Discussion:
What is the name of your state?VA
I am a retailer that sells a product online that I buy from a distributor that bought the product from a sales rep. The manufacturer of the product is trying to build a brick and mortar distribution network and is unhappy with the prices I charge even though I set my prices to be competitive vs other retailers already selling the product online.
I'm hearing that the manufacturer (relatively new in the US) may be thinking about attempting to revoke the use of their logo and freely distributed sales material in my advertising if I don't raise my prices to certain % of list.
I'm relative new in retailing but that seems nuts to me.
Do I have the right to use the TM info under fair use laws?
Answer:
Do I have the right to use the TM info under fair use laws? No. Fair use under trademark law is a very narrow exception to the trademark limitations. Fair use only allows using the mark in a purely descriptive manner; any use of the mark that implies that you are associated with, sponsored by, or have any other relationship with the mark holder would not be fair use. Besides, the guy has already implied that he would "revoke" your rights to use the mark, which means he might be willing to sue you, so why take the risk?
Trademark and antitrust laws are designed to protect consumers, not retailers, so there really isn't anything you can do except either do what he says or stop selling his products. You don't have a "right" to carry his products -- he does not have to sell them to you.
Now, if you were buying the products at a retail and reselling them, my answer would be different, but that's not the case here.
Answer:
I need to be sure that my customer knows what they are getting. I buy the product on the open market from an authorized distributor. The product is widely distributed and is a brand, like "IBM" computer. I own the inventory. I would not have to advertise a computer for sale for example saying "computer made by big NY firm that has 3 letters in it's logo". The consumer has the right to know clearly what they are buying. Saying the computer is an IBM would certainly be a fair use of the TM regardless of what I paid for it or what I sell it for.
Of course the manufacturing company is smaller that IBM. I guess I don't agree with your assessment.
I am using the name and logo is a purely descriptive manner to describe the product (that I own) that I sell in my website.
Answer:
I guess I don't agree with your assessment. Ok. Nobody said you had to.
Answer:
between me selling my Ford and calling it a "ford" and me selling my inventory and calling it a "brand name" widget so my customer knows what they are getting?
Answer:
As I noted in my first response, the law treats "retail" sales differently from "wholesale" sales.
If you purchase an item at "retail" then the trademark holder's rights are "exhausted," that is, the trademark holder cannot assert any further control over the use or sale of that particular trademarked item. This is the "first sale" doctrine, and it exists in copyright and trademark law as well. If you buy and object at retail, you can re-sell that object and use the trademark holder's name in a purely descriptive fashion to sell the item, and that's okay.
However, there is no "first sale" doctrine for wholesale sales; the first sale doctrine and exhaustion only attach after the first retail sale. So a trademark holder can continue to exercise rights up until the first retail sale.
Event he "first sale" doctrine in a retail situation can be limited; if someone buys an item at retail, but then sells or advertises for sale in some way that would "confuse" a customer into believing that the seller was an authorized dealer, then the trademark holder can, for lack of a better word, "re-assert" his trademarks rights, even after a retail sale. One way for someone who bought something at "retail" to get in trouble this was is to advertise in such a way that makes it seem as if the seller is an authorized distributor: "Get your TM'd t-shirt here!" might be sufficient. Another way is for someone to buy up enough items and sell such that it appears that the person is an authorized distributor.
Further, buying up items at a "fire sale" or a going-out-of-business sale, or otherwise paying LESS than retail prices is NOT a retail sale, even if the person selling the items is normally a retailer.
In addition, there is the "likelihood of confusion" issue that can exist when you are a known seller of trademarked goods.
If you are an individual, you can sell your "Ford" car and call it a "Ford" because the use of the trademark is purely descriptive. Nobody expects that you have any special relationship with Ford -- you are just someone trying to sell their car.
If you are a retailer, and you are selling Fords, then calling what you are selling "Fords" is not purely descriptive, because consumers likely believe that you are in some way authorized by Ford to sell the cars to them -- that consumer belief is what makes the use of the mark more than "purely descriptive," and what gives the trademark holder at least some control over the use of the mark.
Answer:
But it seems to me that manufactures could essentially eliminate competition at the retail level by dictating prices. That does not happen with say kitchen faucets. The manufacturer sets list prices and what they sell to the distributors. Its dog eat dog after that.
Lets say I go to a distributor who has an excess of model "X-12" of a Smithtown Widget. He sells them to me at a discount. I don't know if he is a first tier or second tier distributor. I buy the merchandise.
I now put the merchandise on my website and offer Smithtown widgets on sale. Like Overstock.com does.
