Is Amazon’s Brand Registry Protecting Seller Brands As Much As It Protects Amazon Brands?
By Linnea Vail
In August of 2022, the court in Melwani v. Amazon.com, Inc. considered whether Amazon’s Brand Registry protects third party sellers’ brands as much as it protects Amazon brands, and decided that plaintiff Prakash Melwani successfully alleged that Amazon misappropriated his “Royal Silk” trademarks by profiting from the sale of infringing products, in violation of New York’s unfair competition law.
Amazon admittedly has a Herculean task on its hands. On the one hand it has committed to protect a gargantuan number of sellers’ trademarks (not to mention sellers’ copyrighted works, the takedown of which is governed by the Digital Millennium Copyright Act (DMCA)). On the other hand, there are a lot of competing companies that file dubious challenges to trademarks and to copyrighted works. How can Amazon know which challenges and competition are legitimate, and which are overreaching?
While any such system is likely to make some mistakes in each direction, the court in the Mr. Melwani’s case focused on a consideration between the extremes. While yet to be proven at trial, it appears that Amazon is diligent and more successful in protecting Amazon brands than the brands of third party sellers. Furthermore, the more permissive approach that Amazon takes with respect to such seller brands results in more piracy of seller brands – and allegedly more sales and profits to Amazon.
Mr. Melwani is the owner of five versions of the “Royal Silk” trademark, covering a wide variety of products and services. He has sold his products on Amazon.com since 2006, currently through RoyalSilkUSA.com, an e-commerce site owned and operated by his company. Mr. Melwani claims that over the years his business has been plagued by third party infringers of the Royal Silk trademarks across categories of goods at the Amazon marketplace. Melwani submitted some 200 infringing listings from Amazon.com that were attributed to about 100 different unauthorized third-party sellers via Amazon’s Brand Registry program.
The Brand Registry is Amazon’s most recent effort at combating trademark infringement. Melwani alleged that it was nearly impossible to remove any listing from the Brand Registry, and that Amazon itself was responsible for the infringement. In particular, Melwani’s complaint alleges that when customers use Amazon’s Search Box to search for “Royal Silk,” results regularly include products sold by Amazon itself, in addition to products sold by other independent sellers.
The court noted that Melwani “points to Amazon’s ability to avoid serving up infringers when it comes to keyword searches for its own products. As alleged, Amazon does not allow third party sellers to bid on the keywords ‘Fire TV’ or ‘Echo Show’ or ‘Ring Doorbell,’ which are products or services exclusively sold by Amazon.” (Melwani v. Amazon.com, No. C21-1329RSM, (W.D. Wash. Mar. 7, 2022).)
In reviewing Amazon’s motion to dismiss the complaint, the court decided that Mr. Melwani had sufficiently alleged that Amazon acted in bad faith, which is a central element of a claim of unfair competition under New York law. The allegation in this claim was that Amazon evaded “the spirit of the bargain that Defendants purported to offer to rights owners who signed-on to the Amazon Brand Registry program.” (Melwani v. Amazon.com, No. C21-1329RSM, (W.D. Wash. August. 25, 2022).)
The Melwani court’s reasoning has been bolstered by a recent decision that the general immunity from legal liabilities afforded to platforms does not extend situations where they profit from the unlawful conduct of their users. (In Re: Apple Inc. App Store Simulated Casino-Style Games Litigation, No. 5:21-md-02985-EJD, Dkt. No. 92 at 33 (N.D. Cal. Sept. 6, 2022).)
The Melwani decision highlights the conflict Amazon faces as both an e-commerce platform and a product manufacturer. If Amazon is indeed able to restrict third party sellers from using certain keywords on its platform to encourage sales of its own products and discourage that of others, then unfair competition could certainly be one of the claims brought against the company. As a business, Amazon is incentivized to increase the number of products in its inventory, due to the percentage of retail sale fees it can make from third-party seller accounts. In fact, the gross merchandise value (“GMV”) of third-party products on its Marketplace total $400 billion as of February 2022 (https://www.forbes.com/sites/stevendennis/2022/02/07/what-we-get-so-very-wrong-about-amazons-retail-profitability/?sh=378d93ba21aa).
Amazon has touted its Brand Registry program as a means of discouraging IP infringement. Amazon has an entire team dedicated to removing listings even before they are listed online, stating they removed 4 billion listings that were “suspected of being fraudulent, infringing, counterfeit, at risk of other forms of abuse, or presented other significant product quality concerns.” (https://brandservices.amazon.com/progressreport).
However, it seems that brand owners are increasingly having to fight tooth and nail for long-term solutions. Not only have third party sellers manipulated this program to acquire a competitive economic advantage, complaints say Amazon’s Brand Registry has also been misused to stop legal sales (https://news.bloomberglaw.com/ip-law/amazons-judging-of-ip-disputes-questioned-in-sellers-lawsuits), i.e., gray-market goods that are sold legally, but outside of the manufacturer’s traditional trade channels. Amazon has historically avoided liability for third-party sales; in fact, it was decided in the EU in 2020 that the retailer is not liable for the sale of gray market goods (https://www.drapersonline.com/news/amazon-welcomes-grey-market-ruling), with the European Court ruling that the “mere storage by Amazon” of goods that infringe trademark rights does not constitute an infringement by Amazon of those trademark rights, and that “in order for there to be an infringement of the rights in the trademark by the company providing the storage, that company must pursue, like the seller, the aim of offering the goods for sale or putting them on the market.”
Ultimately, Amazon’s objective with the Brand Registry program is to reduce the total number of infringing listings. However, there is an inevitable conflict of interest where Amazon is motivated to encourage sales of its own goods, and at least in the Melwani case, this conflict is playing out. There are drawbacks to this program, and inevitably it is up to the brand owner to ensure their online presence is protected, but the Brand Registry can be a useful asset in curbing online infringement.