Edited by Irene Calboli and Edward Lee
Chapter 22: Trademark exhaustion and the Internet of resold things
Over the past ten years, casual resellers have migrated from garage sales, swap meets, and classified ads to eBay and Craigslist, turning side hobbies into lucrative businesses. Today, 30 million new ads are posted on Craigslist every month, and six million new listings are posted daily on eBay.1 The explosive online market has affected the sales of new goods, troubling manufacturers2 who seek to curtail the growth of this secondary market through several avenues—some legitimate, and others not so much. For example, to combat diversion to resellers outside of its official distribution chain, Tiffany, Inc., the well-known jeweler, attempted to institute a policy of limiting retail sales of identical items to lots of five or fewer, though this proved to be unsuccessful due to its sporadic enforcement.3 Manufacturers have also tried to stifle the resale market by suing resellers and auction sites for trademark and copyright infringement,4 attempting wholesale removal of their goods on auction websites and other unauthorized distribution channels, and using auction site take-down notice procedures that are supposed to be reserved for removing counterfeit and infringing goods.5 These actions go beyond trademark bullying and are more than merely stopping a merchant from using the owner’s mark—the goal is to remove the reseller’s goods from the market altogether. Courts have aided manufacturers by ignoring the lack of confusion as to a good’s source, and finding that online initial interest confusion as to sponsorship or affiliation of the distribution channel (even when the goods are the genuine goods of the mark owner) constitutes infringement. Under a claim of initial interest confusion, a mark owner is arguing that there is trademark infringement because, even though the consumers’ confusion is “dispelled before an actual sale occurs,” the end result is that the defendant “impermissibly capitalizes on the [good will] associated with a mark.”6 These courts’ reasoning is contradicted by strong evidence showing that many consumers visit sites like eBay and Craigslist to find genuine goods at lower costs than they would find buying directly from the mark owner or authorized retailer, and are therefore not confused as to affiliation regarding distribution channel.7
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