why map policies · • vorys has been identified by 17 fortune 500 companies as a go-to law firm ....
TRANSCRIPT
Why MAP Policies
Fail and What You
Can Do So Your
Policy Doesn’t
Whitney Gibson
Laura Erdman
Who We Are
• Vorys, Sater, Seymour and Pease LLP was
established in 1909 and currently has 375 attorneys
in seven offices nationwide
• Currently ranks as one of the 200 largest law firms in
the U.S., according to American Lawyer magazine
• Vorys has been identified by 17 Fortune 500
companies as a go-to law firm
Vorys Online Seller Enforcement Group
• Developed comprehensive graduated enforcement systems
that many companies use today to address MAP violations,
unauthorized sellers, traffic diversion schemes, misleading
adds, defamation attacks and other online brand threats.
• Works with companies across the country on global
enforcement programs.
• Regularly speaks and writes on strategies for stopping
unauthorized online sales, and other online brand threats,
including the SF ACC, DSA Annual Meeting, DSA Global
Summit, Law360, etc.
Vorys Online Seller Enforcement Team
Whitney Gibson,
Partner
Daren Garcia,
Partner
Laura Erdman,
Associate
Adam Sherman,
Partner
Leslie Allen,
Associate
Jessica Baverman,
Associate
Companies Cannot Efficiently Identify
Authorized Sellers Violating MAP
Need Good Technology
• Sellers play games
• Below MAP nights/weekends
• Will deny violations
• Report reliable results
Key Items to Facilitate Identifications
• Need list of screennames/websites of authorized sellers
• Prohibit anonymous sales
• Online channel restrictions
• Incorporate in online seller agreement/policy
• Ability to subpoena if necessary
Unauthorized Sellers Have a Higher
Tendency to Violate MAP Policies
SOURCE: http://insight.kellogg.northwestern.edu/article/when-retail-prices-cross-the-line
15% of authorized retailers
violate MAP policies
53% of unauthorized retailers
violate MAP policies
Northwestern Study
“Overall, the researchers urge manufacturers
to focus on both authorized and unauthorized
retailers when it comes to MAP violations”
See https://insight.kellogg.northwestern.edu/article/when-retail-prices-cross-the-line
Stopping Price Erosion
Companies Often Do Not Have Valid Legal Claims
Against Third-Party Unauthorized Sellers
MAP
Policy
Law
First Sale Doctrine:
Once a trademark owner sells a product,
the buyer ordinarily may resell the product
without infringing the trademark
Law
Material Difference Exception
What Constitutes a Material Difference
• “The threshold of materiality must be kept low . . .
because it is the subtle differences that consumers are
most easily confused.”
• Only one material difference is sufficient to bring a
trademark infringement claim
• Material differences do not have to be “physical” to
establish trademark infringement
Create Material Difference
This limited warranty applies only to purchases
from authorized [Insert Company] retailers.
Trademark Claim Supported by Case Law
• Material difference found when the non-genuine product is not subject to the same
warranty as the genuine product.
• Bayer Corp. v. Custom Sch. Frames, LLC, 259 F. Supp. 2d 503 (E.D. La. 2003);
TracFone Wireless, Inc. v. Pak China Grp. Co., 843 F. Supp. 2d 1284 (S.D. Fla.
2012); Beltronics USA, Inc. v. Midwest Inventory Distrib., LLC, 562 F.3d 1067 (10th
Cir. 2009); Fender Musical Instruments Corp. v. Unlimited Music Ctr., Inc., No.
3:93CV2449, 1995 U.S. Dist. LEXIS 15746 (D. Conn. Feb. 16, 1995); RFA Brands,
LLC v. Beauvais, No. 13-14615, 2014 U.S. Dist. LEXIS 181781 (E.D. Mich. Dec. 23,
2014); Heraeus Kulzer LLC v. Omni Dental Supply, No. 12-11099-RGS, 2013 U.S.
Dist. LEXIS 91949 (D. Mass July 1, 2013); Bel Canto Design, Ltd. v. MSS HiFi,
Inc., 837 F. Supp. 2d 208 (S.D.N.Y. 2011); Montblanc-Simplo GmbH v. Staples,
Inc., 172 F. Supp. 2d 231 (D. Mass. 2001).
