Ask an IP litigator: How do I stop an unauthorized seller?

Teresa Reguly (00:05): So much is purchased online today instead of in brick-and-mortar stores. Online shopping means that you can sell your product all over the world, increasing your potential customer size, and with that, the complexity of your supply chain. Unfortunately, this also presents opportunities for unapproved companies to sell your patented and trademark products, therefore infringing on your IP rights.

I’m Teresa Reguly and I’m joined today by my colleague Niki Mantini to discuss what you can do if you see your product being sold by an unauthorized online seller. So, Niki, let’s say it’s brought to your attention that an online seller’s infringing your IP rights. What can you do?

Nicole Mantini (00:40): As all IP rights—think patents, trademarks, design—are jurisdictional. The first thing you need to do is consider where you have rights, and then you have to figure out where the potentially infringing activity is occurring, and who the infringer actually is. Let’s say you have a Canadian patent covering the product that is being sold on an online platform.

Your Canadian patent gives you the right to exclude others from making, using or selling the patented product in Canada. Even if the product seller is located outside of Canada, if they’re selling into Canada, you can assert your patent. So, the question then becomes: Who can you assert your patent against?

Teresa Reguly (01:13): Right. So, there are wrinkles when dealing with purchases in the online world. Sometimes it’s not clear who the actual seller is. Often a platform owner or operator does not purchase the product from the original product manufacturer or vendor. The platform is only the means by which the product is advertised and promoted to a consumer, and the platform facilitates the sale transaction.

But the platform operator will likely assert that it is not actually selling and so is not an entity that is infringing a patent. If you contact the platform and inform them that you have a Canadian IP right and it’s being infringed by the sale facilitated through their website, they may pass this information along to the vendor and maybe remove the item from the site.

Usually, platforms do have terms that say they will remove products in the event that a product is infringing or not compliant with law. But they’re unlikely to do much more to assist a patent owner any further. Even if the first platform removes your product. You have to keep in mind that there’s probably another platform that the seller can use to promote your product, and unfortunately it can become a bit of a game of whack-a-mole to try to stop a foreign vendor. It can be difficult to enforce against a vendor that truly doesn't have a presence in Canada.

Teresa Reguly (02:28): Niki, let's talk about resellers. Meaning purchases of used items on online platforms. I think product manufacturers would probably prefer that consumers purchase brand new items from their established distribution channels. But is there anything the product manufacturer can do to assert their IP in this case?

Nicole Mantini (02:44): So, when we’re talking about resellers, there’s probably not much that can be done from a patent rights perspective because of the doctrine of exhaustion. Exhaustion is a common law concept; it’s not addressed expressly in the Canadian Patent Act or in any other domestic legislation. Under the doctrine of patent exhaustion, the initial authorized sale of a patented item terminates the patent seller’s rights in that item, so their control over the article is relinquished unless the terms of sale of the patented article provide otherwise.

Any limitations that you place that affect the rights of a subsequent purchaser have to be clearly and unambiguously expressed and brought to the purchaser’s attention. So, in plain language, a purchaser of a patented article generally has the right to do whatever they want with it. Absent some express or clear condition to the contrary.

Teresa Reguly (03:30): Right. Although it may be possible to address reselling a regulated product such as drugs or medical devices, any product that needs some type of license or authorization in order to actually sell it in Canada, if the resale is prohibited by the relevant legislation governing that product, it might be possible to contact the regular regulatory body that oversees the product's sale, ask them to investigate, and possibly they will take enforcement action.

Teresa Reguly (04:01): What about trademarks? So, for example, let's say I'm the owner of a Canadian trademark that is used on products sold in Canada. I see an item on a platform that is using my trademark, but it's not being sold at my authorized distributor. What can I do?

Nicole Mantini (04:14): So, in the trademark scenario, there's a similar issue as with patents relating to exhaustion. Our Federal Court of Appeal has held that purchasing and simply reselling trademark products in Canada, these are sometimes referred to as “gray goods”, doesn't constitute trademark infringement, assuming the products you’re selling are genuine.

Teresa Reguly (04:32): Okay. What if my trademark is being used on a product that's a counterfeit product?

Nicole Mantini (04:36): So that's a different situation. When it comes to counterfeit products, the unauthorized seller is engaged in “passing off”, which is the deceptive representation of goods by competitors in a manner that confuses consumers. Also, if someone makes a false or misleading statement or omission that causes or is likely to cause consumer confusion with respect to the product or its brand. There also maybe an argument that that's passing off.

For example, the Federal Court has issued a permanent injunction against a company that was selling gray market goods with a label that stated that they were the exclusive Canadian distributor when they weren't. If there's evidence that a reseller is selling products that are counterfeit, adulterated, or of an inferior quality to your products, you may also have a claim that the resellers use of your trademarks on those goods has the effect of depreciating the value of the goodwill attached to those trademarks, and this can cause compensable harm to a trademark owner.

This means that if someone else is selling counterfeit products under the guise of them being your products, you may have a claim that these fake products are lowering the perceived value of your goods and you can be entitled to compensation for that.

Teresa Reguly (05:38): Okay, well, this sounds much more promising. So, if a trademark holder sees this occurring, can they assert infringement against the platform or do they still to search for the true seller?

Nicole Mantini (05:48): So, in the case of trademarks, unlike patents, the platform is arguably advertising, even if it's not directly selling the product. So, it might be easier to assert that the platform's activities constitute a trademark infringement, passing off, or the depreciation of goodwill than it would be to assert patent infringement against the platform. Clear cases of trademark infringement or passing off can be more straightforward to prove than patent infringement as well, since they often just require providing proof that you have a trademark registration. The platform's more likely to act quickly to remove products from its sites in these situations where their liability is more clear.

Teresa Reguly (06:21): Okay, great. Well, it sounds like the platform is usually the best source for determining who the true seller is. If the seller is selling directly online or if a platform is not being helpful, then there are other routes you can potentially take to try to find that true seller. For example, corporate searches, domain name lookups, or we can often hire an investigator to do some work there.