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DRTV Powerhouses Take on Amazon in Federal Court

Digital Law Group has been advocating on behalf of its clients and the direct response industry for some time now against Amazon’s unscrupulous business practices of knowingly selling counterfeit products on its marketplace. In fact, when we pitched a panel idea for a recent tradeshow on policing and enforcing intellectual property rights on online marketplaces, the organizer notified us that Amazon could not be included/mentioned in the content of our session.

Naturally, we were concerned by this information and perplexed as to why so many marketers continue to do business with Amazon in spite of the fact that knockoffs and counterfeits were harming their brands’ reputations as well as their profit margins.

However, it seems that the tide has turned, as a few industry leaders – putting their competitive natures aside – banded together to take on what is arguably the largest source of counterfeits, knockoffs, and intellectual property infringement in the country. Here’s a quick synopsis of the lawsuit:

On Dec. 5, Allstar Marketing Group LLC, Ontel Products Corp., and Ideavillage Products Corp. filed a lawsuit against Amazon in the U.S. District Court for the Southern District of New York. Their claims include direct trademark infringement, direct counterfeiting, contributory counterfeiting and trademark infringement, unfair competition and false designation of origin, copyright infringement, and contributory copyright infringement. These claims are based on Amazon’s routine practice of manufacturing, importing, exporting, advertising, marketing, promoting, distributing, displaying, offering for sale and/or selling unlicensed and/or infringing versions of the plaintiffs’ “As Seen on TV” products.

What is noteworthy about this action is that it includes direct infringement rather than just contributory infringement claims, which Amazon has been able to skirt in the past – relying on immunity theories under Section 512(2) of the Digital Millennium Copyright Act, which protects internet service providers who operate third-party vendor platforms.

The complaint calls Amazon out on its well-known practice of commingling products sold by third parties (counterfeits) with inventory supplied by authentic sellers and fulfilled by Amazon. Further, the complaint details how Amazon allows third-party sellers to list their products against a legitimate product’s listing, such that a consumer can see the less expensive option, but believe it to be authentic because it shows up on the primary listing’s page. This particular conduct has been a thorn in marketers’ for some time, as it prevents easy removal of counterfeit listings (and negative reviews) on the platform.

Damages sought by the plaintiffs include profits and treble damages in the amount of a sum equal to three times such profits or damages. Alternatively, the plaintiffs are seeking statutory damages in the amount of not more than $2 million per counterfeit mark infringed. The plaintiffs are also demanding that the court order Amazon to destroy all infringing products along with advertising and promotional materials.

A pretrial hearing has been set for Feb. 15, 2017. If the complaint isn’t thrown out, as was in the case in previous efforts to sue Amazon for infringement, expect to see many other industry players jumping on the bandwagon to have their day in court. If you have concerns about infringing products being sold on third-party marketplaces like Amazon, we’d love to hear your story. Watch this space for updates.

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