Smithtown for whatever reason decides they don't want any sales of their product on the internet and tell me I cant tell the consumer that it is a "Smithtown" widget because they don't like the price I'm selling at.
In fact they decide that nobody can use the Tm name if they are an internet business unless they sell at 100% list. Thats all OK?
Answer:
But it seems to me that manufactures could essentially eliminate competition at the retail level by dictating prices. As I noted above, no manufacture MUST sell their products to any particular distributor, and no distributor or seller has the RIGHT to carry a particular manufacturer's goods.
If a manufacturer decided to start selling their products at retail, they could eliminate all competition merely by refusing to sell their products to any other retailer -- they don't have to sell to anyone else.
And manufacturers can and do dictate price, all the time. Oftentimes, the price is a "suggested retail price," which means it is a "soft" mandate, and retailers can and do change the prices. Sometimes manufacturers will allow a merchant to sell at "below suggested retail price," but not allow the retailer to advertise the lower price. And in certain areas (perfumes is a common one), the manufacturers dictate a minimum price for their goods (in perfume, studies have shown that if a perfume is "too inexpensive," people will see that as "cheap" and sales will go DOWN rather than up...). All of these things are perfectly legal.
Now, all of these things would likely be ILLEGAL if it was a bunch of retailers conspiring to set prices -- then antitrust laws would kick in. But antitrust laws are designed to protect consumers, not retailers, so manufacturers can and do set prices. Many of them do not, many of them don't really care once they've sold to the distributor -- if retailers make money or not, that's not their business. But sometimes manufacturers DO care, as you are finding out.
Lets say I go to a distributor who has an excess of model "X-12" of a Smithtown Widget. He sells them to me at a discount. I don't know if he is a first tier or second tier distributor. I buy the merchandise. If he's a distributor, it doesn't matter if he's first tier or twentieth tier -- first sale doctrine only kicks in when there has been a RETAIL sale, regardless of how many wholesale transactions took place prior to the retail sale.
I now put the merchandise on my website and offer Smithtown widgets on sale. Like Overstock.com does. That's fine. But you can guarantee that if a manufacturer told Overstock to stop selling something, they would -- read their privacy and trademark useage policies.
Smithtown for whatever reason decides they don't want any sales of their product on the internet and tell me I cant tell the consumer that it is a "Smithtown" widget because they don't like the price I'm selling at. That's generally acceptable as long as you are a retailer that has purchased the widgets at wholesale.
In fact they decide that nobody can use the Tm name if they are an internet business unless they sell at 100% list. Thats all OK? In general, that's okay. They can't keep someone from using the TM name if the use is a "fair use," but they can control other uses of their trademark.
Look, this is business, and a lot of things that wouldn't fly at the retail level are perfectly okay at the wholesale level. If you don't want to sell the products at the set price, then don't sell the products. It's not like they are saying that you can't sell the products, just you have to have a minimum price.
Now, if the manufacturer makes all of the retailers sell at a minimum price, but the manufacturer then sells directly to the public at a lower price AND you can show that the purpose is to drive competition out of the market, then you may have an antitrust problem. But everything you've described (given the limited information you've given) appears to be on the up-and-up from a legal perspective, although probably not good business. If you are still not satisfied, you have a couple of choices. You can ignore the TM holder and continue to sell at whatever price you want, and risk a lawsuit, but maybe nothing will happen, who knows. You could also go and talk to a local attorney, who can review ALL of the pertinent facts, with real names, and give you a more accurate opinion of what liabilities you might face down the road, if any.
As always, the advice here is given on general legal principles, and it is certainly possible that a local attorney, who has access to all of the facts, may find some inconsistancy which changes the answer.
Answer:
I believe that the individual who represents the product in the US is trying to force internet prices higher such that they are non-competitive with brick and mortar prices. It makes the proposal to the distributors that he is trying to set up more sellable if the product is not competitively priced on the internet.
Nothing has actually been done, it is just rumoured in the Internet community.
We'll see how it goes.
Answer:
I believe that the individual who represents the product in the US is trying to force internet prices higher such that they are non-competitive with brick and mortar prices. It makes the proposal to the distributors that he is trying to set up more sellable if the product is not competitively priced on the internet. And that's really not that uncommon these days -- a lot of B&M retailers are wary of purchasing (for retail sale) products that can be purchased cheaply and easily over the Internet -- and since Internet sales are still a fairly small fraction of total sales, the manufacturers are oftentimes willing to sacrifice web sales in order to get more B&M orders.
Nothing has actually been done, it is just rumoured in the Internet community. No reason to worry too much until something actually does happen...
Good luck.