Customer Service/Repairs
Access to Promotions, Discounts,
Other Programs
Trademark Claim Supported by Case Law
• The fact that the non-genuine product did not inform consumers of
or allow consumers to participate in the company’s promotions
constituted a material difference.
PepsiCo v. Pacific Produce, Ltd., No. 99-1326-PMP-RLH, 2000 U.S.
Dist. LEXIS 12085 (D. Nev. May 4, 2000); PepsiCo, Inc. v. Longmont
Packing, No. 99 D 1077, 1999 U.S. Dist. LEXIS 12811 (D. Colo. Aug. 2,
1999); PepsiCo, Inc. v. Giraud, 7 U.S.P.Q. 2d 1371 (D. P.R. 1988);
Bayer Corp. v. Custom Sch. Frames, LLC, 259 F. Supp. 2d 503 (E.D.
La. 2003).
Law
Quality Controls Exception
Exception #2 – Quality Controls
• “A product is not truly ‘genuine’ unless it is manufactured and
distributed under quality controls established by the manufacturer.”
• “[A] trademark holder is entitled to an injunction against one who
subverts its quality control measures upon a showing that (i) the
asserted quality control procedures are established, legitimate,
substantial, and nonpretextual, (ii) it abides by these procedures,
and (iii) sales of products that fail to conform to these procedures
will diminish the value of the mark.”
Policy For Vetting Potential Retailers
• Review legal claims
• Bankruptcies
• Online reviews
• Any complaints about delivering
damaged/defective products
Policy/Practice for Checking
on Authorized Sellers
• Checking on your authorized retailers to make
sure they are selling quality, non-damaged
• Practice/policy for terminating retailers that sell
damaged or expired products to customers
Policy for Retailers to Remove, Return
Damaged/Defective Products
Prohibit Anonymous Online Sales
Recall Policy
• Involves quickly reaching out to authorized
sellers
• Involves being able to contact customers
through information obtained by authorized
sellers
Policy Reporting Customer Complaints
Proper Storage/Remove Expired Products
Add Provision to Support Tortious
Interference Claim
• Retailers cannot sell to others for purposes of resale.
e.g. Australian Gold, Inc. v. Hatfield, 436 F.3d 1228, 1235-38 (10th Cir. 2006) (affirming $500,000 damages award for tortious interference with a dealer agreement)
Legal Claims Against All Unauthorized Sellers
We make subtle revisions to
retail agreements to create:
1) Material differences;
2) Differences of quality
controls; and
3) Tortious interference with
contract claims.
MAP
Policy
Enforcing MAP in Traditional Model
Manufacturer
Unknown Reseller
Reseller
Manufacturer
Distributor Distributor
Reseller Reseller Reseller
MAP Policy & Enforcement MAP Policy & Enforcement
Uncontrolled Distribution
Manufacturer
Distributor
Unknown Reseller
eBay Jet Other 3P
Marketplaces
Unknown Reseller
eBay Jet Other 3P
Marketplaces
Unknown Reseller
eBay Jet Other 3P
Marketplaces
Unknown Reseller
eBay Jet Other 3P
Marketplaces
Unknown Reseller
Distributor
Unknown Reseller
eBay Jet Other 3P
Marketplaces
Authorized Reseller Program
Manufacturer
Distributor Distributor
Authorized
Reseller
Authorized
Reseller Authorized
Reseller Authorized
Reseller Authorized
Reseller
Control Online Sales Control Online Sales Control Online Sales
Authorized Reseller Program
Manufacturer
Distributor Distributor
Authorized
Reseller
Authorized
Reseller Authorized
Reseller Authorized
Reseller Authorized
Reseller
Communicate and Enforce MAP and Other Policies
Example: Authorized Distributor Policy
By purchasing manufacturer’s products for resale, they acknowledge:
― They have received the MAP Policy
― They will adhere to quality controls
― They will only sell to Authorized Resellers
― They will not sell online without permission
― They will not sell to any reseller on the “do not sell” list
Example: Authorized Reseller Policy
Products purchased from distributors may only be resold by Authorized Resellers that
adhere to policy; by offering products for sale, Resellers agree to the following:
― They can only sell to end-users or to other Authorized Resellers
― They have received the MAP Policy
― They are prohibited from selling online without the manufacturer’s permission
― They are required to abide by applicable quality controls
― The warranty is available only on products sold by Authorized Resellers
Example: Authorized Online Reseller Policy
Products may be sold online only by Authorized Resellers who:
1. Register and get approval for all websites, storefronts, and screennames
2. Agree to abide by Authorized Online Reseller Policy:
• No anonymous selling
• Follow manufacturer’s marketing/trademark use guidelines
• Data security/privacy
• Manufacturer may revoke approval for Authorized Reseller to sell online
at any time
Lack of Comprehensive Enforcement
Technology C&D notices Then What?
