Wednesday, March 09, 2016

Alleged Amazon shenanigans constitute use in commerce and commercial advertising/promotion

Jae Enterprises, Inc. v. OxGord Inc., 2016 WL 865328, No. 15-CV-228 (W.D. Ky. Mar. 2, 2016)
Jae sells aftermarket automobile accessories under the mark Eagle Flight and designs. Jae entered into a distribution agreement with defendants, who resold the products through internet retailers such as Amazon, co-listed alongside Jae on Amazon under Eagle Flight product listings.  Jae alleged that each product sold on Amazon has a product detail page, and “[t]he first seller to offer a product for sale creates the product detail page ... and is said to ‘own’ that page.” Then other sellers offering the same product list their product “against” the original product detail page, and customers “can view all potential sellers of a product from the same page.”
The parties’ relationship deteriorated; while they agree that defendants could sell any remaining Eagle Flight products they had purchased, Jae alleged that defendants filled orders for Eagle Flight products with generic parts.  
False advertising: Jae also alleged that the Defendants “purposefully delayed shipments to customers,” and when customers complained about the shipping delay, the Defendants responded that the delay was due to “quality issues” with the manufacturer, i.e. Jae. Moreover, Jae alleged that defendants “gained administrative access” to its product listings on Amazon and changed the listings to state incorrect information, such as that “a particular product only fits a certain style of truck, that a listing is only for a single product as opposed to an entire set, and changed the model year with which a particular product is compatible.” Jae subsequently requested that Amazon remove the defendants from its product listings, and Amazon complied.  Further, Jae alleged that defendants called customers who’d bought Eagle Flight products from them and provided a positive review of the products on Amazon, offering them customers a full refund for the Eagle Flight product they purchased if they agreed to change their positive review to a negative one.
I won’t go through all the issues, but a couple worth noting: defendants argued that they didn’t “use” the Eagle Flight mark in commerce because Jae created the product detail page on Amazon, and the products they sold didn’t bear the Eagle Flight mark. The court agreed that, by alleging that defendants listed themselves as registered sellers on the Eagle Flight product detail pages, Jae alleged use in commerce.  “The Defendants’ argument is flawed as it relies on a technicality that ignores the practical effect of their decision to allegedly list themselves as a seller on an Eagle Flight product detail page and, consequently, to advertise and sell products using the Eagle Flight mark to consumers.”
False advertising: Defendants argued that the alleged phone calls offering incentives to customers to change their positive reviews to negative ones and reporting to customers that shipping delays were due to quality issues with Jae, weren’t “commercial advertising or promotion.”  The Sixth Circuit Court of Appeals recently defined “commercial advertising or promotion” as “(1) commercial speech; (2) for the purpose of influencing customers to buy the defendant’s goods or services; (3) that is disseminated either widely enough to the relevant purchasing public to constitute advertising or promotion within that industry or to a substantial portion of the plaintiff’s or defendant’s existing customer or client base.” Grubbs v. Sheakley Grp., Inc., 807 F.3d 785, 801 (6th Cir. 2015). Jae sufficiently pled commercial advertising or promotion, though it might not be able to sustain the claim after discovery.  (I would think that defendants would be at least secondarily liable for the allegedly fake reviews themselves, which clearly would be advertising or promotion.)

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