By Purple Fox Legal
December 8, 2021
Sixth Circuit Judge John Nalbandian wrote, “Online shopping has transformed American life.” And, it’s true. Online shopping has made life significantly easier and more convenient, reducing the crowds in stores, and allowing people to shop for better prices in a much easier way. But, that’s not all it’s done.
Online shopping has also transformed the life of the shop owner, taking them from the front counter and placing them behind an invisible Internet curtain. It’s opened many doors for consumers, but it’s also increased legal questions and e-commerce websites’ liability. The physical-to-digital shopping transformation has also made intellectual property infringement easier to commit. It’s a multilayered transformation.
The reality is that e-commerce sites most often act as a middleman. These sites simply connect vendors with consumers, instead of producing all the products themselves. And, many of them could be violating trademark law without knowing. This article dissects trademark law’s intersection with e-commerce.
For the most part, online marketplaces have been able to sell third-party goods without much concern about trademark law or infringement. This is because, traditionally, the courts don’t hold them liable, so long as they are acting as a neutral or “hands-off” intermediary between vendors and consumers. However, an e-commerce website begins to enter into a gray area when its marketplace does not remain passive. And, this gray area could lead to some legal trouble.
In 2021, one company found itself in such a situation. Redbubble, an Australian printing e-commerce company, was caught in 2017 displaying and selling images that had been trademarked by Ohio State University (OSU). When OSU contacted Redbubble about the infringement, Redbubble refused to remove the offending articles. A lawsuit for trademark infringement, counterfeiting, and unfair competition was launched by OSU.
OSU argued that Redbubble was no longer taking a passive approach with their sales. Unlike marketplaces like Amazon or eBay, which are responsible for facilitating transactions between vendors and consumers, OSU asserted that Redbubble allowed independent artists to “have goods displaying their artwork and images advertised, manufactured, and sold” by using the Redbubble platform.
OSU argued Redbubble’s more active role violated federal trademark law and the Sixth Circuit agreed. The Sixth Circuit determined that the key distinction between someone “using” a trademark, and someone facilitating sales is the “degree to which the party represents itself…” Put simply, it was the Redbubble tags, bags, and packaging that caused Redbubble to violate federal trademark law.
The Lanham Act provides the main rules of federal trademark law and it states that a trademark infringement claim may be brought against any party who, without authorization:
use[s] in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services.
Even in traditional brick-and-mortar shops, a store owner can be found liable for trademark infringement by providing a marketplace for consumers to produce counterfeit products, even without producing the products themselves. Landlords are also being sued for allowing their tenants to create counterfeit goods. The reality by advertising and manufacturing trademarked products on behalf of their artists, Redbbble acted in the same way as brick-and-mortar shops and landlords. Once Redbubble started advertising and manufacturing these products, Redbubble presented itself as the seller or owner of the trademarked goods at a much greater degree than Amazon or eBay.
So, now the question is how does an e-commerce platform, selling user-generated products, protect itself against claims of trademark infringement? The Sixth Circut wrote that it’s important for a platform to distinguish itself from the product and the product’s sellers. As long as a business exercises minimal control over the product, and maintains a clear “hands-off” position, it will not be held liable for infringement.
For example, Amazon and eBay “clearly label” the source of the products on their sites. Unlike Amazon, Redbubble only references its artists and sells products that do not come into existence until after an order is placed. Redbubble also delivers the products in Redbubble packaging with Redbubble tags. Even further, Redbubbe is involved in manufacturing and controlling the quality of the products sold on its platform, unlike Amazon or eBay.
Offering user-generated products, like Redbubble, can easily avoid direct infringement liability by making it clear your business is merely facilitating transactions between vendor and customer. Instead of interfering in each step of the process, e-commerce websites should consider staying as neutral as possible. Minimal risk is assumed when acting solely as a facilitator for the sale of pre-existing products that are advertised, manufactured, and shipped by the vendors themselves. Once you assume control over marketing, manufacture, quality control, and delivery, trademark infringement becomes even more likely.
To further understand trademark law, and the best ways to protect your e-commerce business, contact an experienced attorney.