They sell to retailers, ecommerce channels or through distributors and they wind up having dozens, if not hundreds, of what they would consider unauthorized sellers of their product popping up on Amazon, either on their own listings or on duplicate listings and at that point in the game, it’s usually a fairly significant challenge to go back and begin to clean up that distribution.

Essentially they had no idea who these people are. They have no idea how they’re getting their product and what we’re talking about today is coming from the beginning, how do you go ahead and create sort of a clear line of distribution and – but let’s go ahead. That being said, let’s talk about authorized distributors and what that looks like in some different tactics that a brand owner can take when signing agreements with the distributor to represent their brand.

Howard: Right. So it does make a lot of sense for many, maybe most companies, to have a formal program whereby you appoint authorized distributors. Now some companies, maybe they’re going to distribute online just themselves. They’re not going to have distributors. They’re going to be direct sales to end consumers and that’s fine.

But as you grow or as your needs change or as you find you don’t have the bandwidth or the resources or whatever to focus on a particular market or market segment, that’s when many companies turn to using distributors. So you’re going to want to think about having some number of authorized distributors. These are folks who are going to provide really good service for you.

You’re going to vet them before you appoint them hopefully and you’re going to have a good relationship with them and they’re going to represent your company to the public well in a positive manner and they’re going to add value for you and they’re going to increase customer goodwill by the service that they provide.

The important point – well, there are a couple of important points. One important point about appointing them formally is that you can terminate the relationship if it’s not working out for you.

So you will spell out typically a distribution agreement or a distributorship agreement when and how you can part ways and if you do that, obviously they lose the right to be your authorized distributor.

So this is one way you get to control or maintain control over your distribution chain. Now oftentimes they are going to want, the distributor that is, they are going to want some sort of exclusivity to incentivize them. Maybe they’re going to be the exclusive distributor on Amazon. Maybe that’s – they’re going to be the exclusive distributor for certain types of customers or classes of customers.

But that’s a frequent request. Obviously it gives them an incentive to focus on your product and they don’t have to worry so much about competing with your other distributors and you may find that that’s a good – it makes good business sense for you as well because it does incentivize them to really work harder for you and all of that typically is fine. That is exclusivity provisions and all of that can and should be spelled out formally in a distribution agreement or distributor agreement, so that there’s no fights down the road about who was promised what and who gets to do what and so forth.

So I think all of this is a way of saying you really should consider having distributor agreements, appointing one or more authorized distributors. They’re going to spell out or you’re going to spell out there the basic rights and obligations, whether there are any channel or territory restrictions as well as things like sales terms, credit terms, return policies, product warranties, which is something we will come back to a little bit later and the like.

So this is often the first step when people get up and running is to set something like this up or once they’re up and running selling by themselves and they find out they need some assistance, this is typically the next step they’re going to take.

Shannon: So you might be able to spell out something as specific as a channel. So you have the ability to – or the exclusivity or authorized to sell on Amazon or eBay for example in terms of platform or it could be a territory in terms of you have the ability to sell a product exclusively in Canada or the Continental US or it could be even within those realms. You have the ability to sell to all the B to B customers whereas other distributors might handle the B to C for example.

Howard: Exactly, and we all know if you’re relatively new or you’re a startup or you’re small but growing, there’s a lot of stuff on your plate and it can be easy just to deal with people without formal agreements and it can be all too easy to the promise or the perceived promise, something like this, some form of exclusivity, either on the phone or in an email or maybe one of your sales reps promises one firm one thing and another promises another firm something else.

So to avoid disputes in the future about who has which rights, all of this can be spelled out expressly in these distributor agreements and then there’s no – there’s really no possibility for a dispute about it down the road.

Shannon: Now, we’re talking about distributors and typically we consider distributors – a brand owner would sell to a distributor with – who would then turn around and sell to numerous resellers. Would these same agreement principles apply if the brand owners simply sold directly to resellers instead of through a formal distributor?

Howard: Yeah. So different industries have different terms for what amount – to be the same thing. We can call them wholesalers. We can call them distributors. We can call them sub-distributors, people who buy from the distributors. We can call them resellers. But the point of all of it is there are different levels of the chain between you and the ultimate end consumer.

Shannon: Right.

