Trademark Infringement Against Unauthorized Resellers

By James Juo.

The U.S. District Court for the District of Colorado has granted summary judgment of trademark infringement against an unauthorized reseller in Otter Products, LLC v. Triplenet Pricing Inc., No. 19-cv-000510 (D. Colo. Nov. 10, 2021). Plaintiff Otter manufactures and sells mobile device, smartphone, and tablet cases and accessories under the OtterBox and LifeProof trademarks. Defendant Triplenet sells OtterBox and LifeProof products without Otter’s authorization on the internet, including through its Amazon storefront. The OtterBox and LifeProof products sold by Triplenet were actual products from Otter, but Otter asserted that Triplenet was not authorized to sell those products, was not part of Otter’s quality control program that applies to all of Otter’s authorized sellers, and Otter’s product warranty does not cover products sold by unauthorized sellers such as Triplenet.

The resale of genuine trademarked products generally does not constitute trademark infringement under the first sale doctrine. Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC, 562 F.3d 1067, 1071 (10th Cir. 2009). “[T]he right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product.” Australian Gold, Inc. v. Hatfield, 436 F.3d 1228, 1240–41 (10th Cir. 2006).

There are two exceptions to the first sale doctrine: a “material difference” exception and a “quality control” exception.

For the “material difference” exception, “when [the] alleged infringer sells trademarked goods that are materially different than those sold by the trademark owner,” then a product is not “genuine” and the first sale doctrine does not apply. Belltronics, 562 F. 3d at 1072.

The “quality control” exception applies when the alleged infringer “fail[s] to abide by the trademark holder’s quality controls when distributing the trademarked goods or … interfere[s] with the trademark holder’s ability to control quality.” Id. (citing Skullcandy, Inc. v. Filter USA, Inc., 2019 WL 2568010, at *5 (D. Utah, June 21, 2021)).

Here, the Court found the lack of Otter’s product warranty for products sold by unauthorized sellers such as Triplenet was a “material difference,” which is not limited to physical differences, but may also include differences in warranties or service commitments, citing Belltronics and Otter Products,
LLC v. Cloudseller, LLC, No. 19-cv-0630-JLK, *13 (D. Colo. Dec. 3, 2019). “[A] difference is material if consumers [would] consider [it] relevant to a decision about whether to purchase a product.” Belltronics, 562 F. 3d at 1073 (internal citations omitted).

Otter has cited to uncontradicted evidence establishing that the products sold by Triplenet are not covered by the Otter Warranty. See ECF 42-6, p. 3. Otter has also cited to survey evidence suggesting that more than 85% of respondents reported that they were “much more likely” or “somewhat more likely” to purchase an Otter Product on Amazon if the product included the manufacturer’s warranty. See 41-18, pp.11-12. Perhaps most importantly, Triplenet does not dispute that the applicability of the Otter Warranty is material.

Triplenet argued the Otter Warranty was “invalid,” arguing that the warranty was “packaged in a sealed box, thus, not being published for pre-purchase inspection, and citing Colo. Rev. Stat. § 4-2-314 (the implied warranty of merchantability) and Colo. Rev. Stat. § 4-2-316) (the exclusion or modification of warranties). The Court held that “[n]either statute provides any support for Triplenet’s argument.”

In addition to the “material difference” exception, the Court also addressed the “quality control” exception to the first sale doctrine. “Distribution of a product that does not meet the trademark holder’s quality control standards may result in the devaluation of the mark by tarnishing its image.” Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3, 6 (2d Cir. 1996). The quality control exception requires the trademark owner show that (i) they have established legitimate, substantial, and nonpretextual quality control procedures, (ii) they abide by these procedures, and (iii) the nonconforming sales will diminish the value of the trademark. Otter Products, LLC v. Cloudseller, LLC, No. 19-cv-0630-JLK at *15- 16 (citing Warner-Lambert, 86 F.3d at 6).

According to Otter, its authorized sellers must agree to follow specific instructions regarding shipping and handling of Otter products, product inspection, removal of damaged goods, reporting to Otter any product damages or defects, and product display requirements. Furthermore, before any Authorized Seller is permitted to sell on Amazon, they must submit an application to Otter, and must opt out of Amazon’s “commingling” practice and apply tracking stickers to its products.

The Court found that Otter abides by these quality controls, such as conducting regular reviews of distributor and reseller brick and mortar locations; requiring distributors to provide Otter with sell-through reports to ensure that Otter products are only sold to Authorized Sellers; and regularly auditing its online Authorized Sellers by examining every website and website storefront to confirm compliance with the quality controls, inspecting all reviews of Otter Products, and purchasing Otter Products from every Authorized Seller website to ensure compliance. The Court then concluded that this was not pretexual, and the quality control exception to the first sale rule applies.

Accordingly, the Court granted summary judgment on trademark infringement, as well as for unfair competition, and false advertising.

The Court also granted summary judgment in favor of Otter’s claim under Colorado Consumer Protection Act (“CCPA”). A violation of the CCPA requires: “(1) that the defendant engaged in an unfair or deceptive trade practice; (2) that the challenged practice occurred in the course of defendant’s business, vocation, or occupation; (3) that it significantly impacts the public as actual or potential consumers of the defendant’s goods, services, or property; (4) that the plaintiff suffered injury to a legally protected interest; and (5) that the challenged practice caused the plaintiff’s injury.” Peterson v. USAA Life Ins. Co., 353 F. Supp. 3d 1099, 1112 (D. Colo. 2018) (citing Hall v. Walter, 969 P.2d 224, 235 (Colo. 1998)), aff’d, 814 F. App’x 408 (10th Cir. 2020). The Court found that Triplenet’s statements were directed to the market generally, through its Amazon storefront, which was sufficient to establish impact on the public, citing Hall v. Walter and Matthys v. Narconon Fresh Start, 104 F. Supp. 3d 1191, 1207 (D. Colo. 2015).

The trademark attorneys at Thomas P. Howard, LLC are experienced  in enforcing trademarks or defending against infringement claims in litigation nationwide including in Colorado.