But we said “in many cases” - not in all cases. Fortunately, there are exceptions to the First Sale Doctrine. Let’s discuss these exceptions, and how you can use them to protect your brand against rogue 3rd party resellers.
How to Use the Exceptions to the First Sale Doctrine
The Material Difference Exception
One principle working in favor of manufacturers and brand owners when it comes to unauthorized sellers is that the First Sale Doctrine applies only if a product being resold is not “materially different” from the original product.
Although the law does not give a precise definition of what constitutes a “material difference” in a product, courts have interpreted this concept broadly. A material difference could be a physical change made to the product, such as if the seller removes barcodes or other tracking information from the original packaging to conceal its sale from the manufacturer. Or the difference could include nonphysical characteristics, such as the lack of a service that is part of the authentic product sold through legitimate retailers. The most common example is a warranty or customer support that is available only for products purchased through authorized dealers.
How to use this exception:
The material difference exception can help make a legal case that a rogue retailer is selling your products in violation of trademark law - and that retailer won’t have the legal protection of the First Sale Doctrine.
Knowing this, you should build into your product physical and/or service-related elements that would by definition mean anyone selling your goods without your permission were in violation of trademark law. A great place to start: Include a warranty and/or offer customer service to customers who can verify they’ve bought your product through an authorized dealer.
The Quality Control Exception
In some jurisdictions, brand owners can also leverage the “quality control exception” to the First Sale Doctrine, to demonstrate that a rogue reseller is using quality-assurance standards that are lower than the brand owner itself as well as the standard it demands of its authorized resellers.
In one real-world example of this exception, a retailer was found selling expired cosmetic products, in violation of the manufacturer’s quality-control standards for its authorized sales partners.
How to use this exception:
As part of your reseller policy, you should include written language stating your minimum standards for quality controls in the way these companies handle and maintain your products. This way, if you catch a rogue retailer selling your inventory, you can pierce the First Sale Doctrine shield by demonstrating that they are not abiding by your written policies for quality controls.
Another Great Protection Strategy: an Authorized Dealer Program
Finally, a manufacturer should establish an Authorized Dealer Program, an opt-in partner program that allows the manufacturer to limit which retailers its distributors (and its own in-house sales teams) are allowed to sell to.
There are many business advantages to setting up an Authorized Dealer Program, and one of them is that it can serve as legal barrier preventing rogue retailers from using the First Sale Doctrine as a shield to sell your products without your company's permission.
In some cases (although courts’ interpretations are not entirely predictable), if you have an Authorized Dealer Program in place, and you catch an unauthorized dealer retailing your products, you can bring a legal case of tortious interference - because that rogue seller is in fact interfering with the legal contracts you’ve struck with your authorized dealers.
Need More Guidance Preventing Rogue Retailers?
For more help stopping rotten retailers from harming your brand, here are several resources:
Read our free online guide: How to Stop Unauthorized Amazon Resellers.
Watch our video series: 13 Dirty Tricks Rogue Resellers Use to Devastate Your Brand’s Value.
And let us show you how an automated online brand protection program can help.