In your ongoing battle to preserve your brand’s integrity, protect your authorized resellers from being undersold, and improve MAP enforcement, you might find some unexpected support, of all places, in the federal criminal code.
A clause in US criminal law known as the “First Sale Doctrine,” originally crafted to protect copyright holders, can in some cases be used to help manufacturers and brands against unauthorized resale of their products. The legal principle behind this doctrine (listed in the United States Code under Title 17, Section 109) is that if an individual purchases a copyrighted or trademarked work — say, a CD or a painting, which confers intellectual property rights on its creator — the purchaser can then resell that specific copy of the work without violating the owner’s trademark.
But there are two primary ways that the purchaser of a trademarked product can violate the First Sale Doctrine — one of which might help protect your company against unauthorized resellers.
The first and most obvious way to violate this doctrine would be if the individual made additional copies of the purchased work and then sold those copies. This is why it is called the First Sale Doctrine — it protects a reseller only on that first sale of the original work purchased.
The example given on the Justice Department’s website for this type of violation is computer software. Under the law, the copyright holder remains the owner of all copies sold, meaning that if anyone were to purchase a single copy or license of a piece of software and then resell several copies, the owner would very likely be able to prove the reseller had violated the First Sale Doctrine in a criminal prosecution.
How the first sale doctrine can help your brand
The second way a reseller might fall on the wrong side of the First Sale Doctrine — the clause that can support you — is by reselling not the specific original work they purchased but rather a work they have altered to a degree that makes it “materially different” from the original.
Here the doctrine will primarily protect against counterfeit products — knockoff clothing, electronics, wristwatches, etc. But a material difference does not need to be a provable physical modification to the product. It can also apply to non-physical attributes such as the conditions under which the product is stored in inventory or shipped to distribution or retail facilities, or the levels of customer support available with or after purchase of the product.
Federal courts have also found that resellers violated the First Sale Doctrine — and were therefore guilty of copyright infringement — by failing to offer warranties and return policies that were up to the same levels as those offered by the manufacturers and their authorized distributors.
The good news: What this means for your products and your brand is that, if an unauthorized reseller does not meet all of the quality-control processes you have in place, does not offer and honor the identical terms and conditions offered by you and your authorized resale channel, or falls short in any other way to offer a materially genuine version of your product, you might have recourse in the federal justice system to stop such violations and receive compensation for the damage these infringements might have done to your brand.
The better news: If you include in the language of your MAP, UPP (Unilateral Pricing Policy) and Authorized Dealer Programs your intention to take legal action against violators, including a citation of 17 USC 109 as support for criminal prosecution in these cases, you might very well deter such infringements by unauthorized resellers in the first place.
The even-better news: These “material differences” can often become the lever by which you can get unauthorized products or sellers removed from marketplaces and selling platforms. A well-crafted MAP enforcement policy and Authorized Dealer Program will become the foundation for brand protection and market control.