The Marketplace at amazon.com is a world unto itself for the tens or hundreds of thousands of third-party sellers worldwide who make a living by selling products online. The life of the average seller is not, however, easy or routine. Suppliers are often reluctant to supply products to online sellers, and buyer preferences shift by the season, local economy, and the latest media sensation. Amazon’s storage and transaction fees seem to change constantly, and never in the downward direction. (Depending on the seller, Amazon fees can take up to 50% of the selling price.)
And then there are Amazon’s policies. Amazon’s ever-changing, opaque policy practices are a continuing source of frustration for sellers, requiring a nimbleness not required of traditional brick-and-mortar businesses. One set of especially frustrating policies is the Amazon ecosystem over IP (patents, trademarks, and copyrights). Amazon has set up its own, extrajudicial system for receiving (and acting on) reports of infringement and the sale of counterfeit goods. I help sellers navigate this world. Business is brisk.
I got here after a background that is not atypical of many patent attorneys: a degree in chemical engineering; a four-year stint as a patent examiner; and a proud attendee of night law school. I was then an associate with a small firm (three attorneys including me) getting ready to defend in an infringement trial and then a couple of medium-sized firms (25-ish attorneys) where I became a partner. These firms gave me access to projects where I gained experience in patent practice and litigation. It was not, however, until I opened my own firm with its smaller client budgets and more expansive needs that I expanded into trademarks and copyrights.
Despite being a tech nerd, I found a woman willing to overlook my shortcomings. It helped that she was also technically trained and a lawyer. For her, however, the fulfillment of a family and owning her own business were more compelling than the vagaries and compromises inherent in the practice of law. The opening of the internet was a rare opportunity for her.
She started her eBay business back in the days before they went public and offered stock to their sellers on a “friends and family” program. (Sometimes, no matter how good the opportunity, the timing makes it impossible to take advantage.) Ebay was still a flea market of small sellers of used or collectible items. Seller “stores” were still farays off. Amazon was not yet online. “Online” meant a dial-up connection by your local provider. (We used mindspring.com. I see you nodding in either recollection or horror.)
I became intimately familiar with online marketplace policies and their differing IP infringement issues over the kitchen table. Her business was my first client for the first suit suing a brand for defamation, based on a false report to Amazon that she was selling counterfeit toys that she bought from Target on sale. Her business was not my last.
The greatest buyer concerns in the early internet days were based on a lack of trust in the online buying experience. Ebay required advance payment but did not yet have online payment options. You had to mail a check to the seller and hope that the product you thought you bought would arrive in the advertised condition. Crooks and scams were common. The lack of a trustworthy system and marketplace policies/infrastructure to curtail false listings threatened to derail online commerce.
I mention trust because it is probably the most important characteristic that supports online commerce. Online payment systems, seller feedback, and anti-scam site policies that protect the buyer all flow from those early days on eBay when crooked sellers bilked good faith buyers.
The first online transaction is credited to Pizza Hut upon the launch of pizzanet.net and the 1994 order of a pizza with pepperoni, mushrooms, and extra cheese. By 2013, Pizza Hut’s online sales surpassed $6 billion. About a year after that first online pizza order, in July 1995, Amazon opened its virtual doors on the internet as an online bookstore. By the end of 2022, Amazon’s annual sales were well over $500 billion with over 2 million third-party sellers.
I am fascinated by the rise of the online marketplace IP policies. The issues of IP infringement can be very complicated for patents (e.g., claim construction, prosecution history estoppel, and the doctrine of equivalents), trademarks (likelihood of confusion, descriptive use, and material difference), and copyrights (originality, derivation, and artistic sufficiency).
I think the sites are genuinely trying to present viable answers to the question “How does a website provide effective dispute resolution procedures that can be done at speed and scale?” Artificial intelligence systems are not yet at the point where they might represent the answer, so the sites need staff. Expensive, non-scalable people who probably know nothing about IP laws or issues. Therein lies the curious complexity of online seller law.
At the same time, there are no structural incentives under U.S. law to help small, online sellers who are lawfully trying to sell genuine products at a profit. Judicial deference to a one-sided terms of service agreement by the operating site will almost invariably pose disadvantageous to the seller and allow unrestricted discretion by the site operator. Small, online sellers lack coordination for an effective political voice to get a minimum seller “bill of rights” in place to assure a minimal fairness. The only tools available in seller-site conflicts are traditional, pre-internet precedent that addresses bailment responsibilities, fiduciary duty, and common law fairness principles.
Ebay figured out some of the first policies to protect buyers and buttress faith in online transactions. Those policies, many of which are still in effect today in one form or another, were primarily directed on ensuring listing accuracy and timely delivery of the product offered for sale.
Today, eBay has its Verified Rights Owner (VeRO) program that prohibits listings that infringe the IP rights (copyrights and trademarks only, not patents) of rights owners. The remedy or a reported infringement is removal of the listing for that product. This is a surgical remedy as each listing on eBay is prepared and posted by the specific seller for their own, specific product. The seller chooses the product imagery, descriptive text, and return/warranty terms. Any suspension of a listing affects only that particular seller: listings are not shared.
The sanctions available to eBay under its user agreement include a range of options. As noted on its site: “Such [sanction] actions [for violation of seller terms] may include, as an example only: administratively ending listings or canceling transactions, hiding or lowering the placement of listings in search results, lowering seller rating, restricting buying or selling, forfeiture of fees, loss of buyer or seller protections, restricting access to member communication and rating tools, removing feedback, and account suspension.”
Although I am sure it occurs, I have not heard of anyone getting suspended from eBay. I can’t say the same about sellers on Amazon who are the subject of IP infringement reports.
Amazon is notorious for its opaque policies and unannounced suspension of seller accounts for all products as a result of infringement complaints that are not investigated and need not be established as true before suspension. Many of seller clients rely exclusively on their Amazon sales for an income so that unexpected notice of suspension can seem like getting fired because some unnamed person doesn’t like the color of your socks.
The newly suspended seller is often desperate and has just had their income abruptly stopped. Almost invariably, Amazon also seizes all inventory the seller has in stock (whether it was involved in the complaints or not) and keeps whatever sales proceeds it has collected but not distributed for prior and future sales. This much like a unilateral civil asset forfeiture that is activated at the discretion of and for the benefit of Amazon. In my opinion and according to my reading of the law of Washington state, such conduct is unlawful.
The seller’s sole avenue of appeal is by a demand for arbitration while their account, inventory, and money are unavailable unless, of course, the same brand owner that filed the complaints is somehow persuaded to retract the complaints.
Is it any surprise that the average small business selling on Amazon needs help? I work with a small collection of other consultants and lawyers who help sellers with listing and suspension issues. I focus on the IP side of the issue. Together, we try to get the seller back on track or at least made whole.
I love my practice.
