Home Blog When are Product Resales Not Protected Under the First Sale Doctrine?

When are Product Resales Not Protected Under the First Sale Doctrine?

September 14, 2021
Man holds a cell phone while looking at clothing on an ecommerce website on laptop

Intellectual property law is ever changing. In the Cardozo Online Blog, we have covered the basics of IP law, including why it matters, its limits and what the future holds. Today, we delve a little deeper into specific IP law, exploring trademark law and the first sale doctrine.

The rise of online sales sites, such as Amazon, eBay and even spaces like Craigslist and Facebook Marketplace add complexity when it comes to the selling and reselling of products. Sellers must follow specific rules to be able to resell items on these sites. This is where first sale doctrine comes into play.

What is The First Sale Doctrine?

First and foremost, let’s review the first sale doctrine and what it covers. The doctrine is related to trademark law, which is protected under the Lanham Act. This act prohibits the use of a registered trademark “in connection with the sale, offering for sale, distribution or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive” by unauthorized persons or companies.1 It’s important to remember that trademark laws are meant to protect consumers. Thus the important piece to note here is that the resale of a product cannot cause consumer confusion regarding the original owner of the trademark. We will come back to this later.

The first sale doctrine is a defense against copyright infringement, allowing owners of a trademarked product to resell the product without fear of the trademark owner bringing a lawsuit against them.2 It also applies to copyrights. If the first sale doctrine did not exist, nobody would be able to sell or dispose of items they have purchased. Without the doctrine, you would not legally be able to lend a book out to a family member or friend. As you can imagine, libraries would be in hot water without the first sale doctrine.

As essential as the first sale doctrine may be, there are times, however, when this doctrine does not apply. Below, we explore one of those cases.

Beltronics v. Midwest Inventory Distribution


The 2009 case of Beltronics v. Midwest Inventory Distribution is an excellent example of when the first sale doctrine does not apply to the resale of products. Beltronics, an electronic equipment manufacturer and the trademark holder, discovered that Midwest Inventory Distribution, the reseller, had purchased Beltronics products from authorized distributors and was changing serial numbers on radar detectors before selling them to consumers on eBay.3 This issue came to Beltronics’ attention when people who had purchased the radar detectors from Midwest contacted Beltronics with warranty requests for items with the new (phony) serial numbers. Because Beltronics did not sell these items and had no knowledge of the sale due to the changed serial numbers, these items were not covered under warranty. Customers were not happy. Beltronics then filed an affidavit noting that those Midwest purchasers were confused, thinking that they were entitled to a warranty from Beltronics, which was not the case because of the changed serial numbers.4

Midwest claimed that they were protected under the first sale doctrine, and had they not materially changed the Beltronics products they sold, this argument would have held up in court. For the first sale doctrine to be upheld with no trademark violation, Midwest should have only stocked, displayed and resold the radar detectors under Beltronics’ trademark. By changing the serial numbers, they failed in their role as a reseller.

This is where consumer confusion is important in upholding the Lanham Act and rendering the protections of the first sale doctrine null and void. Beltronics was able to prove that its reputation and goodwill was damaged due to customer confusion over whether warranties were covered by Beltronics for products sold by Midwest.5 The Tenth Circuit court upheld the preliminary injunction granted in favor of Beltronics on this reasoning.

Master the Complexities of Intellectual Property Law

The above example is related to manufactured products, but in the digital age, application of the first sale doctrine continues to grow in complexity.6 Are intangible items covered under the first sale doctrine? In short, yes. And, as in Beltronics v. Midwest Inventory Distribution, there are cases where first sale doctrine does not apply to the resale of digital goods. As an IP lawyer, you must have the expertise to navigate the laws as they stand now, and the legal foundation to foresee changes that will have potential ramifications for the companies and clients you represent.

With an online LL.M. in Intellectual Property from Cardozo School of Law, you will build a deep knowledge base of how laws are being interpreted—both now and in the past—to understand the intricacies and complexities of IP law. This knowledge comes from coursework taught by faculty who are studying the law and actively making an impact in how law is being practiced today. Learn more about our online LL.M. and its coursework today

Sources
  1. Retrieved September 13, 2021, from revisionlegal.com/trademark/what-is-the-trademark-first-sale-doctrine/
  2. Retrieved September 12, 2021, from bonalaw.com/first-sale-doctrine-in-trademark-and-copyright-law.html
  3. Retrieved September 14, 2021, from caselaw.findlaw.com/us-10th-circuit/1354384.html
  4. Retrieved September 14, 2021, from caselaw.findlaw.com/us-10th-circuit/1354384.html
  5. Retrieved September 12, 2021, from theiplawblog.com/2009/12/articles/trademark-law/when-product-resales-are-not-protected-under-the-first-sale-doctrine/
  6. Retrieved September 14, 2021, from msk.com/newsroom-publications-1114