Howard: And yes, you can impose restrictions at these different levels. Now sometimes perhaps typically, let’s say you have a multilevel chain. You have a distributor and that distributor is using resellers to sell their – to end consumers. You may not have a direct contract with the reseller who’s one step removed from you or you might.

You also might have provisions in your agreement with your main distributor as to whom they can appoint as a reseller and it would give you a right of review, a right of refusal, a right to object and so forth.

So there are different ways you can essentially achieve the same end result of controlling the distribution down the different links in the chain.

Shannon: Got it. Yeah, that’s very helpful and I know again we will talk about this more in detail. But knowing who’s selling your product and where they’re planning to sell the product is probably the biggest things in terms of preventing some of the unauthorized distribution that we see on Amazon.

So it’s really sort of a legal game that’s played long before the products ever end up there. That’s sort of having to deal with the problem from an intervention standpoint. If we put these things in place, we might be able to be able to deal with it from a prevention standpoint.

Howard: Right.

Controlling Pricing through Distributors

Shannon: So that said, let’s talk about pricing because that’s certainly an aspect. We’ve mentioned the aspects of channels and territories. But are you able as a brand owner to control the prices at which your distributors sell? So that could be again to other resellers or sub-distributors? Let’s talk about the pricing aspect of this.

Howard: Right. So let’s cover this at a high level and briefly. So this is what we call or what the law calls “resale price maintenance”. You may see that term pop up if you start Googling around online about this issue. RPM for short and there are two types of it really. There’s minimum and maximum. A lot of people focus on the minimum, right? They want their products not sold below a certain floor. But sometimes there are reasons why you don’t want – you may not want distributors to go above a certain ceiling. So that would be the maximum version.

Here’s the bottom line. Under federal law, under federal US law, in virtually all cases – there can be exceptions, which get a little complicated. But in virtually all cases, this practice is now considered to be permissible. OK?

So people say, “Oh, that’s great. That means I can do it.” Well, the complication is we have a federal system and we have 50 states, each with their own laws and not all of them are the same. There are a handful of states that still think that resale price maintenance is what we call per se unlawful, which means there’s no – you don’t have a dissent. If you engage in doing it, you’ve committed a violation. One of the important states that still has this view is California and so unless you can control your distribution system entirely to avoid states like California, it can be problematic to engage in RPM and can be really hard to slice California off. I mean first of all, it’s a big market.

Shannon: Sure.

Howard: Secondly, even if your distributor is in – even if you’re in New York and your distributor is in Illinois, if they’re selling on Amazon into California, this rule may be implicated. Probably it’s implicated. So what we tell people generally is the conservative approach is to avoid RPM for this reason unless you can be absolutely certain to avoid the states where it’s still an issue.

Shannon: Got it. Now that being said then, do brand owners have any way to control any of the pricing downstream once it leaves their hands going to the distributor or the wholesaler for example?

Howard: So the answer to that is yes. There are other things you can do and one of the more common or popular mechanisms is a Minimum Advertised Price Program.

So here, your downstream distributors, they retain the right to price unilaterally as they see – as they so choose. But they don’t have the right to advertise the product let’s say below some minimum threshold. So typically – and the advertising by the way would be online, including on Amazon. The distinction we usually draw between advertised price and actual price is the threshold of the checkout cart. OK?

So a banner ad or a product display ad or the like or listing, that would come within the Minimum Advertised Price policy or prohibition. But once the consumer actually puts a product in their cart and is about to check out and sees the actual price that may be discounted further, that’s the point at which this program no longer controls.

But that said, to set one of these up, typically you want to adopt a policy. This is not an agreement with the retailer or a distributor. It’s a policy that you adopt and promulgate and it indicates it’s going to govern your advertised prices, the actual prices. It says that it’s not an agreement and it specifies what happens if there’s a violation and this gets a little bit complicated. But to avoid the potential problem if there’s an agreement, which could get us back into the resale price maintenance realm.

Shannon: Right.

Howard: Typically, what these policies will say is if there’s a violation, we’re going to cut you off, at least from selling the product in question. Maybe six months from now, we reserve the unilateral right to reappoint you for that product. But we’re not going to have this sort of back and forth negotiation with you where we say there’s a violation and you say, “Oh, I’m sorry,” and then you redo your pricing and then that starts to look like an agreement.

So – and of course to make one of these programs work in addition to having a policy in place, you need to have some monitoring mechanism to make sure people are abiding by it and there are third party firms in the marketplace who do just that.

Controlling Minimum Advertising Pricing (MAP)

Shannon: Right. Two sort of applications for Amazon for this, one is just in terms of distribution enforcement. That aspect that you mentioned, that consequence of cutting people off, of cutting resources of is the most effective both from a distribution standpoint as well as a minimum advertised price violation standpoint, as opposed to fighting and arguing and trying to deal with different things.

So again, knowing who those sellers are is incredibly important and then second of all, there is a great tool that we use called AMZAlert that allows us to monitor our Amazon listings in the case of pricing that would go below a certain amount. What Amazon does is while they are not for MAP and they do nothing to enforce MAP as a general policy, if a seller is selling below a certain price, they can in the backend put what the MAP price is and then put their actual price below that and Amazon will say on the detail page, “Add product to cart in order to see the price.” So that’s how Amazon deals with that, the MAP standpoint of this.

Howard: So, right and so one other – and this may be obvious. But one other important point is that MAP programs can be very beneficial and they can be effective. But they’re only – they really are only good for your authorized distributors. So we started out talking about having authorized distributors and having agreements in place with them. But somebody who’s selling as an unauthorized distributor, the MAP policy doesn’t really apply to them and so you can’t use it to deal with that situation.

Shannon: Yeah. One other point that you made in your outline is the aspect of why MAP is so important and really it’s – from a brand owner’s perspective, it’s not only to maintain product perception. So obviously a high quality brand, if you have a high quality brand, being sold at an incredibly low price, it questions the – not necessarily the authenticity but certainly the quality of the product.

But it also maintains channel viability. So if you sell to for example five different distributors and one of them is able to slice the margin so thin that they could sell well below the MAP and basically just above the cost of goods, it would essentially put all the other distributors out of business, at least as far as that product is concerned. So the goal of the MAP is not only to maintain the perceived value of the brand, the actual value of the brand, but also to maintain channel viability, so that a small retailer has the ability to sell a product and compete with price in the same way that a large one would, despite or regardless of the volume of sales that that seller is doing.

Howard: Yes.

Shannon: So let’s move into the arena of unauthorized distributors because that is where it gets a little tricky and like you mentioned, unauthorized distributors and sellers can be a big challenge on Amazon. There’s some great resources for dealing with them. But what are some of the things that you wanted to cover in regards to that?

Howard: Right. So yeah, I get questions about this with some frequency and Shannon, I imagine you do as well. This can be a real thorn in the side for people. What I want to do is break this down into a few different scenarios depending on what kind of intellectual property you own.

Shannon: OK.

Howard: And we will start with the situation or the scenario where you really don’t have any IP. You don’t have a trademark. You don’t have a patent. You’re just selling a product at the marketplace. Maybe it’s a great product. But again, no IP protection and the unfortunate thing I tell people which they don’t usually like to hear but it’s – it just happens to be true is that in that situation, once somebody buys your product, they’re essentially free to resell it as they will. They buy it free and clear of any restrictions.

So unless they’re – in the course of their selling the product online, unless they’re disparaging it somehow, which usually they’re not. Because why would they want to do that if they’re selling it? Or they’re making some kind of misrepresentation about you or maybe the product itself, if it’s apparent – it’s tied to you or somehow they are – you know, knowingly interfering with your contract to sell it to somebody else. Unless you fall in one of those rather rare situations, there’s really nothing you can do about that. It’s just the free market in the United States, freedom of commerce. People can buy a product and then do what they want with it.

So that’s a very good reason for you to think about getting some sort of IP protection. Now there are limits on that as well, which we will talk about. But at least it can give you a hook to control what’s going on downstream.

Shannon: And just sort of again high level, let’s hit with those three primary intellectual property. Registrations might be one. Certainly trademark of a brand name. Two would be patent protection for an innovative product that you’ve created and three would be a copyright which could apply to either the copy or images maybe you’ve created to sell your product. Those are the three that I typically deal with most when it comes to products sold on Amazon. Is there anything that you want to elaborate on, on that, in terms of intellectual property side?

