With the launch of Brand Registry on Amazon two years ago, sellers were suddenly being held accountable for their listings on a scale that had never been seen before. While Amazon’s rules had always said that we were responsible for not infringing on rights owners’ intellectual property, it had not been enforced with such vigor. Resellers were being held responsible for listings they had not created, products they hadn’t sold for years, and the mistakes of the manufacturers of products they were selling (like with utility patent takedowns).
Patent, trademark and copyright rules were bewildering and unevenly applied. Amazon was allowing brands wanting to enforce MAP pricing to take down sellers, for example. During the first 6-9 months after launch, Amazon sided exclusively with the brands. There was no consideration that the takedown might be bogus or that the seller might be innocent.
The pendulum has swung since then. Amazon created a process to allow sellers to prove they were not infringing, but that created its own problems as Amazon would ping-pong between the seller and rights owner. Sellers lied. Rights owners lied. Bad actors became even more active in taking down competitors through Brand Registry. Recent lawsuits have highlighted how serious and expensive these IP tricks have become for sellers on the platform.
The Design Patent Fraud Scheme Explained
Last week I wrote about Amazon’s new mediation service to resolve utility patent disputes on the platform. I expressed the hope that it will succeed and be expanded to cover design patent clashes as well because activity is picking up on this scam.
This is how I’ve seen the design patent scheme play out:
- Bad actors identify products with good sales volume and margins that they feel confident they can re-create. Some of them get this data directly from Amazon through black market dealers. Others use data scraping tools for their research.
- They then search to see if a design patent has been filed with the USPTO.
- If not, they create drawings and submit a design patent. This usually costs less than $2,000.
- While they wait for the USPTO to go through its lengthy review process, they arrange for their duplicate/knockoff products to be manufactured and sent to Amazon’s warehouses.
- They open a Brand Registry account.
- They file design patent takedowns on their competitors – the same poor slobs who invented the product.
- During the time that the competitor is out of the picture, they rocket to number one – often using other dirty seller tricks like brushing:
- Victim is forced to sue or stop selling that product forever.
Recent Cases Highlight the Problem
I’m not going to name the exact cases here. There’s no point in embarrassing the sellers involved. I’m more interested in the story. Federal lawsuits are public information if you want to read more.
The most recent case I’ve read – all 40+ documents! – involved a seller who implemented the design patent scheme. The original product creator sued the design patent schemer for infringement, tortious interference and basically, for filing his design patent knowing full well that the design had been created by the original product creator.
Unfortunately, I think the rights owner of the common-law trademark is going to lose. The infringement claims have apparently been settled and the case is now focused on tortious interference. For those of you who don’t know, tortious interference occurs when one person/entity intentionally damages someone else’s contractual or business relationships with a third party, causing economic harm.
This claim has real teeth in this case. It is easy to argue that when the defendant did a takedown on Amazon, the intent was to harm the plaintiff’s relationship with Amazon. Unfortunately, the lawyers on the plaintiff’s side have made mistakes out of ignorance of how the platform works. They also have not done a good job of collecting evidence both from the platform and social media – particularly Facebook groups. Had they done so, they would have discovered that this actor was well aware of the design patent scheme and had told others about it. The plaintiff’s lawyers could have done a better job with their Amazon subpoena to get the details they needed.
If they had better understood how the platform works, they could have gathered a fair amount of data themselves. In our work for clients, we are often asked to help gather evidence against bad actors so our client can turn them in to Amazon for violations of TOS or pursue outside legal action. In addition to the seller’s real name and contact information, I would have asked the first time the defendant visited any of the listings in question, for example. If he visited the listings ever, a case could be made that he knew his design patent was questionable and that he filed it deliberately – especially if he visited their listings before filing his patent.
I would have also included the Amazon seller contract and made a strong case for the defendant interfering with it. He violated Amazon’s TOS in making the claim. I would have talked about how this mark is going to be on the plaintiff’s account forever and will interfere with his ranking and ability to be found through keyword search. It will affect his advertising and how often his ads will be shown…it will impact everything unless the plaintiff wins. Lost sales due to suspension is only the beginning.
At the heart of tortious interference is intention, so a key component to prove is that the defendant knew what he was doing when he did it. This is where some social media research and gathering of posts written by the defendant would have helped. The evidence is out there, but the plaintiffs didn’t know where to look. I feel badly for them. They are going to get screwed twice.
Have you heard about this design patent tactic? Was it presented to you as something that was legal and a good thing to do – just good business – and normal competition? Think twice about it. It can backfire on you if you are sued. Even though the defendant seems likely to win, he has spent a lot on legal bills up until now. In addition, I imagine it was a tremendous distraction and impacted his business.
The Critical Merchant ID
Here’s another case where not understanding Amazon impacted a lawsuit. This particular seller most likely was infringing on a design patent. But in this case, the party doing the infringing did not understand how Amazon works. The (alleged) infringing seller tried to hide from the rights owner. Interesting things happened.
For starters, the rights owner got the seller’s information from Amazon and delivered the lawsuit to the seller’s office. I’ll bet that really surprised them. Most people don’t realize that you can get seller information from Amazon legally. You don’t have to go through anything black hat or tricky. It just requires filing a subpoena. You do have to have cause. Amazon’s not going to give seller information to just anybody, but with cause, you can file that subpoena and usually get what you want for around $2,000.
This is not a really high bar. If you have several sellers infringing on your rights, you can get all of their names at the same time for the same $2,000.
Anyway, the plaintiff located the infringing seller and delivered the lawsuit to that seller’s door. In his infinite wisdom, the defendant decided, Hey. I’ll just change my store front name so they don’t know who I am. I’ll be able to keep right on doing what I’m doing. Right?
The defendant didn’t realize that your merchant ID stays the same forever. Call yourself anything you want. Change your storefront name anytime you want, but Amazon always knows who you are and so does anyone else who knows how to find your merchant ID on the platform.
All the plaintiff had to do was research this new seller who popped up on the listing to know, Oh. It’s the same seller because they have the same merchant ID.
That’s why I said I think that the plaintiff, the rights owner, is probably correct because changing your storefront name is not the action of an honest person. It will hurt him in court. I’ll be curious to see how both of these stories play out.
A Blow for Justice
Luckily, the good guys win sometimes. One of the attorneys who we’ve worked with closely over the past three years, Jeffrey Breloski, has done a phenomenal job for our clients with IP issues. He is a warrior in court, and he understands Amazon which makes him a formidable opponent. In one case, the plaintiff was a seller who had been on the platform for about a month. He had barely made any money when a rights owner come down on him with a bogus claim.
This seller, our client, decided to sue. It took less than a year, which is fast, and the seller was awarded $2 million in damages. Not bad for a month’s sale on Amazon. After winning the lawsuit, our client was able to get back on the platform too.
There is justice. It’s not cheap or easy, though. That is why I was pleased to see Amazon’s utility patent mediation service. I do hope that this is the beginning of something beneficial for sellers.
I’m hoping it will greatly reduce some of the bad actors’ shenanigans because now it’s going to be harder for them to get away with it.
Bad actors use bogus takedowns and fake patents because they know that nobody’s likely to hold them accountable. They know that the cost of filing a lawsuit is prohibitive, but if they start losing cases, things might change.
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NEWS FROM EGP
Bewildered sellers are being taken down for pesticide rules for a wide range of products that don’t normally scream “pesticides!” like soap or doorstops. To get the listing back, they have to take the training and test that Amazon has devised for pesticides and pass with an 80% or better. You can find this in Seller Central. We are recommending that resellers take the pesticide test proactively. The key words that are triggering the takedowns include:
- All natural
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