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Title: “How To Prevent Unauthorized Resales Of Your Products Online”
Guest: Tom McNulty of Lando & Anastasi
Interviewer: Nathan Gobes – Radio Entrepreneurs

Click here to read the transcript

Nathan (1s):
Welcome back to Radio Entrepreneurs. I’m producer Nathan, Gobes filling in for Jeffrey Davis this morning. I want to thank everyone for tuning in and listening. We’ve had over 8,000 guests on the show and counting, but up next we’ve got a returning guests – one of our regulars, Tom McNulty of Lando & Anastasi. Welcome Tom.

Tom (23s):
Thanks a lot.

Nathan (24s):
Always good to have you here to talk about IP and trademark litigation and issues that business owners face related to all of that. So why don’t you tell us what you want to talk about today?

Tom (37s):
Okay. Today I kind of wanted to talk about you know, there’s been obviously over the last 10 years or so and explosion of online sales, entities like Alibaba, Amazon, eBay, things like that. And one of the things that I’ve seen in looking at a intellectual property litigation, a Massachusetts is some sort of a growth of a lot of suits that surround the sail of, of, of trademarks stuff, trademark goods that are actually made by the trademark owner, but the sales are not authorized. And what you could do to prevent the unauthorized sail of, of your goods online. You know, there’s a number of reasons you may want to do this. Unauthorized resellers may have a, they may undercut your seller’s pricing.

Tom (1m 18s):
They may offer a shoddy service and lead to negative reviews. They a, you know, obviously whatever, whatever it is, that there are up to his, out of your control. And as the owner, you know, you want to, you want to maintain as much control as you can. A one of the problems that people face and entities face when trying to deal with this sort of thing is a trademark law. There’s a doctor is known as the first sale doctrine that basically says once the trademark owner cells is a good bearing, the trademark, they lose control of that. Good. And they can’t prevent its resale that can’t prevent it’s the use. And the can’t prevent the use of the trademark name a and association with it.

Tom (2m 0s):
I’m. And the idea is, you know, a trademark law is at least a theoretically as intended to prevent to customer confusion. And how can the customer is to be confused if they’re actually buying an authentic, you know, made by the owner. Good. But unfortunately there is an exception that is, that is not super hard to, to come by. And that is the first sale. It’s a, the first sale doctrine does not apply when there is a material difference between the good that you’re being sold than the good that you’ve the trademark or a oner. Mmm Mmm. Excuse me. The difference is the difference is considered material. If it’s something that would influence a, a purchasing decision by a customer and the courts have interpreted material differences is fairly broadly.

Tom (2m 47s):
It doesn’t have to be all that much of a difference. Material differences can include obviously physical things. There have been cases, differences, and battery life M differences and the makeup or the variety or the composition of the product or the formulation. We’re a blended product, M alterations in the packaging removal of, you know, a reference number of SKU’s barcodes, a have been found a, to be sufficient M differences and packaged shape, and the labels M differences and language, for example, differences of alterations of warring labels or changes the warning labels I’m.

Tom (3m 28s):
And you run into this a lot like with electronic goods, because a, one of the, one of the frequent ways that these aren’t authorized sales so occur is purchasing of products that are intended for like the European market. For example, that run on it in a different voltage system than American products. They’re also non-physical material differences. And this is probably the one that it’s easiest to come by you as a, as a cellar or as a, as a, as a trademark holder changes to the operator. Manuels changes to the service plans, a availability or an availability of warranty, coverage of exchange coverage, excuse me, and, and differences and quality control have all been found sufficient too, to take you out of the material differences.

Tom (4m 12s):
I mean, to take you out of the first sale realm. And so one of the ways that you can structure your business too, to at least be able to go after these people and, and stop their sales is to set up a, sort of a, a contractual agreement with a reseller so that, you know, basically a stable of authorized resellers, you know, provide them with some training, provide them with a requirements that they only sell to end-users that not ReCell to other sellers. And then do things like limit warranty coverage to only sales from authorized resellers, a limit Exchange’s to only a, those from authorized resellers.

Tom (4m 57s):
And that, that gives you a sufficient grounds to a, to go after some of these companies, excuse me, and a, and, and stop there, stop to resale of your stuff. A it also a potential gives you another claim. If you file a lawsuit in that a if you have a contract with your, with your authorized sellers, that they not sell to other sellers, and they do, you can go after the ultimate, you know, trademark infringer, all. So for a tortious interference with a, with your contractual relations, with your, with your authorized resellers.

Nathan (5m 30s):
Interesting. I do know a little bit about this and, and that, so I come from a background in the camera industry, and I know that these kinds of issues are often prevalent in that industry, you know, camera’s or a high price items. Yeah. The, the, the, the part that you mentioned about being resold in different markets, you know, EU Asia being resoled in the us, you know, it is, is sometimes is a big issue. I think they call that the gray market rather than a black market, they call that gray market. How, how easy is it for a business owner to, to, to get results on a, on filing these claims against these kinds of people? You know, at least in my mind, you have to expect that.

Nathan (6m 10s):
Or I, I would expect that a lot of these resellers are, you know, their hiding somewhere online, you know, they, they don’t necessarily have as much of a physical entity as a normal business, my end. So how do you go after these people?