Howard: Yeah, sorry. No, those indeed are the three main ones.

Shannon: OK.

Howard: So with that, if you want, we can talk a little bit about trademark products first.

Shannon: Yeah, let’s go ahead and go through that.

What if Your Product is Trademarked?

Howard: So what I would like to leave folks with at the 30,000-foot level is trademarks are great. But it’s not the case that just because you have a trademark that means you can shut down an unauthorized distributor. So it’s not that simple.

So the reason being is that this First Sale Doctrine, which is what we were just talking about, which is the freedom of people to buy and resell something, so upon your first sale of the product, the idea is that your rights in it generally are extinguished and the buyer can do whatever he or she wants with it.

This First Sale Doctrine also applies to trademarked goods. So it’s not the case that just owning a trademark sort of gives you the license to go around shutting down any unauthorized distributor. Sorry. If you have a question, I can stop.

Shannon: No. I was going to mention that’s one of the big questions I get from brand owners. They will say, “This person is selling my product on Amazon. They’re using my trademark term. That’s trademark infringement,” and technically it’s not as long as the product is in fact their trademark brand and product.

So it’s only if somebody is using your trademark term to sell their own product, which is not your genuine product. That would actually be considered trademark infringement against specifically on Amazon in this case.

Howard: Exactly. Yeah. I mean passing off counterfeit or knockoff goods as trademarked goods, clearly that’s problematic and you can go after people for that and people frequently do. But here we’re talking about somebody who somehow buys your actual product. It’s the real thing. It’s the real deal and then they’re reselling it and so there is a way, which we will talk about in a second, to try to set yourself up in a position, so that you can go after those folks. But it’s a little bit complicated and it’s – it sometimes works and it sometimes doesn’t.

Shannon: Right.

Howard: So the kernel idea here is that trademark law looks to whether the sale of the product is likely to cause consumer confusion. OK? That’s kind of the standard and again, if the unauthorized distributor is selling your legitimate product that somehow they bought in an unauthorized sale from one of your distributors, one of your authorized distributors, it’s hard sort of on the face of it to establish this likelihood of consumer confusion.

But there is a possible way. So the way is that you are very clear that you have a warranty policy and it’s spelled out and documented appropriately in your contracts and agreements with your distributors for one thing and it’s also put up on your website probably for another. But it’s very clear that it only applies to sales, purchases from authorized distributors. It doesn’t apply to unauthorized ones.

So if this is set up right and it’s very clear in all the right documentation, what it gives you is the argument to say that these sales by the unauthorized distributors, let’s say on Amazon, are causing consumers to be confused about what – about whether if they buy the product, it’s going to be covered by your warranty policy.

Shannon: Correct.

Howard: And because of that confusion, it’s damaging your brand because imagine consumers get the product. They’re unhappy with it. They don’t like it. They try to return it and then they find out it’s not covered by the warranty and they get upset about that. So that’s the theory or the hook under which you could go after these unauthorized distributors.

Now, for this to work of course, you have to have in the first place a real legitimate trademark. Then you have to do all these things which I was alluding to, which is this warranty policy has to be developed and it has to be put into your distributor agreements and it has to be posted online probably and so forth and then if you have all that in place, then you have this argument and then we can talk about practically how it works or might work. But let me stop there in case you have any questions.

Shannon: No. I think that the only – the practical takeaway for this is Amazon does not usually allow you to update the warranty section of a product detail page. It will typically just say, “See manufacturer’s website,” which is one of the reasons why it’s so important to post that on your website because that’s essentially where Amazon is directing the consumer. But also we have the ability to do it in a graphic form. So essentially we will take either the fuller snippet of the warranty, what a customer can expect to receive if purchased from an authorized seller, and create a graphic that will display as an image on the detail page, conveying that same information and that’s of course backed up by what’s on the manufacturer’s website.

That we find tends to be the most effective. You’re not able to add things like a warranty to what’s called Enhanced Brand Content, the product description. So there’s not a lot of places that you can add that to the Amazon detail page. But we found that images is a great place to do that and currently works to be able to do that.