Misleading Ads Divert Customers to
Unauthorized Sales
• Advertisers use misleading ad-
copy to divert customers to
unauthorized sales
• Ads claim to offer deep
discounts
• Ads direct customers to
competing products
Example search for “Doterra Discount”
Ads Affiliated With Unauthorized Sales and
Listings for Competing Products
Result:
Customers purchase
products from
unauthorized sellers rather than authorized
consultants/official
channels
“Reviews” to Sell Competing Product
• Reviews pass themselves
off as unbiased
• Usually contain some
positive aspects of each
products to support
objective appearance
Reviews are Not Neutral or Objective
Reality:
The comparison
review is designed to
promote the “top
rated product”
Review Sites Earn Money Through Affiliate Links
The “top rated” product review is, unsurprisingly,
the only eye cream review with purchase links.
Fraudulent Apps
• Growing area of brand abuse
• Difficult for consumers to
distinguish official vs. fraudulent
Apps – A Growing Problem
App stores have little
initial screening to ensure
apps are authentic
Result:
Widespread misuse of
trademarked names/logos
Different Types of Diversion Schemes
1. Cybersquatting/Typosquatting
2. Bogus Review Websites
3. Pay Per Click Ad Abuses
4. Fraudulent/Scam Websites
5. False Associations
6. SEO Manipulation
7. Association With Offensive Content
8. Mobile App Fraud
Company Does Not Have a Sufficient
Budget To Allow For Comprehensive
Enforcement
Understand Financial Impact – Justification
for Resources
• Involve person with finance background to measure
impact of MAP violations, unauthorized sales, and ROI
• Track financial KPIs - sales, margins, revenues, profits
Company Sells Through Many Online Resellers,
Some of Which are Not Trustworthy
• Select online retailers that are supportive of
MAP/Unauthorized Sales enforcement
• Retailers with limited assortment more likely to
violate MAP
Company is Scared to Deliver
Real Consequences
• Authorized
― Unclear on actions
― Unwilling to enforce against powerful resellers.
― Incentives/disincentives lack teeth
― Too many allowed strikes
― Bad behaviors allowed
― Inconsistent enforcement
• Unauthorized Sales
― Whack-a-mole takedowns will not work
― Need more than C&D letter (need comprehensive enforcement)
― Unauthorized Sellers have to believe there will be consequences
Companies Only Take Reactive Approach,
Not Proactive
• Issue press release regarding
enforcement against
unauthorized sellers
• Communicate with authorized
sellers about enforcement
Significant e-Commerce Growth
e-Commerce growth is 16-20% for most categories
Third-Party Marketplaces are Growing
- Launched in 2005
- 1.7M active sellers
- 26.1M active buyers
- $2.39B annual gross
merchandise sales
- Originally launched
marketplace for third-party
sellers in 2010
- Oct. 2016, company
began to role out
“Marketplace” feature
through its app in the
United States, the U.K.,
Australia and New Zealand
- Initially launched in 2009,
had a long trial period
- Apr. 2016 begins working
with marketing firm to
compete with eBay,
Amazon
- Launched in 2014
- Acquired by
Walmart in Aug.
2016
- Leading Japanese e-
retailer
- Debuted in the United
States in 2013
- Originally launched in 2010
- Re-launched in 2014
- Launched home products
marketplace in 2014
- App launched in 2011
- Eyeing potential IPO, per
Wall Street Journal
- App launched in 2013
- Debuted in the United
States in 2014
Marketplaces Make Up
31% of e-Commerce (and Growing)
Channels Make it Easy to Sell Online
Tsunami of Unauthorized Sellers Online
Additional Resources
Whitney C. Gibson
Vorys, Sater, Seymour and Pease LLP
513.723.4823| [email protected]
www.onlinesellerenforcement.com
@WhitneyCGibson