Tom (6m 24s):
Yeah, you’re correct. On all of those things. Couple of things that helped in that M one of the, is one of the tricks with going after these sort of anonymous online entities is finding someplace to serve a complaint on them. And of course he has become much more open to allowing service through like the Amazon email service or the E-bay, you know, contact a point. So that makes it a little bit easier to get the suit, you know, actually kicked off, excuse me, and initiated. And a, one of the things you’d typically see, ah, there’s a company and Massachusetts are, I shouldn’t say in Massachusetts, they’re not a Massachusetts company, but there’s a company called the Echobee that makes a smart thermostats kind of home control is things like that, that his bread at this point 13 and 14 different suit’s of this nature and Massachusets over the last, I dunno, two years or so I’m and have the one’s, I’ve looked at a there’s there’s one that is still pending.

Tom (7m 24s):
There is one that has settled and in all of the rest that we’re able to get a default judgment, which means the other side didn’t appear. And, and, you know, a default judgment is fine, but a but the key factor is they were able to get a permanent injunction, which, you know, when the defendant doesn’t appear, the court does still have to look at the complainant and determined whether or not there is sort of sufficient factual allegations that would support her and injunction. So basically they’re getting it. And they’re, they’re a basis was almost entirely on the unavailability of the warranty service, so that the courts, and it’s a number of different judges, Massachusets that have dealt with these, and all of them have determined that they have a, that’s a sufficient, a material difference is to bring this into that area.

Tom (8m 9s):
You know, you do see this in the electronics Rome a lot, and I’m sort of, I’m not sure if that’s because that’s a more relevant or more, more prevalent a area where this takes place, or, but just so happens that they tended to have their business structures already in place that, that enabled us to bring these kinds of complaints. But it’s basically like it’s applicable to anything, you know, whether there’s price differentiation, if you’re selling goods in America for more than, and other countries, you know, <inaudible> where the, the prophet from a, a great market kind of a situation is the other one is you’ll sometimes you run into this and you’ll have one of your authorized resellers will go bankrupt.

Tom (8m 52s):
And a whatever inventory they have is liquidated and just pops up on that. And you know, this, so the main area is I’ve seen it, it’s electronics. I’ve seen some cases involving like dietary supplements wear the formulations might’ve been different, or the quality control wasn’t there. You know, if you have something that needs to be stored at a particular temperature, you don’t want somebody out there to do and how he knows what and selling it under your name. M so those are the kind of the areas that I’ve really a scene, the most action, a, you know, with these types of cases.

Nathan (9m 26s):
So given the courts, a Ken, the courts get a, you know, Amazon or eBay or whoever too, to shut down these, these resellers.

Tom (9m 34s):
Yeah. Once you’ve got the injunction, you can go to, you can go to the, the, the different to online marketplaces, ah, and use that as leverage to shut them down. I’m the other thing that does make it somewhat advantageous these days is sometimes within the last, I want to say the last year, but fairly recently, Amazon has started making it a, more of a requirement that the actual selling entity B identifiable. Umm, so it’s a, it’s a little, at least on Amazon, it’s a little bit harder to be purely anonymous, you know? So, so that sort of works in your favor to say these are not necessarily suit’s that you’re going to make a lot of money on because you still have to try to collect a right.

Tom (10m 14s):
But, but getting the injunction and then getting the, a, the online market place to take some action, it’s becoming a little bit easier to do, you know, a lot of these, a lot of the online entities are taking, this is fairly seriously themselves. They’re not looking, you know, Amazon, it doesn’t do Amazon any good for you to buy stuff on Amazon and be unhappy with it because it’s because it’s a, an improper sail. So the they’ve got an interested in sort of helping out with this two and they’re sort of doing what they can. So

Nathan (10m 42s):
Yeah. And I can imagine, even though there may not be a lot of monetary gain to be able to be had from these cases, there’s a preventative, monetary loss do to sales, to, you know, on authorized resellers instead of, you know, the, the proper to

Tom (10m 55s):
Yeah. Well, I certainly think there’s the monetary loss, but I think probably the biggest factor that would drive you to do this is protection of your reputation. You know, one of, one of the ways that you discover that people who are doing this is you start getting negative reviews on your legit Amazon page. And you wonder, geez, I don’t recall. So, and to that person or I don’t recall having, so that’s one of the ways that you will typically first discover this is taking place.

Nathan (11m 20s):
That makes sense. That makes sense with Tom. That’s a very interesting conversation and I’m sure is something that we’ll continue to develop as our world gets a more interconnected and online sales continue to grow a business. Owner’s a individual’s listeners and viewers want to get in touch with you, find out more about this topic, how a landowner Anasazi can help them or any other, a IP or a trademark questions. How could they reach you

Tom (11m 44s):
A well, they can get to our website. It’s of all things. A and they’d get me a individually. Didn’t get me a, a T K

Nathan (11m 57s):
Great. I want to thank you for coming back.

Tom (11m 60s):
Oh yeah, go ahead. If you could edit that one differently it’s team, McNaulty a okay.

Nathan (12m 5s):
Sure. You want to thank you for a fur returning to Radio Entrepreneurs that we always love having you on and look forward to having you back on the show. Thank you and remind everyone. This is Radio Entrepreneurs. All right, let me.

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