Howard: Fair enough. So if you’ve set up this whole process and then you see unauthorized distribution taking place, what it gives you is the option or the ability to contact these unauthorized distributors and sometimes they can be hard to actually find. You know, the actual human being behind the screen name. But you can send them – usually through outside counsel is the best way because it usually gets the most attention. You can send them a cease and desist letter and you can spell out that you have a trademark and that there is this confusion issue and a warranty issue and so forth. Many times, they will back off and they will drop the listing or whatever because it’s just not worth dealing with the hassle.

Shannon: Right.

Howard: Shannon, do you want to talk about – before I go on, do you want to talk about what you can do in terms of notifying Amazon about this?

Shannon: Yeah, there’s – I mean I think you’re correct. There’s really not any way that Amazon will get involved unless it moves into the realm of counterfeit or passing off. If it’s simply a distribution or exclusive distribution issue, Amazon typically is not going to take any action in regards to that and in fact, they have since started limiting communication with other sellers through the Amazon platform in regards to sending cease and desist. So as you mentioned, that needs to come not only from outside counsel, but also from outside Amazon.

Howard: Uh-huh. So if you do send one of these cease and desist letters, like I said, sometimes the letter alone can be effective. But I think what you should appreciate here is that if they are recalcitrant, if they’re just ignoring you, you can certainly send another letter. But at some point, the only other option you have is to go to court, right?

And I just want to flag for people. It is a theoretical option. But it’s a big deal. I mean it’s expensive. Litigation is always expensive. It could be time-consuming and to establish this likelihood of confusion is going to – and prove it to a court is actually going to require a fair amount of work and probably will require hiring an expert of some sort to come in and say, “Yeah, this is what’s going to happen in the marketplace based on my experience.”

So if you issue the cease and desist letter and it doesn’t work, you do have still an option. But in many cases, especially because the amount – the dollar amount is not necessarily huge, the dollar amount at stake, you may sort of hit the end of the road at that point. I know people don’t like to hear that.

But I’m just trying to be honest about it and it would be easy for me, for other lawyers, to go around saying, “Yeah, just file a bunch of lawsuits because that would make us – I suppose more fees.” But oftentimes, it’s just not worth it unless you’re talking about something where, you know, tens or hundreds of thousands of dollars of product is at stake.

Shannon: Well, this goes back to the earlier point that I made at the beginning, which is once you have identified a seller who’s either unauthorized or violating MAP, the most effective method is not necessarily through legal means but by cutting out the distribution. If they no longer have access to legitimate product, then they no longer have the ability to continue selling and that’s where we have resources and tools that we refer people to that have the ability to identify who those sellers are and then through things like serialization and other aspects, to be able to figure out where they’re getting the product and cut them off from a sourcing standpoint, which is again the most effective way to enforce distribution.

Howard: Right.

What if Your Product is Patented?

Shannon: Let’s go ahead and move on to the second component which is patent, so products that have been patented and just talk a little bit about what that looks like and how that might apply from the distribution enforcement standpoint.

Howard: Right. So I will try to keep this high level and brief again. So the bottom line here again is that this First Sale Doctrine comes into play. So it is not the case that just because you own a patent, that means you get to control whatever happens to the product as it flows through commerce downstream.

So for example, if you own a patent on a bicycle and you licensed somebody to make the bike and then to sell it to consumers, the – once that sale is made to the consumer, because it’s an authorized sale, the law says that your rights, your patent rights are essentially exhausted. So you can no longer go after the consumer if the consumer wants to resell the bike, wants to take it apart, wants to put it back together again and sell it to his buddy. It’s all outside your bundle of patent rights.

So what you can do, if you have a patented product, is impose field of use restrictions. So you can license somebody to sell only online or you can license somebody to sell only in one part of the country but not another part of the country or you can license somebody to sell to commercial businesses but not individuals or vice versa and all those kinds of restrictions are typically permissible and enforceable. OK?

But again, if somebody buys your product and it’s an authorized purchase, even if it’s patented, when they do that, they can resell it sort of in the free and clear end. So you no longer get to control it at that point.

Shannon: That would apply both to somebody who has been licensed to manufacture as well as licensed to sell a patented product?

Howard: Yeah. Yeah. I mean it depends on what the – so it all depends on what rights you’re conferring and granting. But again, once there’s that – and there are a lot of complications under the patent law which we’re not – we don’t have time to get into. But once you sell, once you make that sale to somebody downstream, that’s going to cut off your rights and you’re going to lose control at that point.

