Friday, March 10, 2023

Drop-shipper's "in stock" and "trust us over others" claims not shown to be deceptive

Krikor v. Sports Mall, LLC, 2023 WL 2372068, No. CV 22-5600-DMG (MRWx) (C.D. Cal. Jan. 24, 2023)

Previous decision here—really interesting attack on internet arbitrage; defendant copied Krikor’s eBay memorabilia photos and listed the memorabilia on its own site with a markup; anyone who bought from defendant would actually have defendant buy from Krikor and drop-shipped to the purchaser. Both copyright and false advertising claims (based on Sports Mall’s disparagement of eBay sellers as unreliable) survived a motion to dismiss, but the false advertising claim can’t make it past summary judgment, while Krikor received partial summary judgment on the copyright claim.

Sports Mall advertises items as “in stock” when either (1) it has an item available in its own inventory or (2) the item is in the inventory of a third-party source from which Sports Mall can purchase and either ship or have the item “drop-shipped” to fill an order. “Sports Mall claims that whenever it purchases items from other, third-party vendors of sports memorabilia, it requires certificates of authenticity or has items authenticated by third party service providers.”

Its website FAQ includes: “Why can I, when searching, find the same item for a lower price on eBay?” and the answer states:

You might find the same item or one very similar for various reasons. Most of our leading competitors buy their collectibles in bulk and resell them on their site. deals directly with the athletes at signings along with their agents and our highly reputable vendors, therefore our products are 100% authentic. We would never sacrifice the quality or authenticity of your collectible for a lower price. Anyone can sell their items on eBay, so unless you personally know the vendor you should be cautious when purchasing.

So too “How do I know that what I am purchasing is authentic?”:

SC does not purchase autographed sports memorabilia from private collectors. We do this for your protection. We do not take a chance in purchasing from individuals that we do not know as we want to be able to guarantee our products 110%. All our products come direct from a private session with the athlete in which a reputable company (such as Steiner, Upper Deck, APE, Real Deal, etc.) was present.... We will not purchase any of these items as we only deal direct [sic] with the authenticator.

The court grouped the UCL/Lanham Act claims together.

“In Stock”: This wasn’t literally false, but it could be misleading. The dictionary definitions didn’t show that “in stock” always means that the goods are in the possession of a retailer, rather than merely available “for immediate sale” or “available for sale or use.” There was a genuine dispute of material fact about misleadingness. Even if drop-shipping is a common industry practice used by retail giants such as Amazon, “that does not mean that’s use of ‘in stock’ does not tend to mislead consumers to believe it literally possesses the item, especially given its assurances regarding its process for ensuring authenticity.”

“Why can I, when searching, find the same item for a lower price on eBay?”: This too was misleading in context, because it “implies that the eBay sellers of ‘the same’ merchandise are inauthentic, when in fact, those are the very sellers from which Sports Mall sources at least some of its ‘100% authentic’ products.”

“All our products come direct from a private session with the athlete in which a reputable company... was present. We will not purchase any of these items as we only deal direct [sic] with the authenticator”: Not literally false. The statement didn’t mean that Sports Mall itself is present at these signings, but rather that it verifies the certificates of authenticity of its products. And the record was “replete” with evidence that Sports Mall makes all reasonable efforts to ensure that its products are authenticated in the manner described in this statement. There was no evidence that the statements led any consumers to believe that Sports Mall or its agents personally knows all their vendors and/or has a company representative present at all sessions with the athletes.

However, in the context of the website, the claim that “we only deal direct [sic] with the authenticator” could plausibly mislead a consumer to believe that Sports Mall never sells items obtained by third-party sellers, which is untrue. Nor was it clear whether Sports Mall was distinguishing between products it directly purchases and holds in its own inventory versus products it advertises and sells through other vendors.

Deception: Here’s where the claim failed, because there was only evidence of a single person—a family friend—who may have been deceived by Sports Mall’s advertising, and even that one person’s testimony fell short of supporting that claim. He merely stated that he “couldn’t understand how the exact same item could be in two different places” and “I did not feel right about the decision” to buy from, and that he “just wasn’t sure of [the item’s] authenticity.” This wasn’t enough to show that a substantial number of reasonable consumers were deceived.

Unsurprisingly, the copyright claims fared better. The photos of the items were original: Krikor submitted a declaration describing his intentional choices behind the lighting, composition, and framing of the photographs. Nor was the use of the photos fair use. Sports Mall’s use of the photographs was not “transformative,” but merely “exact copying from Plaintiff’s store to Defendant’s store.” The photos were created to advertise, not as artistic expression, and Krikor didn’t lose his right of first publication, so factor two favored neither party (probably truer to say it favored defendant but was of essentially no weight). They were used in their entirety. And the photos “serve little use outside of the marketing” of the memorabilia. Krikor licensed the photos to co-plaintiff Kevorkian for $100. “The market for the photos may be small, but Sports Mall is Plaintiffs’ direct competitor, and its use of the photos helps it make a profit. The photos help Plaintiffs sell the depicted merchandise and it follows that any potential buyer might be less likely to buy the jerseys directly from Kevorkian’s eBay store if the photos were copied everywhere.”

Unclean hands: Sports Mall alleged that the plaintiffs “created and registered the copyrights in the two photos at issue and put them on [Kevorkian’s] second eBay store (which was never mentioned to Sports Mall), intending only to trick Sports Mall into copying the photos in order sue Sports Mall.” “Though slim, triable questions of fact remain as to whether this defense bars Krikor’s infringement claim.”

There were also triable issues on willfulness. It was uncontroverted that Sports Mall uses an algorithmic “crawler” to locate listings for its site, but it was unclear from the record how that “crawler” works, and how much Sports Mall monitors its listings and manages its “block list.”  

The parties even disputed whether Sports Mall took down the allegedly unlawful photographs referenced in a September 2020 demand letter, and about whether Sports Mall was aware or should have been aware of Kevorkian’s additional eBay stores and blocked its “crawler” from those sites as well.

No comments: