Trademark first sale still exists, at least when owner retroactively withdraws consent

Oneida Consumer, LLC v. Fox, No. 2:20-cv-2043, 2020 WL 4582704 (S.D. Ohio Aug. 10, 2020)

Oneida sells flatware through a network of authorized retailers, partners, dealers and resellers, as well as through Oneida’s own website and third-party websites such as Amazon. It used to work with Robinson Home Products, which acted as the exclusive licensor and paid royalties to Oneida, but Oneida terminated that relationship in 2018.

Fox runs Finest Flatware, which first purchased and resold ONEIDA flatware in 2002. Her primary sales channels are through her own website, Amazon and eBay. “From 2005 to 2009, Ms. Fox purchased ONEIDA flatware directly from Oneida and, with Oneida’s knowledge and approval, resold it on Amazon and eBay.” After Robinson took over the brand in the US, she bought millions of dollars’ worth of flatware from Robinson, reselling it online with Robinson’s “full approval and support.” Indeed, Robinson manufactured large, custom orders of flatware for Fox and appointed her in 2016 as the “brand manager” of ONEIDA flatware on Amazon, which gave her authority over all ONEIDA product listings on Amazon, including control over the product details and descriptions.  The flatware had a limited lifetime warranty, which Fox was authorized to pass on to her customers.

Around when Oneida terminated Robinson, Fox provided Oneida with details about her business, explaining that she resold products and sometimes repackaged the flatware to better suit the needs of her customers. Oneida’s representatives expressed enthusiasm, and designated her as an “authorized distributor” in late 2018. It sent an Authorized Dealer Policy (ADP) in December 2018, which Fox found inconsistent with her earlier understanding, including Oneida’s assurance that she could sell products on Amazon and eBay and could sell custom product configurations, so she didn’t sign it and instead continued to sell online, including custom configurations, as Oneida specifically authorized. Oneida also agreed to cover any warranty claims made by her customers. This worked for about a year, until the people she worked with left Oneida, Fox told Oneida that she wouldn’t be buying new products from Oneida and instead would concentrate on selling her existing inventory, and Oneida told her that it would enforce the ADP, which in Oneida’s view meant that she couldn’t sell her inventory on Amazon or eBay.  

Fox eventually removed the phrase “Authorized Oneida Retailer” from her online sales channels, but continued to offer ONEIDA flatware from her inventory for sale online. Her listings stated that the products were backed by a limited lifetime warranty. Oneida sued for Lanham Act and coordinate state violations, including false designation of origin and false advertising on the theory that Fox improperly held herself out as an “Authorized Oneida Retailer” and represented in her Amazon product listings that her products are “by Oneida.” Oneida also alleged tarnishment because Fox purported to sell flatware with the manufacturer’s warranty when the products were allegedly not covered by a warranty.  It sought a preliminary injunction.

Oneida “expressed concerns” about the source and authenticity of Fox’s inventory, but for purposes of the preliminary injunction didn’t dispute that they were Oneida products, as Fox stated.  “Defendant therefore has established at this stage that she lawfully acquired the products in her inventory and that those products are genuine ONEIDA flatware.” And yet, we must go on.

Oneida argued that, once it terminated the ADP, Fox no longer had a right to resell her inventory. [Framed that way, I don’t see why she shouldn’t get attorneys’ fees for this aspect of the case. I’m not sure the court is willing to go that far, but if discovery confirms that she never agreed to the ADP....] “Oneida believes that it, as the trademark owner, has the right to control the products which Ms. Fox has in her possession.” Oneida attempted to evade first sale because it argued that it terminated its warranty, making Fox’s products materially different from what they were when she purchased them.

Even without first sale, there was no likely success on the merits, because infringement requires use of the mark without authorization. But the affidavits here established Oneida’s and Robinson’s consent to “sell ONEIDA flatware online, including on Amazon and eBay; use the ONEIDA name, including the phrase ‘by Oneida,’ in her product listings; offer custom product configurations; and pass the warranty on to her customers.” In selling existing inventory, Fox was “merely exercising her rights according to the permission granted by Oneida and Robinson at the time she purchased the products from them.” Though the affidavits were self-serving, they were unrebutted. They were not conclusory, vague, contradictory or a sham. Oneida argued that Robinson lacked the authority to give Fox permission to resell as she did, because it was only a licensee and not an agent. Even so, there was evidence of consent from Oneida’s own agents after Fox disclosed the relevant details of her business operations to Oneida.

Oneida argued that it could retroactively withdraw its consent by terminating the relationship, but didn’t show that was true according to their agreement. For example, it didn’t show that termination obligated Fox to tender unsold inventory to Oneida. Though the ADP provided that a dealer was to cease selling ONEIDA products upon termination of the ADP, Fox submitted evidence that she never agreed to it and that Oneida’s employees exempted her from it.

First sale: Oneida argued that first sale was unavailable to a licensee. As a general matter, the court agreed (where the license so specifies): “The licensee acquires the goods subject to the terms of the license, and if the license prohibits a post-expiration selling of inventory by the licensee, then it cannot be said that the first sale was authorized by the trademark owner.” [I expect to see more of the license/sale distinction being manipulated by trademark owners as it has been by copyright owners; then good luck reselling your used Ford!] But Oneida didn’t show that the ADP governed the parties’ relationship. It wasn’t in effect when Fox purchased a large volume of goods from Robinson from 2009 to 2018. And Robinson, as Oneida’s exclusive licensee in the US, was authorized to make the first sale. Fox also showed that she never agreed to the ADP.

Oneida argued that selling a product without its warranty was a material difference. Its COO declared that Oneida’s lifetime warranty to the original purchaser is “an essential feature of its products and its brand.” Fox also agreed that the warranty was important, as she stated that she wouldn’t have resold the product without the warranty passing to her customers.

Again, it was true that material difference negates first sale because a “material difference in a product is likely to cause consumer confusion and could dilute the value of the trademark.” [This has always been way too hasty a statement: full disclosure, as with disclosure that a product is used, is all that is required to protect against confusion; otherwise you couldn’t resell anything used or with an expired warranty.] And “[a] missing or inferior warranty term may constitute a material difference that would defeat the first sale defense.” But again the Fox submitted unrebutted evidence that Robinson and Oneida authorized her to pass the warranty to her customers and that they in fact handled her customers’ warranty claims. “Thus the product she would now resell from her inventory would be identical to what she purchased from Robinson and Oneida.” [This implies that if Oneida now refuses to honor the warranty it offered when Robinson/it parted with title to the goods, it would breach its obligations both to Fox and to the customers. That seems consistent with the warranty law I know.]

Irreparable injury: Also no. Oneida didn’t show that Fox was selling non-genuine or inferior goods. There was no irreparable injury as to the allegedly false advertising “Authorized Oneida Retailer” because she removed all references to being an “Authorized Oneida Retailer” prior to the filing of the lawsuit.

And a preliminary injunction wouldn’t serve the public interest because it would be anti-competitive to bar Fox from selling her lawfully-obtained goods.