But again, if somebody is purchasing through an unauthorized sale channel, OK? They may not acquire that right in the first place. So in theory, that gives you an avenue to pursue there.

Shannon: This could be an example of a grey market for example where you sell to an authorized distributor. But instead of them selling to their authorized resellers, you have one of the employees selling products out the backdoor. Would that be a good example of what that might look like in terms of that first sale is not authorized?

Howard: Yeah. Sorry, yes, that would be such an example. Yeah.

Shannon: OK. In terms of patents then, just really high level, what are the main conditions that somebody would want or need to patent their product? I think obviously there’s not a ton of ambiguity there. But just very high level. If somebody has a product that meets these conditions that they’ve essentially invented or created, should they get a patent?

Howard: So that’s a really interesting and complicated question. It raises a lot of issues, right? So – and I can touch upon just a few of them.

Shannon: Just high level.

Howard: Yeah, just high level. So for example, let’s assume that you can get the patent, which is a whole process onto itself, which can take a long time and can cost a lot of money.

Some firms may – once you get the patent of course, the method that it describes is in the public domain. You get protection for only so many years, right? So some people may decide, “You know what? I don’t want to publish what I know. It’s a secret. I have the secret way of doing something and I don’t want the public to know how I do it. I want to protect it sort of in perpetuity as a secret.”

So if that’s the case, you may not want to get a patent. So that’s one consideration you have to balance. Again, against the time and expense of getting one.

Then I guess maybe on the flipside of that is having a patent, if you have one. It really does give you a lot of power or benefits. You can sue people for infringing it, right? You can use it to protect your brand. You can probably in many cases improve your pricing and your profitability because of essentially the patent monopoly that you’re granted by the patent office. You can keep other folks off the market during the term of the patent. So – yeah. Sorry, go ahead.

Shannon: This is a good example of something where Amazon will take action and so there’s a lot of stories out there where if somebody discovers a product on Amazon that is essentially virtually identical to their product, that if they are able to submit that patent to Amazon, Amazon will take that listing down very likely to protect again the platform and also to protect Amazon from any legal recourse in that regards.

Howard: Right.

What if Your Product Has or Contains Copyrighted Material?

Shannon: OK. Well, that is helpful. Let’s move on to copyright and copyrighted material. Let’s again sort of define that briefly and then go into some specifics in terms of how brand owners can protect their copyright in regards to the Amazon platform.

Howard: Right. So again, just I will give you a very, very brief overview. So yes, you can have a copyright. Maybe the product that you’re making is itself copyrighted material. Maybe it’s a book or photographs or whatever. But you also may have copyright claims in a manual that comes with your product or the text – some of the text included on the product packaging could in theory be copyrighted.

So a lot of products, actually there may be a copyright claim associated with them. The issue though once again, not to sound like a broken record is in copyright, there is also a version of this First Sale Doctrine and so typically, if you own a product and you sell it, even though there’s a copyright in – if it’s a book and the product itself or in the manual or some aspect of its packaging or whatever, you were right to get extinguished at that point.

Now importantly, that only extends to the actual copies sold. So somebody who buys your copyrighted product can resell it and they’re free and clear. But what they can’t do perhaps obviously is just make a bunch of copies of it and sell those. That would infringe your copyright.

Shannon: Yeah, and again in terms of Amazon and brand owners, the two primary aspects that we see this are the copy that you use to describe the product. So maybe the copy on your website, the copy on your Amazon listing and then primarily the product images. They’re the primary product images or in some cases the additional lifestyle images that you have.

So if a reseller goes on your website, grabs your copyrighted images and uses the copy from your website to create an Amazon listing, that in many cases is a copyright violation and Amazon will take that seriously, if you can point them back to the place where the customer or the reseller grabbed that copy or that image from your website.

Those are the primary places that we see that being used. One caveat to note is for Amazon, if I as a brand owner create a list in a detail page of my product on Amazon and I upload my photos and I create copy for the detail page, the product features and descriptions, I give Amazon non-exclusive right to use that basically throughout Amazon globally.

