by Traverse Legal, reviewed by Enrico Schaefer - September 27, 2024 - Brand Protection, Consumer Packaged Goods, Protecting Your Trademark from Infringement
Our technology and internet lawyers are constantly contacted by Amazon sellers trying to protect their brand names and products on the Amazon marketplace. One of the most common brand protection issues involves gray market sellers and counterfeits on Amazon. Many of our clients have a history of trying to protect their brand and products through various tactics, including the Amazon Brand Registry, threat letters, alleging infringement, and monitoring. But often, it feels a lot like whack-a-mole. When you put one counterfeit product or seller down, another one pops up. In some cases,
Are grey market sellers and counterfeiters damaging your brand’s reputation and undercutting your sales on Amazon?” There’s both good news and bad news. Let’s start with the bad news. Protecting your brand and product sales on marketplaces like Amazon is not a one-time effort. All Amazon sellers need consistent monitoring and enforcement to protect themselves from counterfeiters and bad actors in the gray market. Many of our Amazon seller clients have in-house programs to address these issues and farm out the problem cases they can’t solve internally to their attorneys. But under any scenario, you’ll likely have to spend legal dollars to enforce your rights.
The good news is that this monitoring and enforcement activity typically returns excellent returns on investment. The sale of counterfeit goods, competitors’ use of your trademarks to sell their goods, and gray market bad actors are costing you real money and affecting your bottom line. Successful enforcement activities will increase sales and protect your overall brand value.
Perhaps the biggest problem our clients face selling consumer packaged goods online involves individuals or businesses that sell genuine products without authorization or permission from the product manufacturer, wholesaler, wholesaler, or distributor. In short, they sell your products through unauthorized channels. Authorized Sellers are retailers or distributors with direct agreements with the brand or manufacturer, allowing them to sell products through approved channels. They adhere to strict guidelines, pricing policies, and quality standards set by the brand. Grey Market Sellers, on the other hand, do not have official permission from the brand to sell their products. They operate outside the brand’s distribution network, often undercutting prices to attract buyers.
The key here is that you have a controlled distribution network that involves approved wholesalers, retailers, and distributors. When your products are sold outside these authorized distribution channels, everyone within your channel stands to lose. Your contracts with wholesalers, distributors, and retailers are the key to establishing an authorized sales channel to protect yourself against gray market sellers.
You might ask how third parties access products outside the approved distribution network. While this can occur in various ways, the most likely scenarios involve the sale of excess inventory by an authorized channel member, the import of your goods back into the United States from overseas wholesalers, distributors, or retailers, and other unauthorized distributions.
It’s important to distinguish the grey market sellers from counterfeiters. Counterfeiters are selling fake products that are designed to imitate your genuine goods. Almost inevitably, the counterfeit products are of inferior quality and are sold leveraging your brand name, trademark, and intellectual property rights. In short, a counterfeiter tries to trick the consumer into believing they are buying genuine goods when they are not. Because the goods are inferior, they are often cheaper, drastically affecting your sales on a platform like Amazon.
We probably don’t have to tell you about all the negative impacts of grey market sellers on your bottom line. You would not be reading this article without being concerned about those impacts. Not only can grey market sellers affect your brand value by selling at artificially low prices, but they devalue your trademark and brand value and dilute your ability to differentiate your company’s products in the marketplace. It is also likely that your authorized resellers will be affected by the sale of grey market sellers. Your relationships with your authorized resellers are inevitably and negatively impacted. If your authorized reseller contract requires you to protect the marketplace, you could be in breach of contract if you are not exerting enough effort to identify grey market sellers and enforce your rights. Let’s not forget about the consumer. Because these are grey market products, there is no warranty or after-sale support. Many of our clients pride themselves on the support they provide their customers after the sale.
When selling on Amazon, our clients employ various strategies to protect themselves from the grey market. In many cases, they start the protection process internally and refer us to tough cases they cannot handle independently. As Amazon often fails to enforce its policies to protect you from grey market sellers, there is a good chance you’ll have to act on your behalf to reduce the number of sales happening outside your network and the resulting loss of revenue to you and everyone in your distribution channel.
This article assumes that you have already established an authorized reseller program and can control your distribution network. An authorized reseller program helps you control who can sell your products. An explicit reseller agreement will help protect certain territories, reduce the diversion of goods to potential gray market sellers, and provide detailed guidelines for how your resellers can sell your products on online platforms such as Amazon. Many of our clients have a minimum advertising policy known as a MAP. A MAP can provide controlled and consistent pricing so no authorized reseller can undercut another. These contracts will set expectations within your sales network provided that they are communicated, expectations are set, and you can follow up with any issues within your reseller network.
Although Amazon’s enforcement of its internal policies can be arbitrary, it still makes sense to become part of Amazon’s brand registry, which will allow you to report and monitor for unauthorized sellers. Amazon also has an Amazon Project Zero and Transparency Program, which empowers brands to remove counterfeit listings directly. You must understand how to use Amazon’s report infringement tool to submit claims against gray market sellers who violate your trademark rights or misrepresent products. Contact one of our attorneys to learn more about accessing these essential Amazon brand protection tools.
Our attorneys representing Amazon sellers typically get involved when Amazon’s brand protection tools fail to solve the problem. Putting a cease and desist letter to a grey market seller on legal letterhead, threatening maximum damages, injunctions, and other severe consequences can sometimes shut them down. Of course, to send a threat letter, you need to know where to send it. This typically involves an investigation by one of our investigative attorneys who understands how to do the internet research necessary to associate an Amazon seller account with a real company. If the cease and desist letter does not stop the sale of grey market goods, you may need to take the next drastic step by filing litigation. We have handled some of the larger brand enforcement litigation cases and know how to leverage litigation to get early results.
Founding attorney Enrico is a seasoned consultant who guides companies, including law firms, in effectively integrating artificial intelligence (AI). With a wide range of consulting services, Enrico assists clients in harnessing the power of AI while ensuring ethical and responsible implementation.
Years of experience: 35+ years
This page has been written, edited, and reviewed by a team of legal writers following our comprehensive editorial guidelines. This page was approved by attorney Enrico Schaefer, who has more than 20 years of legal experience as a practicing Business, IP, and Technology Law litigation attorney.