So essentially somebody will say, “Well, I’ve uploaded my images and my copy and now Amazon is continuing to use them even though I’m no longer selling on Amazon.” That was essentially the right and the non-exclusive right that I gave them when I created that detail page and listing. The question is, if somebody else uses your images without your permission or approval, that’s where the copyright infringement typically comes into play.

Howard: Right. So yes, and so there may be cases where you can get them to stop using that. But again, even if you’re successful, what you can’t get them to do, at least under copyright law is to stop selling or reselling the actual product.

Shannon: Right. In terms of registration, we know that obviously trademark done through the US Patent and Trademark Office is critical to get a registered trademark. Patents again are something that have to be done through the same office.

In terms of copyright, what is the typical recommendation or the caveats in terms of whether or not you actually need to register for example your images with a copyright office or your product copy with the copyright office in order for that to be covered under US copyright law?

Howard: So I will give you a very generalized answer here. So the copyright is sort of inherent in the text as you write it. I mean it’s there and you can put a little copyright symbol on it yourself to indicate that you’re claiming it. There are some marginal – I guess I would say marginal protections, especially if you go to court and fight about it, but actually registering a copy with the copyright office. But that’s typically not a step you necessarily need to take.

Shannon: Yeah. Again in terms of Amazon, I think that the place where this is most useful and helpful is in terms of copyrighted images. So you can do a link back to your website where maybe a reseller grabbed a copy of your image. But they do ask for it. It’s optional. But if you can provide a copyright number for example where you have copyrighted all of your product photos, it’s not a bad idea and it should be considered by brand owners to make that investment, to copyright your images, especially if there’s a potential likelihood that they might be reused. So you have an actual copyright number to go back to and submit with Amazon or any infringing marketplace.

Howard: Yeah. Yeah, it may make it probably too easy.

Shannon: Well, I think that’s – is there anything else that you wanted to cover in regards to copyright before we do a general wrap-up of the topic?

Howard: No. I think that’s good.

Webinar Summary

Shannon: So give us the overview. We’ve covered a lot of information in terms of the distribution enforcement, in terms of MAP. If you can just sort of recap the high level points again, whether – they’re not specific recommendations for anybody but things that would be considered important for any brand owner in order to maintain some type or aspect of legal distribution. If you could just cover those in terms of a summary, that would be great.

Howard: Yeah, sure. So just to recap, you’re going to want to strongly consider having a rationalized distribution system, not sort of a hodgepodge of chaotic relationships and to do that, you’re going to want some distributor agreements in place and you’re going to want to specify in those its appropriate channel and territory and sales restrictions and the like.

On the pricing front, you’re going to want to consider a MAP program, which will enable you to maintain control over advertised pricing and then on this unauthorized distribution front, one of the tools that you’re going to want to at least think about is getting a trademark and then setting up a warranty policy to work hand in hand with the trademark, so that you have the argument that folks selling your actual product online but in an unauthorized manner outside the warranty are infringing that mark. So I would say those are the three big takeaways.

Shannon: Yeah, and then you mentioned in terms of a – if a product is patented or copyrighted, consider a licensing agreement. Just recap real quickly what that would mean or look like for a potential brand owner.

Howard: Oh, sure. So, well, it could be a separate agreement. It could be part of the distribution agreement. But it would specify what rights you’re giving the distributor and typically that might be – while they’re in good standing and they’re an authorized distributor, they’re allowed to display your mark, your trademark on ads online for example. But they don’t thereby acquire any ownership or other interest in it, certainly not after they are terminated as an authorized distributor.

There are similar sorts of things you may want to do with other IP that you own. But that – by specifying who has what rights, you protect your own ownership interest and make sure it’s not diluted and then you may give yourself avenues to pursue for example unauthorized sales which don’t exhaust your patent rights, let’s just say.

Shannon: Yeah. Well, Howard, thank you so much for your time today. I appreciate it. Again, if you have any questions or would like to read up on this or contact him, he has a website called MyDistributionLaw. That’s www.MyDistributionLaw.com. That link will be available below the webinar and again Howard, thank you again so much for taking the time to share some of this information with our audience.

Howard: Yeah, my pleasure. Thanks so much. Thank you Shannon.

By |2018-10-16T11:06:00+00:00October 16th, 2018|Amazon Webinars|